What are appchains?

What are appchains?

An appchain (application-specific blockchain) is a blockchain built to run a single decentralised application (dapp).

Such designs give developers more freedom to shape ecosystems, governance structures and consensus algorithms for the dapps they build.

How do appchains work?

Appchains operate much like a base blockchain, but on top of one. The key difference is that they are application-specific.

For security, appchains rely on layer-1 (L1) blockchains. These systems are highly customisable and can deliver significant performance, since they do not compete with L1 applications for compute and storage.

They typically issue a utility token used for staking, as an in-app currency and for voting.

Appchains are supported by validators from the base network, provided those validators choose to allocate resources to the specific application.

What are the advantages of appchains?

Building with this approach offers several advantages over L1, layer-2 solutions (L2) and sidechains. As noted, appchains bring customisability and higher throughput without sacrificing security, because they rely on a base blockchain.

Using L1 directly to build dapps means competing with other applications for limited compute resources. That risks lower performance and drawn-out upgrade cycles, since developers do not control the consensus protocol.

Rivalry among dapps on a single network can let one popular application consume a disproportionate share of resources. This pushes up fees (as during the launch of XEN Crypto) and delays transaction processing.

Appchains offer low and predictable transaction costs, which improves the user experience.

As dapps gain traction, developers may need deeper customisation and optimisation of parameters including throughput, finality, security level and access model (permissionless or permissioned).

For traditional organisations, appchains provide a way to enter Web3 without making platforms public from day one. For example, companies can initially require validators to pass KYC, rely on a limited circle of developers and choose specific services for cross-chain interactions.

What are the drawbacks of appchains?

Their defining feature—and potential limitation—is that they are tailored to a single application. L2 solutions, by contrast, can interact with a variety of dapps.

Appchains have limited composability and a degree of isolation, which risks fragmenting liquidity. Cross-chain bridges help, but they are frequent targets for hackers.

If an application sees insufficient activity, launching and maintaining an appchain may prove a waste of time and money. Validators dedicated to the platform could use their resources elsewhere more effectively.

Running an appchain can introduce various complexities—for instance, managing additional infrastructure such as sequencers or validators.

Developers may lack off‑the‑shelf components—block explorers, RPC providers, indexers, oracles, fiat gateways, and so on.

Building directly on L1 has its upsides—such as abundant resources, infrastructure and tooling (especially for beginners). That abundance can simplify integration across ecosystems.

With L2, developers can scale services without major changes to the codebase.

Second-layer solutions also inherit strong security by anchoring to the base blockchain. For example, Optimism and Arbitrum process transactions quickly and submit “fraud proofs” to the main network thanks to Optimistic rollups.

How do appchains differ from sidechains?

Sidechains run a parallel network with a two-way peg to the main chain, but they do not rely on L1 security. Unlike L2s, sidechains do not post transactions to the base blockchain.

Appchains are built for a specific application (app-specific). Sidechains, by contrast, handle operations of any kind. Their main drawback is weaker security due to limited decentralisation.

One of the best-known sidechains is Polygon Proof of Stake, part of the ecosystem of the Polygon project. The latter also includes Polygon Edge—an open-source development environment for creating L2 solutions.

Which projects offer appchains?

Several blockchain projects let developers create appchains. Among them:

• Polkadot parachains;
• Cosmos Zones;
• subnets on Avalanche (subnets);
• Polygon Supernets.

Polkadot parachains

Polkadot is a network of EVM-compatible blockchains—parachains—connected to a central network (Relay Chain). The latter specialises in validating transactions across all connected systems.

The Relay Chain uses Proof-of-Stake consensus, with validators staking DOT (Polkadot’s native token).

Each group of validators is responsible for a specific parachain and is assigned and supported by collators: they collect users’ transactions and attest blocks based on a Proof-of-Validity algorithm. As node operators, collators receive rewards, the size of which depends on the particular parachain.

The number of parachain slots in Polkadot is capped at 100. They are allocated through auctions, during which DOT holders vote for projects to be connected to the Relay Chain.

“Parachain slots can only be obtained for a specific period of up to two years. Once this term ends, the slot returns to auction,” is explained on the project’s website.

Parachains can also serve as bridges linking the Polkadot network to external L1 blockchains such as Ethereum.

These solutions give developers all the above-mentioned appchain capabilities, including the freedom to choose economic and governance structures and to use utility tokens.

A principal drawback of parachains is the limited number of slots, which must be won at auction. That makes such solutions less accessible.

The Polkadot team is working on parathreads—pay-as-you-go parachains. The approach will let developers, without waiting for a parachain auction, upload project code to the Relay Chain and launch several collators. Later, parathreads can be upgraded to parachains if they participate in and win auctions.

The number of parathreads supported by Polkadot is also limited—to up to 10,000.

Another drawback of the ecosystem is that the Relay Chain does not support smart contracts. This limits Polkadot’s capabilities.

Examples of parachain projects:

• Acala — the DeFi hub for Polkadot;
• Litentry — a cross-chain aggregator of identity solutions.