Choosing Between L1 and L2 Appchain: A Guide to Custom Blockchain Options

The inception of Bitcoin marked the dawn of blockchain technology, initially designed for peer-to-peer (P2P) payments. However, as Bitcoin's user base grew, its base layer faced challenges in maintaining high throughput and low transaction costs compared to other blockchain networks. Similarly, Ethereum, the second-largest blockchain by market capitalization, encountered scaling issues during the decentralized finance (DeFi) boom in the summer of 2021. The surge in DeFi application usage led to increased transaction times and fees. Appchains present a promising long-term solution for managing high throughputs at low costs for dedicated use-cases.

What Are Appchains?

Appchains, or application-specific blockchains, are standalone blockchains designed to support a single application or a set of applications. Unlike general-purpose blockchains like Ethereum or Solana, which host numerous applications and smart contracts, appchains are tailored to the specific needs of a particular application. This customization allows for a high degree of optimization and efficiency.

Initially popularized by projects like Polkadot and Cosmos, app chains have become more accessible and straightforward to implement as rollup providers - ZKsync, Polygon, StarkWare, Arbitrum, and Optimism, … - open their tech stack to have rollup- appchain. There are some differences between these providers, which you should be aware before making your decision.

When Should You Consider an Appchain?

Before diving into the options available for appchains, it's essential to understand when you might need your own appchain and when you might not. Here are some key considerations:

• Enterprise Use-Cases: If your application requires permissioned access, such as in finance or gaming, appchains can provide the necessary control and security.
• Gasless Transactions: Appchains can offer gasless transactions, although Layer-2 (L2) solutions with account abstraction might also meet this need.
• Costs and Scalability: Appchains can handle high throughput at lower costs, making them suitable for applications with massive user bases.

Background on Blockchain Layers

• Layer-1 Blockchains (L1): The foundational layer of a blockchain network, responsible for the core functions and security.
• Layer-2 Blockchains (L2): Solutions built on top of Layer-1 blockchains to enhance scalability and reduce transaction costs.

Appchain Tech Stack

For many applications, deploying a decentralized application (dApp) on public blockchains is sufficient. I recommend using EVM-compatible Layer-2 blockchains, such as zkSync or Arbitrum. If your application isn't focused on DeFi, you can consider other rollups that aren't necessarily EVM-based. If you still want to have your own appchain, there are two approaches:

Option 1: Permissioned L1

Building your own Layer-1 blockchain allows for complete control and isolation from other applications. However, this approach requires significant investment in infrastructure (validators) and may not support EVM compatibility. Cosmos offers the SKD to build your own L1-based app chains.

Option 2: Permissioned L2

Creating a Layer-2 solution offers flexibility in terms of permissioned or permissionless access. Leveraging EVM-compatible stacks, such as ZKsync or Optimism, can provide proven technology and enhanced scalability.

ZK rollups, in particular, offer lower gas fees and faster transaction finality, making them a compelling option for high-throughput applications. What is more, ZK rollups (validiums) can store in the underlying Ethereum network only ZK proofs of transactions without revealing any transaction details.

Rollup-based appchains provide enhanced security compared to their Layer-1 counterparts and do not require heavy infrastructure investments.

Conclusion

Appchains are an ideal choice for enterprise applications requiring controlled access and high scalability, such as finance and gaming. They offer seamless performance and enhanced security. However, if your application doesn't need these features, deploying a dApp on an L2 solution might be more cost-effective and efficient.

Building an L1-based appchain offers full control and application isolation but requires significant infrastructure investment (to achieve decentralization and security) and may lack EVM compatibility. In contrast, Layer-2 approach for appchains like permissioned rollups and validiums offers flexibility with security guarantees (of Ethereum) and proven EVM for DeFi protocols and other smart contracts. ZK rollups are particularly attractive, as they can store ZK proofs on the Ethereum network without exposing transaction details.

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