What is an application-specific blockchain (appchain)?

Written by Alchemy

Reviewed by Brady Werkheiser

Published on August 10, 20227 min read

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What is an appchain?

An application-specific blockchain, or appchain, is a blockchain that is exclusively designed to operate one specific application instead of multiple apps like a public blockchain is designed to do. Appchains give web3 developers greater freedom over the economic structure, governance structure, and consensus algorithm for their app. Appchains operate on top of existing Layer 1 (L1) blockchains in order to take advantage of their security and gas fees. Appchains improve on the existing Layer 1 blockchain structure to give developers more freedom. 

In addition to their customizability, appchains empower developers with increased ownership and performance. Stakeholders have the freedom to make updates and changes to the chain as they see fit. Appchains also increase the performance of the app they serve because there are no other apps to compete for computation or storage. 

Appchains vs. L1s

A Layer 1 blockchain is a main blockchain, like Ethereum or Solana, on which web3 apps operate. An appchain is different from a Layer 1 blockchain because an appchain operates for one specific app. While L1 blockchains and appchains are different, appchains still utilize validators from the L1 blockchain the app is based on. 

There are benefits and tradeoffs to using an appchain compared to a public Layer 1 blockchain that we will explore later in this article.

Appchains vs. L2s

Layer 2 blockchains (L2s) are scaling solutions for Layer 1 blockchains, like Ethereum where some tasks of the main blockchain are completed by a separate blockchain. For example, L2s like Optimism and Arbitrum execute transactions and submit fraud proofs through optimistic rollups to still leverage Ethereum's settlement layer.

Appchains are different from L2s because appchains only operate for one app. L2s can operate for many different apps at once and are a generalized scaling solution for the L1 blockchain on which they operate.

Appchains vs. Sidechains

A sidechain is a blockchain that is compatible with the layer one blockchain, but does not use the L1 blockchain for security. Sidechains are different from L2s because they do not post transactions onto the main blockchain, and instead sidechains operate on their own security protocol. Sidechains are connected to the main blockchain through a two-way bridge. 

The main difference between an appchain and a sidechain is that appchains are app-specific. This means that appchains only operate for one specific app. Meanwhile, sidechains execute all kinds of transactions and asset exchanges. 

Polygon is an Ethereum sidechain that provides an appchain solution called Polygon Edge.

Appchains vs. Subgraphs

Subgraphs are a part of the The Graph protocol, which indexes and queries blockchain data. Subgraphs determine which data is indexed by The Graph and how it is stored. The subgraphs are open APIs which make the data accessible to anyone.

There are three parts of a subgraph: 

1. The Manifest - describes and provides information about the smart contracts being indexed by the subgraph

2. The Schema - defines what data is being stored by the subgraph

3. The Mappings - code in AssemblyScript that handles event data and updates the blockchain

While appchains and The Graph can both be used for building apps, appchains are different from subgraphs because appchains provide developers with the ability to create their own blockchains. Subgraphs merely serve to better describe and organize blockchain data. 

Appchain Benefits and Tradeoffs

Building on appchains provides unique advantages over building on a L1, Layer 2, or sidechain. As mentioned above, appchains provide developers with customizability, performance advantages, and increased ownership while leveraging the security of the main blockchain. 

Developing an app directly on a public blockchain means that the app must compete against other apps for computation and storage. This decreases the performance of the app, and can create a longer process to update or change the app since the developer is not in control of the consensus protocol.

However, developing on L1 does have its advantages. There are many more resources and tools available for developers, especially beginners, to develop apps on an L1 chain, L1s have more support, L1s have larger developer ecosystems, and porting code to a compatible blockchain can be easier.

With the introduction of L2s, app developers can access more scalable infrastucture without having to dramatically refactor their codebase to run on a layer 2 solution that offers cheaper gas fees and higher throughput without sacraficing security.

How does an appchain work?

Appchains operate similarly to the main blockchain except the appchain is app-specific. Appchains are built on top of existing blockchains. However, appchains operate slightly differently depending on which blockchain is used. We’ll get into how to choose which blockchain to build your appchain on later.

Appchains use their own token as staking for validators or as in-app ownership of something. Tokens within an app could be used as an in-app currency, as a token of in-app ownership, or even as a voting system. 

Appchains utilize validators from the main blockchain who choose to validate for the specific appchain. Appchains have their own tokens and validators stake using the appchain’s token. That way, appchains do not compete with other apps for transaction capacity.

What blockchains use appchains?

Some blockchains provide developers with the ability to build appchains. In this section, we’ll go over some features of popular blockchains for appchain development including:

1. Polkadot Parachains

2. Cosmos Zones

3. Avalanche Subnets

4. Polygon Supernets

Polkadot Parachains

Polkadot is a network of EVM-compatible L1 blockchains called parachains that are all connected to a central blockchain called the Relay Chain. The Relay Chain is a Layer 0 blockchain that validates all transactions from the parachains.

The Relay Chain uses a Proof-of-Stake consensus mechanism where validators stake DOT, the native token of Polkadot. Groups of validators are each responsible for a specific parachain, and are nominated and supported by collators who serve as nodes for the Relay Chain and their specific parachain.

Parachains can be used to operate specific apps or projects. Currently, the Polkadot network has the capacity for up to 100 parachains. Developers can obtain a parachain through an auction process in which participants bid for the projects they believe should receive a parachain. The parachain is then leased to the developer for two years. Parachains can also act as bridges connecting the Polkadot network to external L1 blockchains like Ethereum. 

Parachains provide developers with all the advantages of appchains described earlier in this article including the freedom to determine the economic and governance structure of their app. Parachains even support the use of their own native tokens. 

However, there are also some downsides to Polkadot Parachains.

One downside is that because Polkadot only supports up to 100 parachains, its use is limited to only the developers who succeed in the auction process, making Polkadot less accessible.

Polkadot is working to increase its capacity using Parathreads. Parathreads differ from Parachains in the economic structure, in that developers have to pay per block. Polkadot supports up to 10,000 parathreads.

Another downside to Polkadot is that the Relay Chain does not support the use of smart contracts. This limits the performance of the Polkadot network.

Examples of Polkadot Parachain Projects:

• Acala - A DeFi hub for the Polkadot network

• Litentry - A cross-chain Identity Aggregator

Cosmos Zones

Cosmos Zones operate in the Cosmos network using a hub-and-spoke model. Each appchain, or ‘zone’, is connected to the Cosmos Hub, which is the center of the Cosmos network. This creates the interconnectedness of all the zones in the Cosmos network.

Because all of the zones are connected through the Cosmos Hub, the zones can send data and tokens to each other. While each zone can have its own token, ATOM is the native token of the Cosmos Hub. ATOM is used for staking, rewards, and transaction fees.

The Cosmos Network uses the Tendermint Core, a Byzantine Fault Tolerant consensus algorithm, to validate transactions in a Proof-of-Stake model. The Cosmos SDK is the platform that developers use to build the zones in the Cosmos Network. Anyone can create a Cosmos Zone for their specific project. 

Cosmos Zones have many advantages for developers in addition to the usual advantages that come with building an appchain.

1. Tendermint Core increases transaction speeds and finality

2. Interblockchain Communication (IBC) allows zones to transfer data between each other

3. Cosmos SDK also allows developers to build parallel chains for their app chain if they need higher throughput

The main difference between Cosmos Zones and Polkadot Parachains is the governance structure.

Instead of validators being nominated by collators, like in Polkadot, Cosmos validators are the top 100 ATOM holders. This makes it more difficult to find Cosmos validators or to become a Cosmos validator. 

Examples of Cosmos Zones projects:

• dYdX - a large, decentralized exchange 

• Osmosis - the largest DEX on Cosmos, which allows people to swap, earn, and build

Avalanche Subnets

The Avalanche ecosystem consists of three blockchains: the contract chain (c-chain) which executes smart contracts, the exchange chain (x-chain) which handles the exchange of assets, and the platform chain (p-chain) which contains the validators and subnets.

Avalanche Subnets are appchains that developers can use for their projects by staking $AVAX, the native token for Avalanche. Subnets are either L1 or L2 blockchains. 

The Avalanche consensus protocol uses the Snowball Algorithm in which validators continuously adopt the majority opinion of a subset of validators until the entire group has reached a consensus. This makes the validation process quick, efficient, and scalable, and means Avalanche can support millions of validators at once. 

Some advantages that Avalanche has over other blockchains include scalability, finality, and speed.

1. Avalanche has no limit on the number of subnets that can be created

2. The Snowball Algorithm processes transactions within 1-2 seconds

3. Avalanche has a high throughput with more than 4500 tps

Examples of Avalanche Subnet Projects:

• DeFi Kingdoms Crystalvale -A play-to-earn, cross-chain, DeFi game. 

• Crabada’s Swimmer - A game that uses a unique fee-cover model. 

Polygon Supernets

Polygon Supernets use Ethereum as the L1 blockchain and Polygon Edge, Polygon’s blockchain building platform which provides developers with the tools they need to build their own EVM-compatible blockchain.

Supernet developers have the option to receive a Polygon validator who uses MATIC, Polygon’s native token, for staking, and can choose whether to use a Proof-of-Stake or Proof-of-Authority model. Each set of validator nodes only serves one supernet. 

Developers also receive tools and third-party services to help them develop their apps using Supernets. Supernets allow developers to connect their appchains to other Supernets and use any scaling architecture they wish. In short, Supernets utilize the advantages of Polygon Edge to allow developers to customize their appchains. 

Examples of Polygon Supernet Projects:

• Vorz - A tokenized Metaverse social media app similar to TikTok. 

• Boomland - A web3 game developed by BoomBit. 

How to Choose the Best Appchain

The best appchain for your project will depend on what you value. Every appchain provides the ability to customize the economic structure and governance structure of your app, however vary widely in their performance, tokenomics, consensus algorithm, and accessibility. 

The first aspect you should consider is the process to create an appchain. For example, blockchains that allow for a limited number of appchains will require you to compete with other projects for a slot.

Research the process of building an appchain, compare it to the process of building an app on a public blockchain using Alchemy, and then determine which one you prefer. 

Another important aspect to consider is the consensus algorithm of the blockchain you choose for your appchain. Some blockchains provide each appchain with many more validators than others. If security is important to you as a developer, be sure to research how transactions are validated for your appchain.