The Rise of Utility Chains: Exploring the Next Frontier of Blockchain Scalability

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Between 2022 and 2023, we see Ethereum making a lot of scaling progress through the L2 network. Rollups based on OP design, such as Arbitrum and Optimism, go hand in hand with rollups utilizing zero-knowledge technologies such as Polygon ZK-EVM, Linea, ZK-Sync, Scroll, and Starknet.

As all L2 network providers know, scaling a blockchain network doesn’t stop at L2, there is an additional layer – L3 or Application Chain, which many consider to be the scalability nirvana of blockchain.

Application chains, or application-specific blockchains, offer faster speeds, lower transaction costs, and can be customized to serve specific use cases, unlike public L2 blockchain networks.

Many teams launching L2 networks have recently announced dedicated stacks for building application chains on top of their L2 networks. As of now, the following major second-tier teams have announced the following application chain stacks:

Polygon’s Chain Development Kit Optimism’s OP Stack ZK Sync’s ZK Stack Arbitrum’s Orbit Chains Starknet’s Starknet Stack Linea and Scroll There are a few more that are not included in this list, but that’s probably because they launched L2 mainnet later than other teams Night.

Outside of the Ethereum ecosystem, you can also find API toolchains for many other blockchain networks, including Polkadot (Substrate), Avalanche (Subnets), and Cosmos (Zones). They also all support EVM in order to rely on the Ethereum ecosystem.

1. Rollups as a Service (RaaS)

In addition to the teams building these application chain stacks, companies that have traditionally provided Blockchain-as-a-Service (BaaS) deployments have also expanded their services to include Rollups-as-a-Service (RaaS).

The terms “Rollup,” “Appchain,” and “Layer 3” are sometimes used interchangeably when referring to these types of networks. Also, “Application Chain as a Service” may be less popular due to its acronym…

2. Private blockchain 2.0

In some ways, this appears to be history repeating itself. Five years ago, when Blockchain as a Service (BaaS) was first offered, companies rushed to launch private blockchain initiatives.

Since then, the storyline has leaned more toward public blockchains being the future, rather than private blockchains. But private networks still have their place, but they are more difficult to launch, manage, and maintain than public networks, which are effectively akin to public utilities.

The problem isn't just the overhead of running a private network, many projects simply don't make it beyond a proof of concept.

Organizations investing in Web3 initiatives now are smarter than ever. They understand the space and many are now aware of the influence that can be achieved through public networks.


They still face challenges on public networks, such as competing with all other users on the network and transaction costs that may be higher than they expect.

3. The attraction of application chain

Launching a dedicated app chain may become attractive for these and other reasons.

By launching AppChain, they are able to control certain components of the network while inheriting the security provided by layer 2 networks without having to establish trust themselves.

This means creators can specify the network configuration that best suits their use case. Some of these options include:

1) Cryptocurrency or Token used to pay for transactions on the network. Whether it is the currency of the underlying network (such as Ethereum) or the token of the network itself. They can even choose a gas-free network.

2) Block size. If the network will handle a large number of simple transactions, a smaller block size can be used to increase throughput. Conversely, if the transaction is more complex, a larger block size can be specified.

3) Restrictions on whether the wallet can conduct transactions with the network, for example, only wallets that have gone through the KYC process are allowed to conduct transactions.

4) How often a transaction or proof representation rolls over to the underlying network it is using.

Additionally, the required lifetime of the rollup window varies. Unlike blockchain, rolling windows can be temporary.

4. Temporary chain

Altlayer's Amrit Kumar discussed these temporary rollups in a great talk at EthCC earlier this year (here's the full talk if you're interested).

He emphasized that temporary rollups are ideal when you have a lot of on-chain activity that needs to be completed in a short period of time, such as NFT minting or virtual land sales like Yuga Labs.

Heavy blockchain activity can be conducted on a dedicated rollup, and once completed, the rollup can be revoked and all state changes will remain on the underlying network.

Later, when someone wishes to attach to this Rollup state, such as transferring ownership of the minted NFT, they can do so on the network used by the Rollup, as the entire history of the ephemeral Rollup will be permanently stored on the network it secures .

5. How many Appchains are enough?

More and more Appchains will be launched in the coming months as the L2 team rolls out their Appchain stack and blockchain infrastructure providers scramble to support it.

Many people have a question on their minds: How big will this field be in the future? Opinions vary, with some believing there will only be hundreds of Appchains in the future, while others believe there could be hundreds of thousands.

For Layer 2 teams and infrastructure providers, bigger is better, but not all investors are convinced right now.

Until we see a new wave of Web3 growth addressed by this technology, we won't know how big of a role Appchain will play in it. Consolidation is also likely to occur in the number of Appchain platforms as winners begin to emerge.

6. Universal settlement layer

Appchain is a vital infrastructure in helping blockchain scale. They offload the execution of decentralized applications onto their own private networks to better serve their needs, rather than overloading the underlying blockchain network.

This allows underlying networks such as Ethereum to transition to a universal settlement layer, a more suitable role for Web3 given their lower throughput and higher costs.

There will be many new Appchains launched in the coming months, which, unlike standalone blockchain networks, exist as part of a wider ecosystem by settling transactions on the underlying network.

These ecosystems will enhance many of Appchain’s advantages. However, it will take time for the field to become established and real winners to emerge. Especially with so many Layer 2 networks to choose from and the need for greater product-market fit in Web3.

What are your thoughts on Appchain? Welcome to comment and exchange.

Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
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