What are Appchains and How Do They Work?

Blockchain technology is evolving, and its applications are growing and consistently attracting more users into the ecosystem. The surge in adoption is pressuring blockchain networks to scale efficiently and meet the specific demands of every application that runs on them.

The modular blockchain architecture addresses this stress by dividing the network's core processes into dedicated layers. For instance, Ethereum’s shift to a rollup-centric roadmap focuses on data availability, cryptoeconomic security, and a second layer for running applications.

However, as applications continue to test the limits of even layer-2 systems, the next wave of this modular evolution is even more specialized: application-specific blockchains or Appchains. Appchains are custom-built blockchains dedicated to a single application, providing higher efficiency and optimization than general-purpose chains.

This analysis will explore what appchains are and why they are becoming increasingly relevant in the future of Web3.

Why Do We Need Appchains?

In the early days of decentralized finance (DeFi), nearly all activity was concentrated on the Ethereum network. However, Ethereum’s growing user base soon led to significant congestion, which caused gas fees to skyrocket, often making small transactions prohibitively expensive. This bottleneck led to the emergence of Layer-2 (L2) scaling solutions, such as rollups, designed to increase throughput and reduce fees by processing transactions off the Ethereum mainnet. While L2s provided relief by lowering gas fees and increasing transaction speed, they were not a perfect solution for every application.​

Need for More Throughput

Some applications, particularly those with high transaction demands like on-chain order book trading or AI-powered DApps, required even more throughput than Layer-2 solutions could offer. These applications needed to process thousands of operations quickly and efficiently, pushing the limits of existing L2 infrastructure.

Design Independence

Developers of highly specialized applications found that general-purpose blockchains did not provide the flexibility to optimize their protocols. For instance, an on-chain gaming application might prioritize larger block sizes and faster consensus mechanisms for real-time actions. At the same time, a lending platform would benefit from smaller blocks and slower but more robust consensus mechanisms for enhanced security. General-purpose Layer-2 solutions were too restrictive for these specific needs.

Security Concerns

Another concern was security. Having a wide variety of applications—from NFTs to DeFi—running on a single blockchain or layer increased the risk of systemic failures. If a vulnerability was exploited in one application, it could affect all applications operating on that layer. This concern led some developers and users to seek out isolated environments where a single application could control its own security parameters.

Increasing Efficiency

Appchain architecture introduces a more modular approach to blockchain design, where nodes specialize in specific tasks—similar to how industries operate on an assembly line. By isolating and optimizing each layer of the blockchain, appchains provide significant efficiency improvements compared to general-purpose blockchains that attempt to handle all operations at once

In conclusion, the need for higher throughput, design independence, improved security, and increased efficiency has driven the demand for appchains. Appchains offers a dedicated blockchain environment for specific applications, allowing developers to build tailored solutions that better meet their technical and operational requirements. This approach helps solve many of the issues faced by Layer-2 solutions and makes appchains an essential innovation in the future of blockchain technology.

What are Appchains?

Appchains, or application-specific blockchains, are distinct from general-purpose chains like Ethereum or Layer-2 networks such as Optimism. Instead of supporting multiple DApps and use cases, appchains are designed to run a single decentralized application or a very specific utility. This singular focus allows them to offer several key advantages, including more predictable fees, higher performance, and a tailored user experience.

Key Characteristics of Appchains:

1. Native Fee Mechanism: One of the hallmarks of appchains is their use of a native fee mechanism. Unlike Ethereum, where users need ETH to pay for transactions, appchains may implement unique fee tokens, streamlining the user experience and ensuring that fees are stable and predictable, as the fee token is tied directly to the appchain’s ecosystem.
2. Modular Blockchain Layers: Appchains typically build their architecture by leveraging a modular approach. Every blockchain, including appchains, requires three core systems: consensus (security), data availability (DA), and execution (transaction processing). While appchains usually construct their own custom execution layer to optimize for their specific use case, they can outsource other layers to specialized providers, allowing them to focus on what they do best. Examples of this modular approach include:
   • Polkadot Parachains: Each parachain is an appchain that runs its own application but relies on Polkadot’s shared security.
   • Cosmos IBC Chains: These appchains operate independently but can communicate with each other via the Inter-Blockchain Communication (IBC) protocol, enabling cross-chain interactions.
   • Chains using EigenDA or Celestia for Data Availability (DA): Appchains can outsource their data availability layer to services like EigenDA or Celestia, optimizing data storage and retrieval processes.
   • Aggregated Layers: Some appchains use aggregation layers from projects like Polygon’s Agglayer, ZK rollups, or Optimism’s OP Stack to further enhance their modular stack.
3. Tailored Execution Layer: Unlike general-purpose chains, where smart contracts and execution layers are built to accommodate a wide variety of applications, appchains can optimize their execution layer specifically for the task at hand. This means the execution layer is built from the ground up to support the unique needs of the DApp it runs, resulting in superior performance and customization.
4. Chain Abstraction and User Experience: One of the defining features of appchains is the seamless user experience they provide through chain abstraction. Although appchains interact with multiple blockchain layers (execution, consensus, data availability), these processes remain invisible to the user. From the user’s perspective, interacting with an appchain feels no different from using any other DApp, making the blockchain’s complexity abstracted away.

The best example of an appchain is when users don’t even realize they are interacting with a blockchain. This smooth integration of multiple layers behind the scenes results in a streamlined and efficient user experience.

Appchains represent a new evolution in blockchain technology by focusing on modular design and tailored performance for a single use case. This specificity allows them to optimize for performance, security, and user experience, all while reducing fees and maintaining efficiency. With growing adoption in ecosystems like Polkadot, Cosmos, and other modular blockchain platforms, appchains are set to play a significant role in the future of decentralized applications.

How Appchains Work?

To understand how application-specific blockchains function, it's essential first to break down the fundamental blockchain infrastructure that supports these dedicated networks. When a blockchain project outgrows the limitations of general-purpose execution layers, it requires a specialized blockchain infrastructure to optimize performance, security, and user experience. Building an appchain involves assembling various components to form a custom blockchain stack that caters to the application's unique needs. 

Here's a step-by-step look at the essential infrastructure required for appchains:

• Development Kits: Developing an appchain from scratch would be time-consuming and costly without software development kits (SDKs) and libraries. SDKs provide essential tools, templates, and modules that expedite blockchain and application development. 
  For example, Cosmos SDK and Polygon CDK are widely used to build appchains because they offer pre-configured frameworks for creating custom blockchains. These kits allow developers to focus on fine-tuning the application-specific features rather than spending resources on building foundational blockchain elements.
  • Cosmos SDK is a toolkit that allows developers to create modular and interoperable blockchains with built-in governance, staking, and slashing functionalities​(
  • Polygon CDK is a framework for building customizable chains that can integrate seamlessly into the Ethereum ecosystem.​
• Hardware Infrastructure: Blockchains require a decentralized network of nodes (computers) to operate. These nodes run the blockchain software, validate transactions, and synchronize the network. In an appchain, nodes execute the application's specific logic, ensuring it remains accessible and functional. The degree of decentralization (number of nodes) required varies depending on the security demands of the application. More validators mean better security and decentralization, but they also add complexity and cost to the network infrastructure.
  • Decentralized Validators: To secure the blockchain, decentralized validators ensure that data remains reliable and untampered. Validators maintain a copy of the blockchain and participate in consensus to confirm transactions.
  • Scaling Security: Projects with higher security demands, such as financial applications or on-chain gaming platforms, require more decentralized validators to ensure trust in the network.
• Sequencers: Sequencers are specialized nodes used by rollup-based blockchains (especially Layer-2 solutions). They batch transactions off-chain, compress them, and then send them to a parent chain (like Ethereum) for final settlement. Some appchains, especially those built as rollups or closely integrated with Layer-1 blockchains, require sequencers to handle transaction orders efficiently.
  Rollup Sequencers: Appchains built on Layer-2 rollups often use sequencers to handle off-chain computation and transaction ordering, only submitting the final transaction state to the parent chain.
• Consensus Framework: Every blockchain network requires a consensus mechanism to validate the state of the blockchain. This mechanism ensures that all nodes agree on the latest valid block, preventing double-spending and other malicious activities. The choice of consensus depends on the application’s needs for speed, security, and decentralization. For example:
  • Proof of Stake (PoS): In a PoS system, validators stake tokens to propose and validate blocks. It is a popular choice for appchains because it is more energy-efficient and scalable than Proof of Work (PoW).
  • Tendermint (BFT): Appchains built using Cosmos SDK, for instance, often rely on Tendermint's Byzantine Fault Tolerant (BFT) consensus, which ensures quick finality while supporting a decentralized validator set.
• Hashrate or Staked Value: Depending on the consensus mechanism, appchains need to secure their network through computational power (in Proof of Work chains) or by staking sufficient assets (in Proof of Stake chains). A high hash power or stake ensures that the network remains secure from attacks and can function optimally.
• Stake in PoS Systems: In Proof of Stake systems, appchains depend on the value staked in the network by validators, which incentivizes honest behavior and protects against malicious actors.

Leveraging Modularity in Appchains

While setting up the essential infrastructure for a dedicated blockchain is resource-intensive, appchains often rely on modular components to streamline development and reduce costs. By outsourcing certain elements of the blockchain stack, appchains can focus on customizing the aspects most relevant to their application. Here's how they leverage modularity:

• Data Availability (DA): Instead of building a full validator network, appchains can use data availability services like EigenLayer, Celestia, zkPorter, or Avail. These services ensure that data is available and secure, reducing the need for extensive infrastructure.
• Sequencer Services: If appchains are designed as rollups, they can utilize external sequencer services that connect to Layer-1 chains like Ethereum, ensuring smooth transaction processing.
• Development Kits: Appchains benefit from SDKs and blockchain development kits such as Cosmos SDK or Polygon CDK, which provide modular and customizable blockchain templates that reduce development time and complexity.
• EVM Compatibility: Many appchains choose to be EVM-compatible (Ethereum Virtual Machine) to leverage the wide range of developer tools, libraries (such as Geth), and existing smart contract standards available within the Ethereum ecosystem. This increases developers' accessibility and simplifies the deployment of DApps.

Conclusion

Building an appchain involves assembling various infrastructural components, from development kits and hardware nodes to consensus mechanisms and data availability services. By adopting modular frameworks, appchains can optimize their networks without building each component from scratch. This approach significantly reduces the complexity and cost of creating dedicated blockchains while allowing for customized solutions tailored to specific applications. As modularity becomes more prevalent, appchains will continue to grow in adoption, offering powerful, scalable solutions for highly specialized decentralized applications.

Appchain Frameworks in Web3

Appchains require a robust infrastructure to operate efficiently, which includes nodes and validators, sequencers for settlement, data availability (DA) services, and application development kits (SDKs). Several blockchain infrastructure projects specialize in providing these essential services, helping developers build application-specific blockchains.

This section will introduce critical projects supporting appchain development and explain their services. We'll also highlight appchain examples for each project.

Polkadot Parachains

Services Provided: Nodes, Validator Network, Data Availability
Polkadot enables the creation of parachains—app-specific blockchains that benefit from Polkadot’s shared security model. Parachains run independently but rely on Polkadot’s validator network to ensure the integrity of transactions and data availability. Validators on Polkadot manage the security of all connected parachains, while each appchain can focus on optimizing its execution layer. Polkadot’s cross-chain messaging (XCMP) enables these appchains to communicate seamlessly.

Appchain Examples:

• Acala: A decentralized finance (DeFi) hub for the Polkadot ecosystem that uses Polkadot’s shared security for fast and low-cost financial transactions.
• Ava Protocol: A protocol for decentralized autonomous organizations (DAOs), leveraging Polkadot’s infrastructure for scalability and security.

EigenDA

Services Provided: Data Availability, Validator and Node Network
EigenDA offers specialized data availability services, ensuring blockchain data's secure storage and retrieval. EigenDA is designed for appchains that require a scalable validator and node network but don’t want to manage the complexities of building their own. By integrating with EigenDA, appchains can offload their data availability layer, ensuring efficient and decentralized data processing.

Appchain Examples:

• Layer N: A decentralized application layer that utilizes EigenDA for scalable data availability.
• DoDo: A decentralized exchange (DEX) that leverages EigenDA’s network for high throughput and secure data storage.

Celestia

Services Provided: Data Availability, Validator and Node Network
Celestia is a modular blockchain network that provides decentralized data availability and consensus. It allows appchains to plug into its data availability layer while focusing on developing their execution logic. Celestia’s infrastructure ensures that appchains don’t need to build their validator networks from scratch, as they can rely on Celestia’s decentralized validators for security and scalability.

Appchain Examples:

• Manta Network: A privacy-focused blockchain that uses Celestia’s data availability layer for secure and scalable transactions.
• Osmosis: A decentralized exchange (DEX) leveraging Celestia’s infrastructure to ensure high throughput and data security.

Cosmos IBC and Interchain Security

Services Provided: Data Availability, Validator Network, Application Development Kit (Cosmos SDK)
Cosmos is a leading ecosystem for appchains, offering the Inter-Blockchain Communication (IBC) protocol to facilitate cross-chain data transfer and Interchain Security to provide shared security. Appchains built on Cosmos benefit from a highly customizable development kit (Cosmos SDK), a reliable validator network, and a modular approach to blockchain architecture. These services allow appchains to communicate seamlessly with other blockchains in the Cosmos ecosystem.

Appchain Examples:

• Neutron: A smart contract platform on Cosmos that uses IBC for interoperability and shared security via Interchain Security.
• Stride: A liquid staking solution that relies on Cosmos IBC for cross-chain functionality and Interchain Security for decentralization.

Polygon Supernets

Services Provided: Sequencers, Application Development Kits (Data Availability from Ethereum)
Polygon Supernets enable appchains to leverage Polygon’s infrastructure for fast, low-cost transactions. These supernets provide specialized sequencers for transaction processing, while application development kits help appchains quickly build and scale their blockchain stack. Polygon supernets often connect with Ethereum for data availability and settlement, allowing for a balance between performance and security.

Appchain Examples:

• Arcana: A decentralized identity and privacy platform using Polygon’s infrastructure to streamline secure, low-cost transactions.
• SX Network: A prediction market platform that benefits from Polygon’s sequencer services and Ethereum’s data availability.

Optimism Superchain

Services Provided: Sequencers (Data Availability from Polygon PoS Chain, Ethereum, or Avail)
Optimism’s Superchain model allows appchains to benefit from Optimism’s sequencers for processing transactions, with flexible data availability options from Polygon, Ethereum, or Avail. Optimism Superchain appchains can achieve high scalability by utilizing rollup technology while offloading their data availability and settlement layers to more secure and decentralized platforms.

Appchain Examples:

• Fraxtal: A protocol focused on decentralized finance using Optimism’s infrastructure for low-cost, high-speed transactions.
• Coinbase Base: A Layer-2 network leveraging Optimism’s rollup infrastructure to provide a seamless user experience with enhanced security.

ZKsync ZK Chains

Services Provided: Sequencers (Data Availability from Ethereum or zkPorter)
ZKsync is a ZK-rollup solution that provides appchains with fast and cost-effective transaction processing through specialized sequencers. ZKsync allows appchains to choose between Ethereum’s robust security or zkPorter’s off-chain storage for data availability, depending on their specific needs.

Appchain Examples:

• Mute: A DeFi platform using ZKsync’s fast transaction settlement with zkPorter for efficient data handling.
• Rhino.fi: A decentralized exchange (DEX) leveraging ZKsync’s sequencers and Ethereum’s data availability.

SKALE Sidechains

Services Provided: Data Availability, Validator Network
SKALE provides appchains with a network of sidechains designed to enhance performance and scalability. SKALE’s decentralized validator network ensures secure transaction processing, while its modular sidechain architecture provides scalable data availability for appchains that require higher throughput and low-latency operations.

Appchain Examples:

• SKALE Swell: A DeFi application leveraging SKALE’s sidechain infrastructure for high throughput.
• 5TARS: A gaming platform that uses SKALE’s sidechains to ensure fast, low-cost transactions with reliable data availability.

In conclusion, these infrastructure projects provide critical services like validator networks, sequencers, data availability, and development kits that appchains need to operate efficiently. By leveraging these frameworks, appchains can focus on optimizing their specific applications while relying on established infrastructure to ensure scalability, security, and performance.

Closing Thoughts: Rise of RaaS (Rollups-as-a-Service)

As appchains continue to grow in popularity, the blockchain industry has seen the emergence of a new trend—Rollups-as-a-Service (RaaS). RaaS projects are designed to simplify the development and deployment of appchains by providing generalized tools, infrastructure, and services that can be easily adapted to various use cases. The rise of RaaS is significant for several reasons, including the growing ease of launching custom blockchains and the increased accessibility of Web3 development.

RaaS platforms typically offer generalized SDKs (software development kits) that allow developers to build appchains without being confined to a specific ecosystem. These SDKs enable flexibility, allowing developers to choose their preferred consensus mechanisms, data availability layers, and other infrastructural components.

Another key innovation in the RaaS space is the development of shared sequencer sets. These sequencers act as intermediaries to batch transactions and settle them on a parent chain, such as Ethereum. Rather than each appchain building and maintaining its own sequencers, RaaS platforms offer shared sequencers that appchains can subscribe to, significantly reducing the technical burden on developers. This service enables faster transaction processing and allows appchains to leverage the security and scalability of Layer-1 blockchains while focusing on their specific applications.

Additionally, no-code RaaS platforms are emerging, lowering the barrier to entry for blockchain development even further. These platforms enable developers or non-technical users to deploy appchains with minimal coding experience. By providing pre-built templates, tools, and integrations, no-code platforms democratize appchain deployment, allowing a wider range of participants to enter the Web3 space.

The trend is clear: as RaaS lowers both the financial and technical barriers to creating custom blockchains, we are witnessing a significant shift in the Web3 industry. The growing accessibility and demand for appchains fuel an industry where developers can focus more on application logic and user experience rather than the complexities of blockchain infrastructure. This drives innovation and fosters the expansion of decentralized applications, contributing to the broader adoption of Web3 technologies.

In conclusion, Rollups-as-a-Service is rapidly becoming a cornerstone of the appchain ecosystem, making it easier for developers to build, deploy, and scale decentralized applications with fewer resources. As the RaaS sector evolves, it is poised to play a critical role in the future of blockchain infrastructure and Web3 growth.