The continuous technological innovations in the DeFi field have given rise to the emergence of Appchains, which has sparked widespread discussions in the industry. In a recent article, Yearn Finance founder Andre Cronje shared his views on this new technology and delved into the question of whether Appchains are truly practical. Drawing on his extensive experience, Cronje analyzed the potential and challenges of this technology, and provided a calm assessment of its future development.
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ToggleInspiration from a Tweet
Cronje's article started from a tweet that sparked a series of discussions and product recommendations around new technologies. One particular product that caught his attention allowed him to build his own "Appchain" in just a few minutes. This hands-on experience excited Cronje, as it gave him the opportunity to explore many novel technical solutions, which was a great opportunity for someone like him who is passionate about learning new technologies.
Appchains: The Ideal Concept and the Reality Gap
Cronje then delved deeper into the potential of Appchains. He pointed out that the idea behind Appchains is to provide developers with a complete technology stack, including native stablecoins, oracles, consensus systems, bridging technologies, and cross-chain interoperability. However, the reality is not as perfect as it seems, especially in terms of automation and free-of-charge aspects.
The Real Challenges of Native Stablecoins and Oracles
Cronje focused on what he considers the two most challenging issues: the issuance of native stablecoins and reliable oracles. He mentioned that in his recent Sonic project, he spent over $5 million to implement these features, so when he heard about the possibility of obtaining these technologies for free, he felt both humbled and embarrassed. Specifically, Noble.xyz, a platform that claims to provide native USDC and CCTP for any IBC-supported chain, is not truly a native issuance, but rather a bridging solution using IBC technology, as Cronje pointed out.
He further discussed other recommended solutions, such as LayerZero and AcrossProtocol, which are technically impressive but also not native issuances. For chains aiming for large-scale adoption and trust, native issuance is the ideal solution, but it comes at a significant cost.
Where Lies the Difficulty of Oracles? Integration and Costs
Regarding oracles, the recommendations Cronje received include SkipProtocol, StorkOracle, and Redstone_defi. Unfortunately, these oracles are not immediately usable and require additional integration work, which may also incur costs. He believes that for developers who want to become top L1 or L2 blockchains, this could be a significant challenge, as most new chains aim to be at the forefront of the market.
Development Tools and Wallets: Potential Operational Friction
While development tools and wallets are compatible with new blockchains, Cronje pointed out that users and developers need to manually configure RPC (Remote Procedure Call) endpoints. This may seem trivial, but it adds unnecessary friction to the user experience.
Choosing a Block Browser: Free or Paid
In the area of block chain browsers, Cronje stated that Blockscout is an excellent representative of the free options, but paid products like Etherscan, with the support of a professional team, are usually able to provide more competitive services.
Network Effects and Interoperability Still Need to be Solved
Cronje mentioned that network effects and interoperability are crucial for the block chain ecosystem.
Using Unichain as an example, even if the chain has strong network effects, if it is the only chain that applies Uniswap, its actual trading volume may be limited. This is because most of the trading volume comes from arbitrage trades with other AMMs, liquidation positions, etc. Therefore, Cronje believes that interoperability and composability are important factors in driving economic activity in the block chain, and chains that exist alone are unlikely to generate sufficient fees.
The Practicality of Appchains: Engineering Solution or Overdesign?
Although the concept of Appchains is exciting, Cronje questioned its practicality. He pointed out that starting your own L1 or L2 block chain with all the technical functionalities in just a few minutes is indeed an impressive technical feat, but does it really solve the actual problem?
Cronje specifically mentioned the performance of Uniswap on Ethereum, which has created over $240 million in gas fees for validators, fees that could have been captured by the application itself. He believes that if the value capture problem can be solved in a more practical way, perhaps there is no need for technologies like Appchains to decentralize the network effects.
Conclusion: Technological Innovation or Value Capture Problem?
In summary, Cronje believes that while Appchains are an exciting technological innovation, they seem more like an engineering solution in search of a problem. He believes that the value capture of applications can perhaps be achieved in a simpler way, such as a revenue sharing model, which can avoid the various challenges of running your own block chain and related technologies.
As a technology enthusiast, Cronje is passionate about Appchains, but as a practical builder, he questions whether they are truly necessary. His perspective has led to deep reflections on the future development of Appchains.
