How do appchains work?
Appchains operate in a similar manner to a basic blockchain, but on top of it. The primary distinction is that they are app-specific.
Appchains rely on Layer 1 (L1) blockchains in terms of security. Because they do not compete for processing power and storage space with L1 applications, such systems are highly customizable and have significant performance potential.
Such solutions typically have a utility token. It is used for stacking, as the application’s internal currency, and for voting.
Validators from the main network help appchains (if they agree to allocate resources to a particular application).
What advantages does it have?
Using the new approach to application development has several advantages over L1, Layer 2 (L2) solutions, and sidechains. As previously stated, appchains increase system performance and customizability without sacrificing security because they rely on the underlying blockchain.
The direct use of L1 in the creation of dapps involves competing for limited computing resources with other applications. Because developers have no control over the consensus protocol, this is likely to result in performance degradation and a lengthy platform upgrade process.
Because of competition among dapps on the same network, a single popular application can consume a disproportionate amount of resources. This results in higher fees (as seen with the launch of XEN Crypto) and transaction processing delays.
Upchains imply low and predictable transaction costs, which are beneficial to the user experience.
As the popularity of decentralized applications grows, developers may be required to perform advanced customization and optimization of various parameters such as throughput, finality, security level, and degree of availability (permissionless or permissioned).
Upchains allow traditional organizations to immerse themselves in Web3 without making their platforms public from the start. Companies, for example, can initially require KYC compliance from validators, rely on a limited set of developers, and select specific services for cross-chain interactions.
What disadvantages does it have?
The main distinction and, perhaps, limitation of appchains is that they are “locked” to a single application. L2-solutions, on the other hand, can interact with a wide range of dapps.
Appchains imply limited linkability and isolation, which can result in liquidity fragmentation. The problem is largely solved by integrating cross-chain bridges, but the latter are often a target for hackers.
Running and maintaining an appchain can be a waste of time and money if an application is underutilized. Platform-specific validators can effectively leverage resources from other sources.
The operation of an appchain can be complicated in a variety of ways. For example, management of additional infrastructure elements such as sequencers or validators.
Developers may lack ready-made out-of-the-box solutions such as block observers, RPC providers, indexers, oracles, fiat gateways, and so on.
Building L1 solutions has advantages, such as the availability of a massive amount of resources, infrastructure elements, and developer tools (especially beginners). This abundance can make integration with other ecosystems easier.
L2 allows developers to increase the scalability of services without requiring significant changes to the code base.
Because they rely on the underlying blockchain, Layer 2 solutions also imply a high level of security. Optimism and Arbitrum, for example, process transactions quickly and send “fraud proofs” to the main network thanks to Optimistic rollups.