The use of this site and the content contained therein is governed by the Terms of Use. When you use this site you acknowledge that you have read the Terms of Use and that you accept and will be bound by the terms hereof and such terms as may be modified from time to time.
All text, graphics, audio, design and other works on the site are the copyrighted works of nasscom unless otherwise indicated. All rights reserved.
Content on the site is for personal use only and may be downloaded provided the material is kept intact and there is no violation of the copyrights, trademarks, and other proprietary rights. Any alteration of the material or use of the material contained in the site for any other purpose is a violation of the copyright of nasscom and / or its affiliates or associates or of its third-party information providers. This material cannot be copied, reproduced, republished, uploaded, posted, transmitted or distributed in any way for non-personal use without obtaining the prior permission from nasscom.
The nasscom Members login is for the reference of only registered nasscom Member Companies.
nasscom reserves the right to modify the terms of use of any service without any liability. nasscom reserves the right to take all measures necessary to prevent access to any service or termination of service if the terms of use are not complied with or are contravened or there is any violation of copyright, trademark or other proprietary right.
From time to time nasscom may supplement these terms of use with additional terms pertaining to specific content (additional terms). Such additional terms are hereby incorporated by reference into these Terms of Use.
Disclaimer
The Company information provided on the nasscom web site is as per data collected by companies. nasscom is not liable on the authenticity of such data.
nasscom has exercised due diligence in checking the correctness and authenticity of the information contained in the site, but nasscom or any of its affiliates or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this site. The information from or through this site is provided "as is" and all warranties express or implied of any kind, regarding any matter pertaining to any service or channel, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement are disclaimed. nasscom and its affiliates and associates shall not be liable, at any time, for any failure of performance, error, omission, interruption, deletion, defect, delay in operation or transmission, computer virus, communications line failure, theft or destruction or unauthorised access to, alteration of, or use of information contained on the site. No representations, warranties or guarantees whatsoever are made as to the accuracy, adequacy, reliability, completeness, suitability or applicability of the information to a particular situation.
nasscom or its affiliates or associates or its employees do not provide any judgments or warranty in respect of the authenticity or correctness of the content of other services or sites to which links are provided. A link to another service or site is not an endorsement of any products or services on such site or the site.
The content provided is for information purposes alone and does not substitute for specific advice whether investment, legal, taxation or otherwise. nasscom disclaims all liability for damages caused by use of content on the site.
All responsibility and liability for any damages caused by downloading of any data is disclaimed.
nasscom reserves the right to modify, suspend / cancel, or discontinue any or all sections, or service at any time without notice.
For any grievances under the Information Technology Act 2000, please get in touch with Grievance Officer, Mr. Anirban Mandal at data-query@nasscom.in.
The blockchain space is rapidly evolving and new approaches to developing and launching blockchain networks are emerging. However, as more and more web3 developers gain experience with blockchain technology, they are beginning to realize the limitations of the architecture of popular blockchains such as Ethereum and Solana. Although Ethereum enables the development of applications through smart contracts, it does not allow for the automatic running of code and has stringent regulations on how consensus and networking operations are revealed. To overcome these pertinent obstacles, some developers have started to explore the use of application-specific blockchains, also known as “appchains”.
This blog will explore the current popularity of modular frameworks among businesses for the development and deployment of blockchain networks, and how this novel technique affects enterprise customers who are looking to construct permissioned consortiums, application-specific chains, or sidechains. Also, we would delve deeper into why you should consider building your decentralized application as an application-specific blockchain?
What are app-chains?
Today, the development of decentralized applications is often done on top of an existing blockchain such as Ethereum, as it is the most convenient and practical way to do so.A substitute approach to creating decentralized applications was suggested, allowing developers to construct decentralized applications as the application of the blockchain itself, as opposed to having the application part of the blockchain be a Virtual-machine and having decentralized applications built on top of it. This is known as an application-specific blockchain or app-chain. App-chains are designed to provide developers with a platform that is reliable, expansive, and economical.
App-chains are designed to provide developers with a platform that comes enhanced with security features, facilitate scalability, and also has lower gas fees. They are built on top of a blockchain network, which allows for the development of applications that are secure, immutable, and resistant to censorship. App-chains also provide developers with the ability to create applications that are interoperable with other blockchains and applications.
History of AppChains
For years, web3 developers have been waiting for AppChain infrastructure to be provided by major blockchains. In 2016, Cosmos and Polkadot began working on the mission to bring the benefit of this relevant concept to masses, but it wasn’t until 2021 that their networks were fully launched (with IBC and parachain capabilities). By the end of 2020, there was a growing demand for Ethereum to be made scalable and the transaction fees were too high, thereby prompting several developers to begin their search for alternatives as a way to combat these challenges.
As Ethereum’s scalability solutions continue to be developed during 2020 and 2021, the focus gradually shifted to the implementation of Layer 2s (L2s). Layer 2s are a set of protocols that enable the scaling of Ethereum, allowing for faster and cheaper transactions. Polygon, Skale, zkSync (1.0), StarkWare (StarkEx), Optimism, and Arbitrum are all Layer 2 solutions that have been launched in 2020 and 2021. These Layer 2s facilitate quicker and more economical transactions, as well as enhanced scalability. Additionally, they provide a layer of security, as transactions are secured by the Ethereum mainchain.
The importance of supporting the Ethereum Virtual Machine (EVM) became increasingly increasingly clear as blockchain space evolved and needs for better alternatives grew. In 2020 and 2021, a number of other base layers (“L1s”) launched EVM-compatible chains in order to further their business development efforts. These encompass Avalanche (C-Chain), NEAR (Aurora), Polkadot (Moonbeam), and Cosmos (Evmos).
In 2019, Celestia (formerly known as LazyLedger) presented an innovative modular design that separates the execution, settlement, and data access layers of a conventional monolithic blockchain. This pioneering design allows for the formation of application-specific blockchains without having to reconstruct the other components of the stack. This flexible and customizable design allows developers to create on the application-specific blockchains without having the need to reconstruct other components of the stack. By separating and running these components in parallel, Celestia has opened up a new world of possibilities for blockchain applications.
How does an appchain work?
Appchains are built upon existing blockchains and have similar functions, yet their operations may vary depending on the blockchain they are based on. Appchains employ their own token for staking by validators or as a representation of ownership within the app. These tokens can be used as an internal currency, a token of ownership, or even as a voting system within the app.
Validators from the main blockchain who opt to validate for a particular appchain can stake the appchain’s token. This ensures that appchains do not compete with other applications for transaction capacity.
Current market overview of app-chains
At present, developers have a range of options when it comes to AppChain infrastructure.
In recent years, the use of AppChains has been gaining traction among developers and users alike. Axie initiated the release of their Ethereum sidechain, Ronin, while DeFi Kingdoms declared their relocation from Harmony to an Avalanche subnet at the end of 2021. In the middle of 2022, almost half of the Apecoin community voted in favor of ApeChain, and dYdX declared that their V4 will be constructed on a self-governing L1 using the Cosmos SDK. Nowadays, AppChains are being employed to create a broad range of applications on different platforms. With the increasing popularity of AppChains, developers and users are now able to launch and interact with them more easily than ever before.
Many platforms provide shared blockspace layers, such as Optimism and zkSync, while others are likely to offer dedicated execution layers if there is enough demand from developers. With the increasing popularity of blockchain technology, it is likely that more platforms will be available in the near future, giving developers even more options for creating and deploying their applications. No matter what platform developers choose, they can be sure that their applications will be secure and reliable.
Why AppChains For Enterprises?
In recent years, developers have been turning to appchains as a better alternative to launching smart contracts on shared blockspace and this can be attributed largely to following advantages:
Performance: Performance is improved because AppChains allow projects to keep transaction costs and latency low and predictable, resulting in a better user experience. This is in contrast to shared blockspace, where one popular dApp can consume a disproportionate amount of resources, resulting in higher costs and slower transaction times for other dApps.
Customizability: Customizability is an important factor when it comes to dApp development as this feature allows developers to be able to tailor their applications to the specific needs of their users. This includes the ability to modify the underlying blockchain protocol, customize the consensus algorithm, permissioning, the development process and other features. This could include features such as customizing the wallet, the smart contracts, setting up a testing environment, creating custom tokens, and more.
Also, developers building their applications on Virtual-machine blockchains have to face the restricting development environment of the blockchain. Ethereum developers are restricted to a few programming languages, including Solidity and Serpent. Additionally, they are bound by the rules set by the Virtual-machine. For instance, most Virtual-machine blockchains do not enable automatic state transitions. Every state transition must be activated by a user sending a transaction.This approach is logical when constructing a blockchain on a Virtual-machine, however it can be a source of problem for developers, causing them to encounter severe challenges.
When developing larger applications, developers need to focus on certain crucial design elements such as throughput, finality, security level, permissioning, composability, and compatibility with the existing ecosystem. For instance, validators may need high-performance hardware, such as SGX or FPGAs for creating zero-knowledge proofs. AppChains provide traditional organizations with an opportunity to explore Web3 solutions without having to be fully permissionless from the start. Organizations can mandate KYC-confirmed validators, vet coders who wish to construct on their network, and select which blockchains they wish to link their assets to and from.
Autonomy: When constructing an application-specific blockchain, you have absolute autonomy over the governance of the chain – you can either opt to deploy it as a public (Proof-Of-Stake) or private (Proof-Of-Authority) chain. This means that you can make decisions that are tailored to the needs of your application, without having to worry about the consensus of other applications in the ecosystem. Governance of your application is isolated from other applications, so if there is an issue it can be addressed without affecting any other applications in the system.
In the event of a decentralized application running on a Virtual-machine being hacked, there is no way to rectify the situation if the governing body of the blockchain does not give its consent. This was the case with the Parity multisig hack, where the Ethereum community was unable to repair the damage.
Earning through monetization of apps: AppChains offer developers a unique opportunity to monetize their applications and this feature makes for a strong business use case for app-chains. By forking existing protocols, developers can create their own ecosystems and generate revenue from trading fees, staking tokens, and other token sinks. Furthermore, coders can utilize MEV by running their own sequencers or validators, enabling them to develop new cryptonative business models. For instance, dYdX validators can provide users with low or no charges while giving them slightly worse execution costs. Moreover, AppChains can provide a platform for modders to monetize their creations. By extending existing IP on a rollup, modders can generate revenue through the use of blockspace. This presents a fresh chance for hobbyists to generate revenues from their work. Numerous successful video games have a plethora of modifications, add-ons, skins, etc., and are designed to be as modifiable as possible. Nevertheless, modding is generally done by gamers who don’t have the means to capitalize on their labor. This gives them the chance to monetize their efforts and generate a new source of revenue. If such games were AppChains, mods could extend the IP on a rollup and monetize through the use of the blockspace.
Scalability: Scalability is also improved with AppChains, as projects can increase the capacity of their own chain without having to compete for blockspace on the same network. This allows projects to scale up their operations without having to worry about being outcompeted by other dApps. Finally, AppChains offer improved security. By running on their own dedicated chain, projects can benefit from the security of their own network and avoid the risk of being affected by security issues on the shared blockspace.
Areas of improvement for App- Chains
AppChains provide a layer of isolation to infrastructure and users within different ecosystems. This does not prevent applications from being composed together, but it does prevent transactions from being atomic. While atomicity is an important property for some applications, it is not necessary for others, such as P2E games.
Also, AppChains allow for the transfer of assets and liquidity between different layers or chains, but this process requires bridging infrastructure, which can be inconvenient for end-users. In comparison to app-chains, the advantages of developing apps on the L1 and L2 protocols are still greater as they make more resources and tools available for developers. With the required support and larger developer ecosystems, LI makes it easy to port code to a compatible blockchain. Layer 2 (L2) solutions offer a more expansive framework for app developers, allowing them to expand their operations without having to undertake extensive modifications to their existing code. Additionally, L2s offer lower gas fees and higher throughput, without compromising on security.
Emerging AppChain Market Structure
The AppChain market structure is also evolving to include more specialized services such as decentralized exchanges, smart contract platforms, and other services. These services are designed to make it easier for developers to create and deploy dApps, as well as to provide additional security and scalability.
Applications that have achieved a certain degree of growth (e.g. user base, protocol revenue, TVL) and have proven their product-market fit are ideal for AppChains. These applications can benefit from the dedicated blockspace and have fewer security and atomicity requirements (e.g. P2E games, NFT collections, cryptosocial). For other programs, the most suitable option is to initiate on generalized L2s, and if they generate a sufficiently extensive ecosystem, they can migrate to app-specific L3s or app-specific L1s. It is probable that the majority of applications will remain on Layer 1 (L1) and Layer 2 (L2) blockchains with shared blockspace. Due to the fragmented nature of the L2 landscape, teams, especially those in the DeFi space, will likely opt for L1s due to their security, liquidity, and atomicity properties, the latter of which is especially important for flash loans that provide virtually infinite capital efficiency with no balance sheet risk. Non-DeFi applications can initiate on generalized Layer 2s and migrate to application-specific Layer 3s or Layer 1s if they acquire a considerable user base and network effects. This order of operations can be visualized as follows
Developers using the AppChains to launch their apps are likely to opt for modular execution layers (especially roll-ups) instead of monolithic chains due to the lack of capital needed to initiate a large validator set. Moreover, it is improbable that top-notch validators will assign their resources to an AppChain whose token has a low and unsteady market value.
App-design space
When selecting an AppChain infrastructure, there are a few design tradeoffs to consider in terms of security. These include shared security, which includes the consideration that whether it is secured by multiple independent validators, isolated security, which is provided by the application itself and its own validators or sequencers, and inherited security, which is provided by an underlying settlement or consensus layer. Critically analyzing pros and cons of each option is essential before settling on a choice. It is important to think through the advantages and drawbacks of different solutions available to make the best choice.
It is important to consider the security source and security settlement when choosing the AppChains. Cryptography is the most common form of protection, but other measures such as consensus protocols, smart contracts, and distributed ledgers also play a role. Cryptography is used to encrypt data, while consensus protocols are used to ensure the integrity of the data. Smart contracts are used to automate certain processes, and distributed ledgers are used to store and share data securely. Coming together of these components can facilitate a secure environment for blockchain applications. On Ethereum, security is provided by a combination of the Ethereum network and fraud proofs, validity proofs, and double spend protection. Non-Ethereum Layer 1 networks may use different consensus models to provide security. Finally, some applications use their own token as crypto economic security. Settlement of transactions typically occurs on the same layer that provides security.
When choosing an AppChain infrastructure, there are certain design decisions to make regarding the consensus – whether it is permissionless or permissioned model. Permissionless networks, such as Optimism and StarkNet, allow anyone to read, write, and validate state transitions. On the other hand, permissioned-by-choice networks, such as Polygon Supernets and Avalanche Subnets, only allow whitelisted validators and developers to read, write, and validate the chain.
It is essential to select a platform that allows for the smooth and secure transfer of both liquidity and data between different applications. This will ensure that users can access the services they need without having to worry about the security of their assets. Infrastructure with full moves to any application with minimum latency and maximum security, such as Polkadot XCMP and Cosmos IBC, should be preferred over those with limited connectivity, latency, and/or security.
Other factors such as gas fees, required stakes, transactions-per-second (TPS), transaction finality and EVM support are also important considerations when choosing the app-chains infrastructure to build on.
Final thoughts
Blockchain developers looking to create fully-optimized web3 applications can fall back on AppChains. However, developers should carefully consider their application’s needs and the trade-offs before dedicating resources to launching an AppChain.
It will be intriguing to observe the financial model, revenue plans, system immunity, value accrual across the stack, and consequent impacts on the crypto market structure in the upcoming years. If you are involved in the development of AppChain-focused infrastructure or applications, please get in touch!
About The Author
Dr. Ravi Chamria is co-founder CEO of Zeeve Inc, an Enterprise Blockchain company. He has an experience of 18+ years in IT consulting spanning across Fintech, InsureTech, Supply Chain and eCommerce. He is an executive MBA from IIM, Lucknow and a prolific speaker on emerging technologies like Blockchain, IoT and AI/ML.
Passionate About: Blockchain, Supply Chain Management, Digital Lending, Digital Payments, AI/ML, IoT
That the contents of third-party articles/blogs published here on the website, and the interpretation of all information in the article/blogs such as data, maps, numbers, opinions etc. displayed in the article/blogs and views or the opinions expressed within the content are solely of the author's; and do not reflect the opinions and beliefs of NASSCOM or its affiliates in any manner. NASSCOM does not take any liability w.r.t. content in any manner and will not be liable in any manner whatsoever for any kind of liability arising out of any act, error or omission. The contents of third-party article/blogs published, are provided solely as convenience; and the presence of these articles/blogs should not, under any circumstances, be considered as an endorsement of the contents by NASSCOM in any manner; and if you chose to access these articles/blogs , you do so at your own risk.
Zeeve is an enterprise-grade Blockchain Infrastructure Automation Platform. Join the growing list of clients that trust us with their Blockchain initiatives
Web3, a vision for a new internet based on blockchain technology. Welcome to the decentralized future: an open and level playing field of ideas, data and applications that are revolutionizing how we interact with each other online. Here, freedom…
The gaming and esports industry’s authenticity has improved dramatically compared to the past. It is a fast-growing, vibrant sector and provides a multitude of opportunities. After creating endless innovations in the Web 2 sphere, gaming and…
Industries are changing the nature of business by bringing blockchain technology into the frame. The tech stack has revolutionized every sector, from logistics to gaming and finance to healthcare. This was possible because of smart contract …
Blockchain has a pivotal application called NFT. Integrating NFTs with businesses has opened realms of innovation and massive revenue. It is a new way to commercialize your brand and transform digital work into a tradable digital asset. These …
Future of Metaverse
In many respects, the future of the metaverse will be like our present. As the notion of the metaverse expands to include Web3 technologies made possible by blockchain, certain real-world activities may even be replaced by them…
We have come a long way on the internet, something unimaginable in the early days. Currently, there are agreements and disagreements regarding Web3, but it has a lot to offer. Companies adopting Web3 and blockchain are gearing up for the future…
