Exploring the Origin, Development, and Prospects of AppChain

The Inevitable Trend of AppChain Development

In 2023-2024, more and more dApps are announcing their transformation into AppChains. This trend is mainly concentrated in areas such as DeFi, gaming, social, and AI. The development of AppChains has become inevitable, and the reasons include:

• Modular technology matures
• General Rollup Layer 2 Network Widely Verified
• The increase of RaaS platforms and the improvement of services
• The competition for public chain blockchain space resources among dApps is intensifying.
• Optimization of transaction cost requirements for end users
• Customization of token economics

Upgrading dApps to AppChains will not immediately transform them into high-valued infrastructure. The advantage of AppChains lies in facilitating more high-frequency on-chain transactions through low-cost transactions, utilizing data accumulation to enhance user experience, and forming user stickiness to achieve network effects. The core of AppChain development still rests on its unique application barriers and traffic.

Exploring the Origin of AppChain

The origin of AppChain can be traced back to the Cosmos project. Cosmos is known for its modular and pluggable design concept, separating the virtual machine and consensus engine, allowing developers to freely choose the building framework and customize parameters. This enables applications to exist in the form of independent chains, providing advantages in flexibility and sovereignty.

However, the overall growth trend of Cosmos AppChain has not been sustained, and the number of new AppChains has not significantly increased. The main reasons include:

• Sovereignty is too strong
• High security, startup and maintenance costs
• High technical threshold
• Token depreciation issue
• Insufficient Liveness Characteristics
• Developer documentation resources are incomplete.
• Community cultural issues

Catalyst for New AppChain

The rise of the new AppChain is due to:

1. Popularization of Modular Blockchain Concepts
2. General-purpose Rollup Layer2 Maturity and Widespread Validation
3. Interoperability and Liquidity Aggregation Layer Development
4. The Rise and Improvement of RaaS Platforms

Projects like Optimism and Arbitrum have driven the exploration of Layer 2 solutions. Major projects have successively introduced the concept of AppChain, such as OP Stack and Arbitrum Orbits. The emergence of RaaS platforms like Altlayer and Caldera has further simplified the AppChain development process.

The infrastructure and functions around AppChain are also advancing rapidly, such as Alternative Data Availability, custom Gas tokens, etc. Aggregated and unified layer solutions like Superchain and AggLayer aim to improve interoperability between AppChains and liquidity aggregation.

Advantages and Disadvantages of New AppChains

Advantages:

• Modular design
• Optimize performance
• Enhance value capture

Disadvantages:

• Liquidity Fragmentation
• Interoperability and composability issues
• Increased complexity

Core Considerations for Deciding on AppChain

1. Rely on existing public chain features
2. Need to customize features
3. Cost Sensitive

The Construction and Development Path of the AppChain Moat

The moat of the AppChain lies in its own application business. The key to success is:

• Digging into market pain points
• Build PMF product applications
• Build low-cost on-chain applications
• Accumulate user data
• Forming user stickiness and scale effects

The development approach should be focused on steady and solid progress, first establishing core functions, and then developing new features and product lines.

Token Gameplay Design Ideas

Adopt a natural development ( Organic ) strategy:

• Reduce human intervention
• Avoid reliance on short-term incentives
• Coordination of Token Circulation and Application Development
• Design user attraction mechanisms based on product positioning.
• Establish the core value of the token
• The growth of token holders is consistent with the expansion of the user base.
• Avoid overly aggressive allocation strategies

Overview of Well-Known AppChain Projects

• Cyber: A Restaked Ethereum Layer 2 network focused on social scenarios.
• XAI: A game three-layer network compatible with EVM developed by Offchain Labs
• MyShell: Innovative AI Agent Creator Platform
• GM Network: Innovator in the consumer AIoT space

Investment Analysis Framework

• Industry understanding and market positioning
• Target customer group
• Product delivery and iteration speed
• User Retention and Business Model

Outlook

AppChain is expected to play an important role in diverse fields such as social networking and gaming, driving innovation and development in related industries.