App-specific blockchains remain a promising solution for scalability

App-specific blockchains, or app chains, are specifically designed to support the creation and distribution of decentralized applications (DApps). In an app chain, each app runs on its own separate blockchain, linked to the main chain. This provides greater scalability and flexibility, as each app can be customized and optimized for its specific use case.

App chains are also an alternative solution for scalability to modular blockchains or layer-2 protocols. Appchains have similar characteristics to modular blockchains, as it is a type of blockchain architecture that separates data, transaction processing, and consensus processing elements into distinct modules that can be combined in different ways. These can be considered “pluggable modules” that can be interchanged or combined depending on the use case.

This separation of functions is why there is greater flexibility and adaptability to app chains compared to traditional, monolithic blockchain architectures, where all these functions are built into one application. They allow for the creation of custom, sovereign blockchains—tailored to meet specific needs and use cases—where users can focus on specific tasks while delegating the rest to other layers. This can be beneficial when it comes to resource management, as it allows different parties to specialize in different areas and share the workload.

The scalability of blockchain technology is a key factor for future success. Due to the scalability issues in layer-1 blockchain architecture, there has been a shift towards using modular blockchains or layer-2 protocols, which offer solutions to the limitations of monolithic systems.

As a result, the use of layer-2 networks is increasing, as they provide a way to solve scalability and other problems in current blockchain networks, especially for a layer-1 like Ethereum. Layer-2 protocols offer lower transaction fees, fewer capacity limitations, and faster transaction speeds that paved the way for its growing use, capturing the attention of 600,000 users.

App chains vs. monolithic chains

App chains are not entirely different from monolithic chains. Monolithic chains, like app chains, follow the fat protocol thesis where a single chain handles most decentralized finance (DeFi) activity and puts everything on one layer with a valuable token. However, layer-1 blockchains are difficult to scale. App chains currently do not have the same limited space issues as monolithic chains, but they can use modular solutions in the future if necessary.

“The fundamental value proposition of app chains is superb interoperability,” explained Stevie Barker, a researcher at Osmosis Labs, a decentralized commerce protocol for the Cosmos ecosystem. He told Cointelegraph:

“Appchains are supreme because they have precise control over the entire stack and any other areas of blockchain structure and operations they want to adapt. And they are interoperable because appchains can freely interact with each other.”

App chains can optimize for user experience and make execution faster, easier and more efficient. They can also secure their chain by recruiting validators to implement code, produce blocks, forward transactions, and more. Alternatively, they can borrow the security from another set of validators, interchain security, or combine both options to share the security between the entire interchain.

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Osmosis has developed a new version of proof-of-stake called “superfluid staking” which aims to improve both security and user experience. This approach enables liquidity providers to stake tokens in their liquidity pool (LP) shares to help secure the chain. In return, they will receive stake rewards in addition to the LP rewards, which can help increase their capital efficiency. This can be a more seamless and integrated approach to staking, as liquidity providers can simultaneously earn rewards for their LP and staking activities.

With current progress, the entire interchain will be able to use its staked assets for DeFi activities without risking centralization or compromising chain security, as is often the case with traditional liquid derivatives. This will allow users to take advantage of DeFi opportunities while maintaining the security and decentralization of their assets. Valentin Pletnev, CEO and co-founder of Quasar, a decentralized app chain designed for asset management, told Cointelegraph:

“Owning the entire stack from top to bottom provides easy value generation and purpose for the token – it also provides higher efficiency as chains can be designed around a specific use case and optimized for it.”

Appchains can also effectively manage Maximal Extractable Value (MEV), which refers to the profit earned by those who have the power to determine the order and inclusion of transactions. MEV has been a problem for DeFi users across various ecosystems. However, app chains can more quickly implement on-chain solutions that significantly reduce malicious MEV and redirect healthy third-party arbitrage profits to the app chain itself. This can help improve the user experience and reduce the potential for exploitation in the DeFi ecosystem.

Appchains enable radical blockchain experiments to be performed quickly. While Tendermint and the Cosmos SDK are notable technologies that enable apps to spin up inter-blockchain communication (IBC) protocol-ready blockchains quickly, the entire Cosmos stack is not required to become an IBC-enabled appchain. Barney Mannerings, co-founder of the Vega Protocol, an application-specific blockchain for derivatives trading, told Cointelegraph:

“As the space moves toward a multi-chain, multi-tier world—where assets can be moved between chains and specific scaling layers—distributing an application across multiple hubs can make sense.”

App chains offer a path for the new blockchain communication standard. Native token transfer between ecosystems eliminates bridges and allows native token transfer across chains.

App-specific blockchains also offer several valuable benefits that make them attractive to both developers and users. Their ability to improve application scalability, performance, security and interoperability makes them a valuable tool for building the next generation of software. As the technology continues to evolve, we will likely see more and more developers adopt app-specific blockchains for their applications.

Related: Blockchain interoperability, explained

However, the use of multiple app chains can make them more complex and difficult to manage compared to other types of blockchain technology. Since each app runs on its own blockchain, managing and maintaining multiple blockchains can be resource-intensive and time-consuming. Integrating different app chains can be challenging due to potential compatibility issues.

Overall, the advantages and disadvantages of app chains depend on the specific use case and requirements of the DApps under development. In some cases, app chains may provide the ideal solution for building and deploying DApps, while other types of blockchain technology may be more suitable in others.