ABCDE Capital: Reconsidering the Appchain, ZK, and GameFi Tracks
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ABCDE Capital: Reconsidering the Appchain, ZK, and GameFi Tracks
ABCDE has long been bullish on the three sectors described in the article and has already invested or plans to invest in these areas.
Navigating Web3 tides with focused insights
The Hong Kong conference season is in full swing, and the primary market is warming up. In Q1, ABCDE reviewed over 100 projects and personally experienced several particularly hot sectors—among them, Appchains, ZK, and Gaming were the hottest.
There have also been some changes in these three sectors this year, prompting us to rethink our perspectives. We’ve documented these thoughts in this memo for your reference.
I. Appchains (especially RAAS – Rollup as a Service)
RAAS emerged at the end of last year, largely due to the release of OP Stack. However, Appchain-as-a-Service has existed earlier, represented by Cosmos SDK, and began gaining traction after Celestia introduced the concept of modular blockchains. RAAS can be seen as a currently popular subset within this broader category.
Why might the Appchain-as-a-Service sector be overhyped recently?
First, if you’re a developer wanting to build your own Appchain, here are your current options:
If your chain is EVM-compatible, then you can...
1. Build a pure Ethereum sidechain like Ronin (nowadays, few would choose this approach);
2. Use Skale to create an Ethereum sidechain;
3. Launch a chain using Avalanche and connect it to Avalanche’s P-chain;
4. Use Polygon Supernet to launch an EVM chain;
5. Use BAS to create a sidechain based on BNB Chain;
6. Use OP Stack to build a Rollup Appchain;
7. Use Caldera to build a Rollup Appchain (essentially still OP Stack-based);
8. Use zkSync to build an L3 (expected to see progress this year);
9. Arbitrum just launched Orbit, another L3 infrastructure similar to OP Stack;
10. More projects under development include Opside, Stackr, Sovereign SDK, and others.
If your chain is non-EVM, then you can...
1. Use Cosmos SDK to build a chain—either independently or sharing ATOM security (the ICS proposal has just passed);
2. Use Substrate to launch a chain—either by bidding for a Polkadot parachain slot, connecting to Octopus Network, or going solo;
3. Use Celestia’s Rollkit to build a Rollup Appchain, with Celestia as DA and settlement being optional;
4. Use Dymension to build a Rollup Appchain;
5. Use Saga to build a Rollup Appchain;
6. Build an L3 based on Starkware (likely to emerge this year);
7. Many more such projects are likely under development that I’m either unaware of or have missed.
Does this feel like—“slightly too many options?!”
Second, which applications are actually suitable for becoming Appchains? Remember the online debate a few months ago about whether Uniswap should become its own Appchain?
Overall, if Uniswap became an Appchain, it could gain advantages such as transaction fee capture, token value accrual, MEV resistance, and dedicated resources—but it would simultaneously suffer from worse user experience, reduced security, and diminished composability.
In short, we haven’t seen any plans—or “ambition”—from Uniswap to become an Appchain.
Compound initially considered building a chain with Substrate but later abandoned the idea. Now both Compound and Aave V3 deploy across multiple chains, making it seem unlikely they’ll become standalone Appchains anytime soon.
As for Curve, there probably never was such a plan.
Only DYDX, which doesn’t rely heavily on composability, chose to go independent and build an application chain on Cosmos. This will likely launch in Q3 this year and may be the most anticipated Appchain since Luna. When it launches, DYDX will demonstrate a viable path for builders: if you dominate your niche and don’t require high composability, launching a “sovereign + high-performance” Appchain makes sense. Until then, start within a general-purpose ecosystem to grow gradually before eventually spinning off.
This path is relatively feasible. For example, if a future SocialFi dApp built on Lens Protocol grows large enough—with high daily activity exceeding Polygon’s throughput—spinning off into a Rollup Appchain using one of the above infrastructures would make perfect sense. But in the short term, the number of projects meeting such criteria is likely far fewer than the number of available infrastructures…
Then there are sectors inherently suited to launching directly as Appchains—these will become the biggest users of the aforementioned infrastructures. Before heterogeneous cross-chain composability is fully solved, non-Cosmos DeFi projects are unlikely to take this route. The most suitable sector is clearly GameFi (including Onchain Autonomous Worlds). Examples include DFK & Crabs on AVAX, the recently popular OPcraft, and Curio using Caldera.
Looking at my MetaMask and Keplr wallets, aside from DFK and Osmosis since the collapse of Luna, I haven’t really used other Appchains much. This makes me wonder: do we really need dozens of Appchains or Rollups-as-a-Service in this cycle?
Finally, a brief note on the recently hyped RAAS trend.
1.1 OP Series
Currently, OP-based RAAS solutions essentially involve forking OP Stack. There's little technical barrier—OP’s codebase and documentation are exceptionally clean and clear. Our tech experts at ABCDE can set up an OP Rollup Appchain in less than a day by following the docs. So the real value these RAAS providers offer lies more in sequencer services, block explorers, and fast deployment—marketing often outweighs technical depth.
Moreover, TPS, block times, and fees on these Appchains are nearly identical to Optimism—there are no meaningful performance or cost optimizations. Theoretically, unless Optimism becomes congested, you won’t get a better experience on these chains. And all the existing drawbacks of OP—like the long-delayed fraud proofs—are inherited wholesale.
That said, we must applaud the vision behind OP Stack’s “Superchain.” The more Rollup chains built using OP Stack or its forks, the closer we get to a Polkadot-like architecture—no slot auctions needed, native communication protocols, fully asynchronous composability. Though distant, this vision is compelling. OP has managed to hold its ground against Arbitrum’s thriving DeFi innovation through narrative alone. Midway through writing this report, Arbitrum launched Orbit—of course they wouldn’t miss out on such a juicy opportunity. With token launch and new projects rolling out, the OP vs. Arb rivalry is heating up!
1.2 ZK Series
Theoretically, ZK-based RAAS could enhance Appchain user experience. Projects like zkSync and Scroll follow the ZK-EVM path and prioritize compatibility, sacrificing some efficiency. If RAAS providers could customize circuit designs or optimize for specific dApps, ZK Appchains could outperform generic ZK-EVMs.
However, there are extremely few people in the world who deeply understand both ZK and blockchain. Most are concentrated at Starknet, zkSync, Scroll, and Polygon. Currently available ZK-based RAAS offerings mostly just fork zkSync’s open-source Alpha version to spin up a new chain. Once Polygon and Scroll go fully open-source, RAAS providers might simply let customers choose between zkSync, Polygon, or Scroll EVM—giving a strong “AWS Linux VM” vibe where you pick RedHat, CentOS, or Debian.
Same story: minimal technical moat, BD-driven, and less mature than OP-based solutions since major ZK Rollups aren’t fully live or open-source yet. What’s available now are test versions riddled with bugs and subpar UX. We hope to see future ZK RAAS platforms offering truly customized circuit optimization per Appchain.
II. ZK
If Appchain-as-a-Service represents modular blockchains, then the two dominant themes in blockchain this year are modularity and ZK.
ZK challenges can be examined from several angles:
2.1 Scaling
No need to elaborate—major ZK-Rollups are launching mainnets this year. But even after launch, significant issues remain.
Maturity
Currently, zkSync, Scroll, and Polygon have launched EVM-compatible mainnets—only Starknet hasn’t (though Kakarot, its “official” ZK-EVM project, is underway). From conversations with ZK experts, I learned that these flagship ZK-Rollup launches felt somewhat “rushed.” Product maturity hasn’t quite reached traditional “mainnet readiness.” Post-launch, expect ongoing performance issues and bugs requiring continuous upgrades. Delays in testnet rollouts—from last year into this year—hint at the underlying complexity. The truth is, ZK-EVM is just *that hard*, even for top engineers. Why rush now? Probably due to pressure from OP’s rapidly expanding ecosystem and steady upgrades. If ZK delays further, it risks irrelevance—so “good enough” gets shipped first, with improvements to follow.
Performance
At least for now, ZK performance ≤ OP performance. But users may not notice—the Sequencer confirms transactions in seconds. ZK proofs themselves take 10–20 minutes per block, but users don’t care much about when finality occurs on L1. Current optimizations focus on reducing proof time via circuit tweaks or hardware acceleration—but these don’t significantly improve user experience.
Cost
OP’s fraud proofs are nearly free, while ZK proofs require massive computation—real money. Yes, ZK uploads less data to L1 (lower calldata gas), but savings are likely outweighed by prover costs. Especially once EIP-4844’s blob transactions arrive, L1 posting costs for OP will drop dramatically, widening their fee advantage.
Security
This is debatable. Conventional wisdom: ZK relies on mathematical proofs; OP relies on economic games. Math > game theory, so ZK is more secure.
Long-term, this holds true.
But not necessarily today.
“Security” means transactions achieving true finality on Ethereum L1. Arbitrum submits every 2–3 minutes; OP takes ~10 minutes. ZK, due to proof generation overhead, typically takes 10–20 minutes—even longer if blocks aren’t full due to low activity.
So while math may beat economics, ZK transaction finality today is much slower than OP. Only when ZK algorithms, circuits, and hardware accelerate proofs down to 10–20 seconds (maybe in 5–10 years?) will ZK decisively win on security.
2.2 Middleware & Others
This is a sector many see as more promising than scaling. Building ZK Rollups is heavy lifting—as evidenced by years of delays. Middleware, however, is lighter and better leverages ZK’s strengths.
The hottest middleware area is Interoperability—using ZK proofs to eliminate third-party validators and greatly improve bridge security, even connecting previously isolated ecosystems like different L2s or bridging EVM with Cosmos IBC. Key teams include Succinct Labs (recently launched Telepathy, a unidirectional ZK bridge from ETH), Electron Labs (early proposer of ZK-IBC), and Polyhedra (ZK Bridge, ZK DID—the first investment by ABCDE).
Though lighter than Rollups, this remains a highly technical and time-consuming field. Expecting secure, performant bidirectional ZK bridges this year is unrealistic. Full ZK-based interoperability should be planned on a 2–3 year horizon.
Other ZK applications are exploding—anyone who attended ETH Denver knows this. Teams are applying ZK to everything: encrypted vaults, DID, oracles, even AI and machine learning. Some use cases make sense; others raise eyebrows—“Couldn’t this work without ZK?” Overall, it feels reminiscent of 2017 ICO mania, where blockchain was the hammer for every nail, spawning absurd ideas like decentralized Uber or Airbnb. Today, ZK is the hammer—we’re trying to apply it everywhere.
III. GameFi
GameFi is arguably the hottest sector right now. Counting projects reviewed and discussed over recent months, subdivided by niche, GameFi leads by far.
Reasons are clear:
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Vitalik himself predicted years ago that finance and gaming would be blockchain’s first real-world applications.
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Despite attempts in DeFi, storage, SocialFi, etc., mass adoption remains elusive. While the X-to-Earn myth has collapsed, Axie and StepN showed the community what “breaking into the mainstream” could look like. Many still believe only “games” can achieve true mass adoption.
As a result, Web2 game developers—including talent from major studios—are increasingly turning to Web3. Meanwhile, native Web3 communities—NFTs, DeFi, etc.—are exploring how to “add a GameFi layer” to their products. Ape’s Dookey Dash was a relatively successful example.
Yet GameFi is currently in an awkward phase. The pain of X-to-Earn’s death spiral has just passed. No one knows how to balance incentives and gameplay—everyone is feeling their way forward blindly. One emerging consensus: Free-to-Play is here. Pay-to-play models like buying NFTs upfront to start playing (as in Axie) are no longer viable.
We’re seeing several experimental approaches:
AAA-Grade Games—
A shift from one extreme to another. If Axie emphasized “Earn,” AAA titles emphasize “Play”—to varying degrees. Lighter versions target Web3 natives, using NFTs to attract early adopters. Heavier versions aim at Web2 audiences, adopting traditional mobile game production, marketing, and distribution—simply moving the transaction system on-chain, possibly embedding wallets seamlessly.
Casual/Social Games—
Web2 had FarmVille, Mafia Wars, parking-space battles. Will Web3 GameFi have its own era of social, casual mini-games with light earning mechanics? Uncertain, but it’s an unexplored direction. New X-to-Earn models—most notably PSI’s “Bet-to-Earn” (or “Risk-to-Earn”)—tie earnings to skill and performance. Imagine a Web3 battle royale: 100 players pay $1 to enter, winner takes $100. This breaks the Ponzi reliance on endless new users and avoids inevitable collapse—turning the economy into PvP. But like AAA games, high gameplay quality is essential, since direct financial incentives for average users are minimal.
Free-to-Own via NFTs—
Exemplified by DigiDaigaku—and somewhat echoed in APE’s Dookey Dash—the model draws users to acquire NFTs cheaply or freely, then gradually adds utility. This demands exceptional storytelling, mystery, and marketing upfront, plus strong game development later. It’s a high-barrier path. Also, early NFT caps (e.g., 10k) limit community growth—a persistent challenge.
Game Nintendo—
Represented by TreasureDAO and Gala. Gala leans toward heavier games; TreasureDAO focuses on lightweight “minigames.” After the breakout success of Beacon, more minigames are expected to join its ecosystem. Web2’s minigames have enduring appeal—can Web3 replicate this? Nobody knows yet.
DeFi Gamification—
Defi Kingdoms stands nearly alone here, with grand ambitions and immense complexity—evoking memories of “on-chain fantasy MMOs.” Yet after its 100x hype in 2021, it stalled, and its token price languished. Complex, deeply integrated DeFi-game hybrids face an uphill road.
Fully Onchain Games—
This was arguably the most hyped GameFi category at ETH Denver. Why? Because unlike other types carrying Web2.5 vibes, fully onchain games embody true Web3 characteristics—some even call them Onchain Autonomous Worlds, representing perhaps the third genuinely “blockchain-native” innovation after DeFi and NFTs. Like DeFi (MakerDAO) and NFTs (CryptoKitties), which emerged in 2017 but exploded in 2020 and 2021 respectively, Fully Onchain Games are still in their earliest exploratory phase—likely needing another 3–4 years before their breakout moment.
Of these seven directions, it’s unclear which—if any—will succeed. Moreover, GameFi faces a fundamental tension: while games are ideal for bringing outsiders into crypto, their essence is creating an escape from reality—a temporary refuge from daily grind. But linking to Web3/blockchain inevitably re-anchors the experience to real-world economics. Whether this undermines the core “sanctuary” function of games is a question worth pondering.
Conclusion:
Re-evaluating these three hottest sectors doesn’t mean we’re bearish. Quite the opposite—ABCDE remains strongly bullish on all three and has already made or plans to make investments in each. We often overestimate the short-term value of technologies while underestimating their long-term potential. These sectors may not deliver immediate ROI for investors or match short-term market expectations. But for us—a long-term VC with a 5-year LP horizon—time is our greatest ally.
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