CoinMarketCap Academy takes a deep dive into appchains — blockchains that are designed to operate a specific application.
In the fast-moving world of blockchain scaling, appchains are one of the new contenders to help everyone make it to a decentralized utopia.
But what are they and where do they come from?
- What is an appchain and how does it work?
- What blockchains use appchains?
- A comparison of appchains to other blockchain solutions.
- What are some of the most popular appchains in the market?
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What Is an AppChain and How Does It Work?
The benefit of appchains is greater freedom and control for developers. Additionally, they inherit the security and scalability of the layer-0 they are connected to.
Blockchain ecosystems may choose an appchain architecture for different reasons.
Applications can communicate and exchange value across the broader ecosystem, thanks to common protocols and standards. This creates a more connected and diverse ecosystem of applications.
Which Blockchains Use AppChains?
Some examples of appchains built on Cosmos are:
- Akash Network: A decentralized cloud computing platform that leverages unused computing capacity to provide affordable and censorship-resistant cloud services.
- Osmosis: A decentralized exchange platform that allows users to create and trade custom liquidity pools across different zones.
Some examples of appchains built on Polkadot are:
- Acala: A decentralized finance hub that offers a multi-collateralized stablecoin, a trustless staking derivative, and a decentralized exchange platform.
- Litentry: A cross-chain identity aggregator, which offers decentralized identity verification and reputation management.
Comparing AppChains to Other Blockchains
Appchains typically focus on one application in a wider web of blockchains. How does this compare to other blockchain architectures?
Appchains vs Monolithic Chains
- Simplicity: Monolithic chains don't rely on external parties or protocols to operate, reducing network complexity.
- Security: With a smaller attack surface, monolithic chains generally offer greater security.
- Decentralization and Immutability: All nodes follow the same rules and validate the same transactions, ensuring a high degree of decentralization.
However, monolithic chains also come with significant disadvantages:
- Scalability: Limited resources and bandwidth restrict the number of transactions and data storage, leading to network congestion and high fees.
- Flexibility and Innovation: Upgrading or customizing the platform can be difficult without affecting or depending on existing applications.
Appchains differ from monolithic chains in several ways:
- On appchains, one application uses all the blockspace but on monolithic chains, there are multiple applications.
- Monolithic chains provide security for other applications, while appchains leverage the security of a layer-0 chain.
- Appchains are flexible in terms of customization, while monolithic chains have fixed and rigid parameters for their platform.
AppChains vs Modular Chains
- Scalability: Modular chains can process more transactions and store more data by using parallelization and specialization techniques.
- Resource Optimization: By outsourcing some tasks to other layers or chains, modular chains can optimize their resources and bandwidth.
However, modular chains also face some drawbacks:
- Complexity: Modular chains depend on external parties or protocols to operate, which increases network complexity.
- Security: The increased attack surface and reliance on external parties can present security concerns.
- Decentralization Trade-offs: Different layers or chains may have varying levels of trust and validation, impacting overall decentralization.
Appchains share some similarities with modular chains but also have key differences:
- Appchains still dedicate blockspace to a specific application, while modular chains run multiple applications.
- Appchains connect to a general layer-0 solution, whereas modular chains use specialized layer-1 or layer-2 solutions.
AppChains vs Layer-2 Chains
- Speed: Compression and aggregation techniques allow layer-2s to process more transactions and charge lower fees.
- Faster finality: Layer-2s can provide faster finality and confirmation times by using optimistic or zero-knowledge proofs.
However, layer-2s also come with some limitations:
- Dependency: Layer-2s rely on the layer-1 blockchain for consensus and data availability, which can limit their autonomy and sovereignty.
- Security Risks: Layer-2s have the potential for fraud or censorship by malicious actors due to their dependence on the layer-1 blockchain.
Appchains differ from layer-2s in several ways:
- Appchains handle all core functions on their own chain, while layer-2s handle some or all of the execution and settlement functions on their platform.
- Appchains connect to a general layer-0 solution, instead of operating on top of a specific layer-1 blockchain.
AppChains vs Sidechains
- Performance: Sidechains can process more transactions and store more data by using their own resources and bandwidth.
- Flexibility: Sidechains can customize their parameters and features according to their needs and preferences.
However, sidechains also face some challenges:
- Security: Not relying on the security or scalability of the other blockchain exposes sidechains to more attacks and vulnerabilities.
- Interoperability: Sidechains may face difficulties in communicating and exchanging value with the other blockchain, as they require bridges or adapters to enable cross-chain transactions.
Appchains have some similarities and differences with sidechains:
- AppChains and sidechains both have their own native tokens and governance models and handle all core functions on their chains.
- AppChains leverage the security and scalability of a larger network, while sidechains do not.
- AppChains connect to a general layer-0 solution, while sidechains are compatible with a specific blockchain.
Many appchains are either live or in development, but here are some of the most notable ones: