Explaining what appchains are in simple terms

What are appchains?

An Appchain (application-specific blockchain) is a blockchain specifically designed to work with one particular application. The use of such solutions gives developers more freedom when creating ecosystems, governance structures, and consensus algorithms for their decentralized applications.

How do appchains work?

Appchains work roughly the same way as a base blockchain, but on top of it. The main difference is that they are app-specific. In terms of security, appchains rely on first-level blockchains (L1). Such systems are well customizable and have significant performance potential, as they do not compete with L1 applications for computing power and storage space. Such solutions usually have a utility token. It is used for staking, as an internal application currency, and for voting. The work of appchains is supported by validators from the main network (if they agree to direct resources to a specific application).

What are the advantages of appchains?

Using a new approach in creating applications has a number of advantages compared to L1, second-level (L2) solutions, and sidechains. As mentioned, sidechains bring customization and increase the performance of systems without sacrificing security, as they rely on the basic blockchain. Direct use of L1 in creating dapps implies competition with other applications for limited computational resources. This is prone to a probable decrease in performance and a prolonged process of platform updates, as developers do not control the consensus protocol. Due to competition between dapps on a single network, it is possible that a single popular application uses disproportionately large resources. This leads to an increase in commissions (as in the case of the XEN Crypto launch) and delays in processing transactions. Sidechains provide low and predictable costs when conducting transactions and the ability to scale, which is important for the mass adoption of decentralized applications.

What are the drawbacks of appchains?

The main difference and possibly limitation of appchains is that they are “tailored” for one specific application. L2 solutions, on the other hand, are able to interact with the most diverse dapps. Appchains imply limited composability and some degree of isolation, which is prone to fragmentation of liquidity. The problem is largely solved by the integration of cross-chain bridges, however, the latter are often a target for hackers. If the application is not used actively enough, launching and maintaining an appchain may be a waste of time and resources. Validators allocated for the platform can effectively deploy resources elsewhere. The operation of an appchain can be associated with various complexities. For example, those related to the management of additional infrastructure elements such as sequencers or validators. Developers may not have ready-made “out of the box” solutions – block explorers, RPC providers, indexers, oracles, fiat gateways, etc. There are advantages to creating L1 solutions – for example, access to a huge amount of resources, infrastructure elements, and tools for developers (especially beginners). Such abundance can simplify integration with various ecosystems. Thanks to L2, developers can increase the scalability of services without the need to make significant changes to the codebase.

What is the difference between appchains and sidechains?

Sidechains are proposed to work in parallel with the main network, but such solutions do not rely on the security of Layer 1. Sidechains differ from Layer 2 in that they do not send transactions to the main blockchain. Appchains are created for a specific application (app-specific). Sidechains, on the other hand, perform operations of any kind. Their main disadvantage is reduced security due to limited decentralization. One of the most well-known sidechains is Polygon Proof of Stake, which is part of the Polygon project ecosystem. The latter also includes Polygon Edge – an open source development environment that allows creating Layer 2 solutions.