Are Application Specific Chains the Future of Blockchain? – The new stack

As developers of decentralized applications (dApps) gain more experience working with blockchains, some are encountering limitations created by the parameters of blockchain architecture. Ethereum, for example, allows applications to be created via smart contracts, but does not allow automatic code execution. It also maintains fairly tight control over the way consensus and network functions are exposed to these applications. To overcome these limitations, some developers are turning to application-specific blockchains – custom-built and tuned for their specific application needs, and colloquially called “app chains”.

One of the more popular options for building app chains is the Cosmos SDK, due to its built-in composability, interconnected blockchains, and the ability for developers to maintain sovereignty over their blockchain. We’ve covered Cosmos in the past, including a developer academy to learn how to build in the Cosmos Network and the addition of Interchain Security, which allows multiple Cosmos blockchains to adapt to common security protocols while maintaining sovereignty.

Cosmos SDK and application modularity

In an interview with The New Stack, Sunny Aggarwalco-founder of Osmosis, said: “The Cosmos SDK makes it easy to build your custom blockchain and modify the core code. We can modify very core parts of the blockchain to create new features or create new user experiences that other DEXs don’t have; for example, requiring most blockchains that you use a native token for fees, which always felt like really bad UX. So what we did with our chain, in order to get mass adoption, we realized that we needed to let users pay transaction fees with whatever token they want.”

This notion of creating payment flexibility may sound as simple as allowing users to pay with both euros and US dollars, but it is far more complicated with blockchain implementations like Ethereum, where the blockchain has no direct knowledge of other chains. Because the Cosmos ecosystem is designed for Cosmos blockchains to be aware of each other, it becomes easier to adapt features such as payments while maintaining awareness of other Cosmos-compatible blockchains.

One advantage Cosmos has for building app chains is the modular nature of the Cosmos SDK. Aggarwal said: “There is a set of core modules that all Cosmos-based blockchains reuse, even if people change them. For example, we modified the stake module, but we try to keep it in line with the upstream module.” The real power of the modular approach is being able to adopt modules written by other developers to extend beyond the core SDK. “Developers write add-on modules and other app chains can copy those modules and split them into a repro,” Aggarwal said. “For example, we’ve written timer modules on the chain that allow self-executing code, and a number of chains have discarded that module.”

CosmWasm: The Cosmos way of using WebAssembly

One of the main strengths of the Cosmos blockchain is the smart contract module CosmWasm, which allows developers to write cross-chain smart contracts. It is primarily customized for your specific applications using Rust and can be further customized in combination with the Cosmos SDK. “CosmWasm is Cosmos’ smart contract systems built as a module of the SDK,” said Aggarwal. “It’s become kind of a secondary standard for how to build things in Cosmos. More of the application code development is going to move into CosmWasm and treat the Cosmos SDK almost like you would core code that you only change when there’s no other option.”

CosmWasm is also seeing interest from parties looking to adapt it for other blockchains, due to its flexibility. Composable has already implemented CosmWasm in the Substrate and DotSama blockchains, which allows them to execute cross-chain smart contracts in combination with the Composable Cross-chain Virtual Machine.

Economics of decentralized application development

According to Aggarwal, a particular argument in favor of app chains is the elimination of maximum extractable value (MEV) leakage. In blockchains in general, there is a strong incentive to identify the most valuable transactions and submit them ahead of other transactions at a higher price, in part because this is how consensus solutions are compensated. “More app developers are going to realize that it makes sense to have your own app chain,” Aggarwal said. “The value of layer 1 blockchains is the MEV you can capture. App developers are going to start questioning why they are leaking value to L1 when they can instead capture this value on their own chain and distribute it as income to token holders. »

In July, HOPR highlighted some potential risks surrounding the upcoming Ethereum merger and how it could create new incentives to attack validator vulnerabilities (see Twitter thread below). Running your own blockchain removes these kinds of problems from the underlying infrastructure your application depends on.

ETH2 validators have a major attack vulnerability that is worse than what is currently known

And as the merger gets closer, this issue should be talked about – but it needs some background:

A thread 🧵

— HOPR 🟡 (@hoprnet) 11 July 2022

Another way to look at the economic aspects of running your own blockchain is the potential to create cost efficiencies, much in the same way that traditional application models evaluate developing features internally rather than paying for API calls to third parties. An application-specific blockchain also eliminates competition for resources away from everyone else using the chain, meaning that all transactions in the chain are directly associated with the activity of the application users. In theory, this means better application performance, which in turn provides a better user experience.

In the longer term, we can see a greater commoditization of the blockchains themselves, with a greater focus on applications and how these applications support users’ needs. Aggarwal put it this way: “My thesis is that L1s become commoditized over time, and what has value are the apps, because the apps are what have relationships with the users. If you look at the early Internet, the way to bet on the rise of the Internet was not to bet on the rise of AOL and Compuserve, it was to bet on Amazon and Google, which were the early apps of the Internet. Ethereum apps will slowly start to realize that.”

Feature image via Shutterstock.