The use of such solutions allows developers greater flexibility in designing ecosystems, governance structures, and consensus algorithms for the decentralized applications they create.

How do appchains work?

Appchains operate in a similar manner to a basic blockchain, but on top of it. The primary distinction is that they are app-specific.

Appchains rely on Layer 1 (L1) blockchains in terms of security. Because they do not compete for processing power and storage space with L1 applications, such systems are highly customizable and have significant performance potential.

Such solutions typically have a utility token. It is used for stacking, as the application’s internal currency, and for voting.

Validators from the main network help appchains (if they agree to allocate resources to a particular application).

What advantages does it have?

Using the new approach to application development has several advantages over L1, Layer 2 (L2) solutions, and sidechains. As previously stated, appchains increase system performance and customizability without sacrificing security because they rely on the underlying blockchain.

The direct use of L1 in the creation of dapps involves competing for limited computing resources with other applications. Because developers have no control over the consensus protocol, this is likely to result in performance degradation and a lengthy platform upgrade process.

Because of competition among dapps on the same network, a single popular application can consume a disproportionate amount of resources. This results in higher fees (as seen with the launch of XEN Crypto) and transaction processing delays.

Upchains imply low and predictable transaction costs, which are beneficial to the user experience.

As the popularity of decentralized applications grows, developers may be required to perform advanced customization and optimization of various parameters such as throughput, finality, security level, and degree of availability (permissionless or permissioned).

Upchains allow traditional organizations to immerse themselves in Web3 without making their platforms public from the start. Companies, for example, can initially require KYC compliance from validators, rely on a limited set of developers, and select specific services for cross-chain interactions.

What disadvantages does it have?

The main distinction and, perhaps, limitation of appchains is that they are “locked” to a single application. L2-solutions, on the other hand, can interact with a wide range of dapps.

Appchains imply limited linkability and isolation, which can result in liquidity fragmentation. The problem is largely solved by integrating cross-chain bridges, but the latter are often a target for hackers.

Running and maintaining an appchain can be a waste of time and money if an application is underutilized. Platform-specific validators can effectively leverage resources from other sources.

The operation of an appchain can be complicated in a variety of ways. For example, management of additional infrastructure elements such as sequencers or validators.

Developers may lack ready-made out-of-the-box solutions such as block observers, RPC providers, indexers, oracles, fiat gateways, and so on.

Building L1 solutions has advantages, such as the availability of a massive amount of resources, infrastructure elements, and developer tools (especially beginners). This abundance can make integration with other ecosystems easier.

L2 allows developers to increase the scalability of services without requiring significant changes to the code base.

Because they rely on the underlying blockchain, Layer 2 solutions also imply a high level of security. Optimism and Arbitrum, for example, process transactions quickly and send “fraud proofs” to the main network thanks to Optimistic rollups.

What is the difference between appchains and sidechains?

Sidechains are a parallel network with a two-way connection to the main network, but they do not rely on L1 security. Sidechains differ from L2 in that they do not send transactions to the underlying blockchain.

Upchains are created for a specific application (app-specific). Sidecaps, on the other hand, perform any type of transaction. Their main disadvantage is the lack of security due to limited decentralization.

Polygon Proof of Stake, which is part of the Polygon project ecosystem, is one of the most popular sidechains. Polygon Edge, an open-source development environment for creating L2 solutions, is also included in the latter.

Which projects do have appchains?

Some blockchain projects allow developers to create appchains:

Polkadot parachains

Polkadot is a network of EVM-compatible blockchains, or parachains, that are connected to a central network (Relay Chain). The Relay Chain specializes in validating all related system transactions.

Relay Chain uses the Proof-of-Stake consensus mechanism, in which validators stack a DOT (Polkadot native token).

Each validator group is responsible for a specific parachain, which is assigned and maintained by collators: they collect user transactions and validate blocks using the Proof-of-Value algorithm. Collators are compensated for their work as nodes in varying amounts depending on the parachain.

The Polkadot network has a maximum of 100 parachain slots. They are distributed through auctions in which DOT holders vote on which projects should be linked to the Relay Chain.

“Parachain slots can only be acquired for a finite period of two years or less. At the conclusion of the lease, the slot will go back up for auction,” the project’s website explains.

Parachains can also act as bridges between the Polkadot network and external L1 blockchains such as Ethereum.

Such solutions give developers access to all of the appchain features mentioned above, as well as the freedom to choose an economic or management structure that allows utility tokens to be used.

One of the main disadvantages of parachains is the limited number of auction slots available. As a result, such solutions become less affordable.

The Polkadot team is developing paratrades, which are pay-per-use parachains. The solution will allow developers to upload the project code to Relay Chain and launch several collaborators without having to wait for a parachains auction. In the future, paratrades can be upgraded to parachains if they participate in and win auctions.

Polkadot also supports a maximum of 10,000 paratreads.

Another disadvantage of the ecosystem is that it does not support smart contracts. The Polkadot network’s capabilities are thus limited.

The parachains projects:

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