Jul 12, 2023 • 12 Min Read

What is an Appchain?

Appchains, short for application-specific blockchains, are built to run one specific application or use case. They differ from general-purpose L1/L2 infrastructure chains that run many decentralized applications (dApps) concurrently. While both dApps and appchains technically exist on a base layer blockchain, the key difference is that appchains also operate their own sovereign blockchains while dApps do not. In this piece we will cover factors driving the rise of appchains, how value capture is shifting from this rise, and potential investment opportunities created with that shift.

Why build an Appchain Instead of a dApp?

dApp Model

When developers build a new application on an established L1 like Ethereum, the application and its developers inherit many benefits of an established ecosystem: more resources, tools, potential users, and, most importantly, security to run the application. They also inherit the underlying network's design choices and limitations, including protocol consensus, governance, and scalability. User transactions from their application must compete for block space with the base layer transactions and other applications on the network. High activity can cause the application's performance to deteriorate with longer processin...

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