Simply put, an AppChain is a blockchain that dedicates its blockspace to a specific application.
Importantly, they *do not* only refer to monolithic L1s because "layers" are mostly just trust-minimized blockchains w/ two-way trust-minimized bridges.
3/ AppChains as a concept have been in the making since 2016 but have evolved and accelerated since 2020.
4/ Today, there are a variety of platforms providing AppChain infrastructure, both as "modular execution layers" (i.e. rollups & sidechains) and "monolithic blockchains" (i.e. combining execution, settlement, and consensus).
5/ There are also a bunch of teams building on these platforms across a number of use cases, and teams continuing to launch standalone AppChains optimized for their use-cases.
6/ There are 3 main reasons why devs are building AppChains:
- Performance: low & predictable TX costs
- Customizability: optimizing for throughput, security, permissioning, etc.
- Value capture: forking DeFi infra, internalizing MEV, and token-based staking & gas fees
7/ But this is *not* a shill piece - there are actually *many* issues with AppChains!:
- Limited composability & atomicity
- Recreating walled gardens
- Liquidity fragmentation
- Reflexive security model
- Waste of resources
- Additional developer lift
- Limited ecosystem tooling
8/ So which apps are AppChains best suited for?
Apps that:
- Care less about security and atomicity (e.g. P2E games, NFT collections, cryptosocial)
- Reach some notion of scale & PMF
- Have significant product/performance benefits from dedicated blockspace
9/ Will we see a UNIchain?
Unlikely, unless we can solve for x-chain liquidity and atomicity.
Remember that flash loans provide effectively infinite capital efficiency with zero balance sheet risk, which is incredibly important for a well-functioning DeFi ecosystem!
10/ Still want to build an AppChain? Unfortunately, there are lots of factors to consider, e.g.
- Security source
- Permissions
- Composability
- Finality
- Gas currency
- Required stake
- EVM support
There is no "best" solution, but roll-ups are sufficient for most requirements
1/ Market timing is arguably the most important factor that determines the success of a company.
Here are three mental models for determining whether it is the right time for what you're building:
- Prior failures
- Ingredients for success
- Awareness & acuteness of pain
2/ Prior failures:
- Who else has tried something similar to what you're building and failed?
- Why did they fail (e.g. competition? no demand? bad UX)?
- Have those reasons been solved by the market (e.g. better tech)?
- Can you solve any of those reasons (e.g. better GTM/team)?
3/ Ingredients for success:
- What needs to come together for your project to be successful (e.g. platform scalability, end-user distribution)?
- Are most of these ingredients achievable in the next 1-2 years?
- Can you accelerate the timelines for any of these ingredients?
Bridges enable:
- Greater productivity and utility for existing cryptoassets
- Greater product capabilities for existing protocols
- New features and use cases for users and developers
3/ There are usually 4 components to these systems:
- Monitoring state on the source chain
- Relaying information to the destination chain
- Reaching consensus on which information to relay
- Cryptographically signing the information sent
2/ Liquidity mining (LM) is a network participation strategy in which a user provides capital to a protocol in return for that protocol's native token.
3/ LM programs come in 3 flavors:
- Growth marketing: <20% of tokens distributed to incentivize specific actions
- Programmatic decentralization: 20-80% of tokens gradually distributed to the community
- Fair launches: >80% of tokens quickly distributed via specific actions
1/ @YamFinance was a fascinating social experiment to watch unfold in real-time.
It's not ideal to test in production with large amounts of capital at risk, but we've learned a lot.
My takeaways 👇
2/ DeFi is an MMO with money at the center of the game design.
Users had to figure out how to maximize yield in a time-constrained and reflexive environment (e.g. which pools are most profitable, whether to sell before/after rebase).
3/ We've barely scratched the surface with the game design.
Incorporating more DeFi building blocks, compounding incentives, and intuitive UIs will enable more immersive engagement at a larger scale.
Here are their recommendations to address the regulatory, supervisory and oversight challenges identified for stablecoins:
2/ Authorities should have and utilize the necessary powers and tools, and adequate resources, to comprehensively regulate, supervise, and oversee a stablecoin and its multi-functional activities, and enforce relevant laws and regulations effectively.
3/ Authorities should apply regulatory requirements to stablecoins on a functional basis and proportionate to their risks.