Author: Pavel Paramonov, Source: Author’s Twitter @paramonoww; Translated by: Deng Tong, Golden Finance
Is everything really moving towards AppChains?
Well, yes, but not really.
The main reason dApps are moving to sovereign chains is because they feel they have been robbed.
This is not far from the truth as most dApps are not profitable.
You can consider the example of the recently shut down @zkxprotocol, and many other applications in the past like @utopialabs_, @yield, FujiFinance, etc.
But is the business model really that flawed, or is the protocol truly a rip-off?
The main (and often only) source of revenue for a dApp is fees. Users pay fees because they directly benefit from them.
However, users are not the only parties that benefit from dApp usage.
There are several participants who profit from the transaction supply chain, but they are primarily block proposers, even if they are the last to see the transaction. In the case of L2, these are sequencers.
MEV is being extracted en masse, which isn’t always a bad thing, but the value created by dApps is being taken away from them, so they are not getting the full value they provide.
There are currently 3 ways to solve this problem:
1. Become an application chain.
2. Select L1/L2 for the return value.
3. Implement application-specific sequencing.
Like everything in encryption, every solution has its trade-offs.
1. Becoming an application chain: high cost + high value
You gain countless advantages: extracting as much value as possible, controlling your own network (if you are L2), easier scaling, avoiding competition for block space, and more.
Disadvantages: It's really expensive. Very expensive. And it's hard to do because you have to make both the app and the chain.
Even if you want to build L2 and use a solution like @alt_layer .
The argument that every application will eventually become an appchain is generally untenable for 3 reasons:
- Not every dapp is large enough to move to Lisk.
- Some dapps directly benefit from the architecture of the underlying chain.
- Dapp feels comfortable on another chain.
2. L1/L2 of return value: low cost + medium value
It’s much cheaper to deploy an application on a rollup or L1 because you don’t have to implement new rules for validation, inclusion, consensus, transaction flow, etc.
For rollups: It’s really easy to bring your app from Ethereum to a rollup (most of the time) because rollups are either EVM-compatible (e.g. @arbitrum) or EVM-equivalent (e.g. @taikoxyz).
You still need to consider the architecture of the underlying chain, but you don’t have to build it from scratch.
Maybe in the future we’ll have true chain abstraction and developers won’t have to care about anything except their dapp, but that’s another story…
Developers receive a medium value in return, because it is not high (you don’t own the chain economy), but not low (you get some return in addition to the fees).
There are almost no implementations at the moment because sharing MEV with dapps is still a complex process and we need to do more R&D.
3. Application-specific ranking: medium cost + uncertain value
The concept of application-specific sequencing is fairly new and people often confuse it with application chains. The difference between the two is simple:
- Appchain takes care of sequencing and execution.
- Self-sorting dapps only care about sorting and "outsource" the execution to L1/L2.
It is medium cost because besides dapp building you also have to consider ordering transactions, and the value is uncertain because the concept is fairly new and has different concerns.
First, because of the inclusion of games, you are still dependent on the proposer: you can send any bundle you want, but the decision whether to include your bundle is up to the proposer.
If you will accept all MEV, the proposer has no clear incentive to include your bundle in the block.
Therefore, it opens another incentive market for proposers. They (dapp + proposer) should cooperate, otherwise none of them have any value or power.
It also has uncertain value because we are not sure whether the shared value of L1/L2 will exceed the value dapps create for themselves by ordering transactions.
Any chain is a dark forest (not just Ethereum!). So back to the question at the beginning:
Is everything really moving towards AppChains?
1. Yes (some dapps have better benefits to have their own chain than to stay on an existing chain).
2. No (there are other solutions that fit dapp needs)
The forest is huge and all options can be explored.
There is a certain diversity in every landscape (crypto) in the world, so choose the one that better suits your needs or build your own solution!
