This article was originally published on November 2, 2023
I think investing in the application chain is the most profitable in the currency circle besides contracts, but the income is also the same, because the function of the application chain is fundamentally like an independent application. Opening the mobile application store requires so many apps. The competition for survival is still fierce. I have been telling you about modular blockchain in the previous issues. I wonder if you remember that there was a Fat Protocol Thesis. Now it seems that this was in line with the requirements of the project team at that time, but it was not suitable for the market requirements because at that time According to his logic there should be no modularity and application chaining.
Today we will talk about the application chain, the right arm of L2. Let’s talk about the history first. This year, the inj team announced the establishment of an ecosystem fund supported by companies such as Pantera Capital and Jump Crypto, which is mainly responsible for supporting the construction of other applications on the application-specific layer. , thus creating the application chain protocol.
The protocols of these application chains can promote a positive feedback loop of the speculative value of native network tokens; the currency price rises, and then developers and investors invest the income into the ecosystem, allowing this flywheel to spin.
From the perspective of application expansion, as the demand for native tokens increases, the protocol can capture the value created by the application layer. This is where the gas fees we talk about all day appear. So, theoretically speaking, the more transactions the app puts into the protocol, the more value the protocol will be able to capture.
When the "Fat Man Protocol" came out, all the big guys expressed their opinions. This also meant that good things must withstand scrutiny, but in the end, the cumbersome side still won the upper hand. At that time, modularization, as we talk about it today, was still There is no concept of application chain.
Those who advocate solving the problem from the perspective of complexity are only concerned about their own income. If modularization is used, such a rich block space will squeeze the gas fees of users. In addition, the application chain can be started on multiple chains, which is not very friendly to those single protocols. In this way, the flywheel we mentioned above will stop.
The design of the application chain is a blockchain built for specific uses; the design still has certain advantages, such as better value accumulation. For example, when we talk about the problem of choosing two out of three blockchains, the application chain can solve this problem. By pledging machine network tokens, the security factor will be higher than other chain supply pools, and you can also obtain value from the blockchain business model. Developers are free to customize any configuration in the technology stack for specific purposes, such as throughput and finality, and make trade-offs based on what works best for the application.
For example, let’s talk about our old friend dydx. In V4, it is implemented on the Cosmos-SDK driver chain; it promises that traders will no longer pay gas fees for transactions; but fees will be charged based on the size of the transaction, imitating the trading experience on a centralized trading platform.
(Directly translated by WeChat)
As for the commercial value mentioned above, I actually didn’t delve into it. I can only mention it to them. For example, uni, opensea, etc. can now be downloaded in the app store, because with the rise of L2, more protocols are now available. The shift from user-centered to enterprise-centered is manifested in data availability and consensus payment. The total valuation of this application now exceeds 1 billion US dollars. In general, let professional people do professional things, and by outsourcing some non-essential tasks, you can still achieve the same goal.
The application chain itself still has some shortcomings, because the concept has not been around for long, and many things are not yet fully popularized. For example, liquidity dispersion and composability; because the native assets retained in a specific application chain cannot interact with assets in other chains, unless these assets are sugar-coated and sweet-talked by other guys and meet all her requirements. In this way, the princess of this family will have a chance to get on the bus.
It now appears that the business model of Application Chain is very suitable for the current market structure; because the protocol can accumulate value from more sustainable information. And try to build your own ecosystem so that you can make full use of the technologies of protocols such as Inj and Cosmos.
Appchains are no longer competing with alternative base layers or protocols with lower gas fees; but instead they have found a more reliable and sustainable business model where the market agrees on a fair price; also solving the value accretion problem of the first generation “fat protocol thesis”.
Just like the history of the application chain we mentioned at the beginning, inj's operation this year proves that the "Fat App Chain Thesis" was originally an independent perpetual futures application chain; inj runs a typical order book model; and is the first to create zero gas to avoid preemption Transactions and other malicious MEVs.
inj wants to build an ecosystem, and they have also found the door to building this ecosystem. They still have time to figure out how to transform it after entering the door, but in the long run, it can be used as an investment application chain target, such as the one that is most similar to it. The one is Sei. Sei is widely regarded as the closest thing to Inj in the industry. Both operate as an order book; Sei’s native token does not accumulate value like Inj, quite the contrary, it acts as the network’s native gas token.
Relatively speaking, Sei will still perform well in this field, including some relatively good protocols in its ecosystem, such as Mars and Levana. Sei's team is also building their ecosystem around AMM. For us, we just need to take the chips and let time take care of the rest.
