AppChain Development Trend Analysis: From Origin to Future Outlook

The Inevitability of AppChain Development Trends

From 2023 to 2024, an increasing number of dApps have announced their transformation into AppChains, mainly focusing on areas such as DeFi, gaming, social, and AI. This trend has emerged from multiple factors:

• The maturity of modular technology
• Wide validation of General Rollup Layer 2 networks
• The increase of RaaS platforms and the improvement of services
• The competition for public chain blockchain space resources among dApps is intensifying.
• Optimization of end-user transaction cost requirements
• The demand for customized token economics is increasing

The main advantage of AppChain lies in promoting high-frequency on-chain transactions through low-cost transactions, utilizing data accumulation to enhance user experience, forming user stickiness, and achieving network effects. Therefore, the core of AppChain development still lies in its unique application barriers and traffic.

The Origin of AppChain

Cosmos is a pioneering project in the AppChain field, known for its modular and pluggable design. It separates the virtual machine and consensus engine, allowing developers to freely choose building frameworks and customize key parameters. This design enables applications to exist in the form of independent chains, demonstrating advantages in flexibility and sovereignty.

However, the growth trend of the Cosmos AppChain has not continued, mainly due to:

• The sovereignty of the AppChain is too strong
• High startup and maintenance costs for security.
• High technical threshold, an additional burden for application development teams.
• The token incentive mechanism leads to a rapid decline in value
• There is a lack of Liveness characteristics, development resources, and community culture.

Catalyst for New AppChains

The new type of AppChain focuses more on the development of the application itself, and its rise is attributed to:

• Popularization of modular blockchain concept
• General-purpose Rollup Layer2 maturity and validation
• Development of interoperability and liquidity aggregation layer
• The rise and improvement of RaaS platforms

Projects like Optimism have driven in-depth exploration of Layer 2 solutions in the industry. Major projects have launched AppChain solutions, such as Arbitrum Orbits and Polygon CDK. The emergence of RaaS platforms has further simplified the AppChain development process.

At the same time, the infrastructure and functions surrounding AppChain are also advancing rapidly, such as Alternative Data Availability and custom Gas tokens. The issues of liquidity fragmentation and interoperability have prompted the emergence of aggregation and unified layer solutions.

Advantages and Disadvantages of New AppChains

Advantages:

• Modular design with customizable infrastructure components
• Performance optimization, reduce costs and improve throughput
• Enhance value capture, support flexible business models

Disadvantage:

• Liquidity Fragmentation
• Interoperability and composability issues
• Increased complexity

The Moat Construction of AppChain

The core moat of AppChain lies in the application business itself. The key to success is:

• Deeply explore market pain points and build PMF products
• Build low-cost on-chain applications
• Accumulate user data and conduct analysis
• Build cash flow model
• Forming user stickiness and scale effects

The development approach should primarily be稳扎稳打, first establishing core functions, and then expanding new functions and product lines.

Token Economic Model Design

It is recommended to adopt a strategy of natural development ( Organic ):

• Reduce human intervention and avoid reliance on short-term incentives
• The circulation of tokens and the development of applications are synchronized.
• Design efficient attraction mechanisms to achieve cold start
• Establish the core value of the token
• The growth of token holders is consistent with the expansion of the user base.
• Avoid overly aggressive allocation strategies
• Reasonably combine innovative assets such as NFTs

Overview of Well-known AppChain Projects

• Cyber: A Restaked Ethereum Layer 2 network focusing on social scenarios.
• XAI: EVM-compatible three-layer gaming network
• MyShell: AI Agent Creator Platform
• GM Network: Innovator in the Consumer AIoT Field

Investment Analysis Framework

• Industry Understanding and Market Positioning
• Target Customer Group
• Product delivery and iteration speed
• User Retention and Business Model

Outlook

AppChain serves as the core platform for user activities, playing an important role in diverse fields such as social networking and gaming, and is expected to drive innovation and development in related industries.