Appchain-as-a-Service: We Are Entering the Era of 1,000 Small Blockchains
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Appchain-as-a-Service: We Are Entering the Era of 1,000 Small Blockchains
Aside from a few high-profile projects, application-specific chains still see relatively limited adoption compared to L1s and L2s.
Navigating Web3 tides with focused insights
By Sheldon
Sheldon Zhao lives in San Francisco and currently works as a business analyst at a top global consulting firm, focusing on blockchain and cryptocurrency services including asset tokenization, blockchain for sustainability, and NFT product strategy.
This article is translated and published by TechFlow with permission from Sheldon.
Ironically, the world runs in massive cycles: fashion designers return to baggy jeans every decade; behaviors rejected by one generation always find new audiences in the future...
Now crypto is back to early 2022, as I’m seeing a lot of bullish discussions about Avalanche again on Twitter. With new high-profile clients joining its subnets, Avalanche has brought specific-purpose blockchains—commonly known as “app chains”—back into public view.
Note: I use "app chain" as a generic term referring to blockchains or rollups dedicated to a single application or use case. The concept is simple: instead of building on a large shared blockchain, you launch your own blockchain tailored to your needs. Your chain can interconnect with larger blockchains—for security or data sharing—but your application and ecosystem run exclusively on it.
App chains aren’t just about scaling—they enable entirely new use cases
Yes, Cosmos and Avalanche initially framed the narrative as “app chains are the future of scaling.” In the era of Ethereum killers, this might have been a widely accepted idea. But to me, the strongest argument for app chains lies in the fact that different applications require different infrastructure optimizations—just like Optimus Prime can't be a school bus.
Beyond buzzwords like “sovereignty” and “flexibility,” several strong value propositions of app chains include:
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Custom validator sets;
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Exclusive access to all blockspace;
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Ability to write your own rules at the protocol level.
Of course, you can choose how much of these benefits you want to enjoy:
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Oracle networks like Bandchain opt for trusted validators to ensure price reliability;
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dYdX believes exclusive blockspace is key to building limit order books on-chain;
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Osmosis writes superfluid staking directly into its protocol to maximize AMM liquidity;
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Axie Infinity and Crabada want full control over their blockspace;
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KKR is experimenting with highly permissioned validators, KYC-integrated wallets, and possibly custom asset features to tokenize assets in the U.S.
Of course, app chain evangelists will offer more reasons, such as the ability to customize virtual machines or create more flexible tokenomics. But regardless, one thing is clear: app chains offer far greater creative freedom than general-purpose blockchains.
Private, permissioned app chains should also exist
Permissioned chains—often built around a single application—do have a place in our reality.
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Regulation often demands highly controlled environments. Under current frameworks, proving “safety and soundness” to regulators may only be possible through a permissioned setup.
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Permissioned chains can still improve upon existing tech stacks. You're essentially rebuilding a better distributed ledger—with enhanced security, automated processes, and faster settlement. You could even fork Ethereum directly instead of building something fully custom.
Permissioned chains aren't without success stories. Signature Bank pioneered instant cash payments and settlements with its permissioned chain, Signet™. Many solutions already use permissioned chains to streamline asset issuance, automate workflows, and reduce costs for issuers.
So if the use case is automating internal processes with more secure infrastructure, then settling in 12 seconds—even on an uncool blockchain—is cooler than what we have today.
App Chain as a Service: A promising business model
I’ve always wondered: when Polygon’s business development team meets with Starbucks, how exactly do they explain what an app chain is?
My guess is they say something like: launching an app chain means accessing blockchain without dealing with other transactions, or: the app chain handles everything for you!
This “helping people build their own blockchain” model can be called App Chain-as-a-Service (AppChain-as-a-Service), or simply PaaS (Platform-as-a-Service) for 2023. The collaboration between Avalanche and AWS (and Tencent Cloud) may be the best example: permissionless technology foundations act merely as service providers responsible for setting up necessary platforms on optimized infrastructure. You pay a fee to the foundation and a security budget to the permissionless infrastructure.
Open-source protocols have done this for a while with varying degrees of success, but at least AppChain-as-a-Service could genuinely help alternative L1s and rollups find sustainable revenue models. That’s exciting because revenue is another retro concept making a comeback. Indeed, history is cyclical.
Interoperability is the key to unlocking potential
The success of app chains depends on blockchain interoperability—meaning assets and data from one chain can easily move to others.
Without interoperability, composability disappears, liquidity dries up, and user experience suffers. The solution lies in creating more interoperable tools—whether through Avalanche, Cosmos, Eigenlayer, LayerZero, Osmosis, or Ren Protocol.
But interoperability must become both safer and faster. Security remains the top concern. Trust-minimized cross-chain bridges haven’t been fully realized yet, as recent hacks demonstrate. On speed, current bridges are simply not fast enough.
Interoperability offers a balance point between crypto and regulation. There's no reason stablecoins can't fund compliant securities on private chains—and vice versa. In a zero-knowledge proof utopia, we could eventually settle private chain data onto public chains. Of course, there’s still a long way to go.
Which app chains will win? We may need to wait for more use cases
The app chain landscape is evolving:
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L1 blockchains such as Avalanche Subnets, Polygon Supernets, Polkadot Parachains, and Cosmos;
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Ethereum roll-ups, like zkSync’s vision for Layer3;
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Even some private chain solutions (like Hyperledger) could qualify, given they support small-scale applications.
The debate around app chain design is fascinating, but in practice, app chain designs haven’t been pushed to their limits yet.
Outside of a few high-profile projects, app chain adoption remains relatively limited compared to L1s and L2s. But as economic incentives grow, we’ll start seeing massive user inflows, high demand for blockspace, and complex (hacker) attacks. Eventually, some projects will collapse under pressure—and the winners will emerge from that moment.
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