The emergence of industry-recognized tech stacks and ecosystem clusters such as Optimism Superchain and Arbitrum Orbit has made deploying new L2 chains easier than ever, offering essential benefits to teams with established dapps and high-scale usage. However, the most successful L2s are not new general-purpose ecosystem chains though. They are much more userbase- or purpose-specific.
Recent developments and trends in the EVM ecosystem clearly show that application-specific chains deployed as L2s are driving the Web3 industry forward. With dapps, L1s, and traditional organizations launching as L2s, managing dedicated appchains unlocks significant improvements in performance, transaction throughputs, and user experience.
Of course, the increasing number of networks also brings additional considerations, requiring strong underlying infrastructure to support their growth.
The genesis of the appchain thesis
The idea of application-specific, interconnected chains originated in the Cosmos ecosystem as a way for applications to truly work as distributed fault-tolerant systems, that are independently validated and have true sovereignty. With natively supported Inter-Blockchain Communication Protocol (IBC), these chains, built using the Cosmos SDK, were natively interoperable and independent, enabling easy data transfer between chains.
However, with its much higher liquidity, greater number of users, and more extensive tooling support, Ethereum has proven to be a more prevalent solution. The development of optimistic and zero-knowledge rollups has particularly established Ethereum as a more scalable ecosystem with more liquidity available, applying the appchain idea more effectively.
Ethereum also benefits from the existence of a true mainnet that the appchains and L2s can bow down to. On the other hand, every chain is an island for itself in the Cosmos ecosystem. So, Cosmos is yet to fully figure out and monetize on the aspect of shared security that Ethereum natively has through a public permissionless Ethereum mainnet.
Of course, one concept moving between ecosystems isn’t a new development. We already saw great ideas from other ecosystems successfully ported to Ethereum in the past, thriving better than on their original blockchain.
The appeal of appchain deployment
With lower transaction costs, higher throughputs, and the established security of Ethereum as the parent chain, rollups became the heart of Ethereum’s scalability roadmap. This has sparked the growth of RaaS providers, the development of specialized modular components, and the establishment of industry-recognized rollup stacks.
These recent industry trends make the deployment of new chains easier than ever. And deploying dapps on their dedicated L2 chains has become particularly efficient for multiple reasons:
- Application-specific rollups give dapps an uncontested amount of block space, which improves performance and increases transaction throughput significantly.
- Improved performance, greater transaction throughputs, and lower fees benefit end users, enabling ease of use, improved user experience, and greater adoption.
- Managing self-hosted rollups brings teams greater control and flexibility over chain customization and upgrades.
The emerging L2 trends
Over the past couple of years, we’ve seen major growth in the number of deployed L2 scaling solutions. While some were ecosystem chains, most new L2 rollups were designed and intended to address a specific use case, be it decentralized finance, an NFT marketplace, gaming, or something else entirely.
In particular, multiple trends emerged when it comes to the entities deploying dedicated L2 chains for their applications:
- Major applications and protocols with a proven use case launched their application-specific rollup solutions, bringing an existing userbase on-chain. Some of the most notable ones include Uniswap launching Unichain, Kraken deploying Ink, and, of course, Coinbase’s Base which has proven to be a major success story driving the trend forward. More of these are certain to come.
- Several L1 solutions decided to transition to L2s, narrowing down their focus to addressing specific industry challenges or use cases while benefiting from rollup technology. Lisk was the first one to transition to L2, with Celo as another important industry player. Running an L1 is hard and sharing security assumptions and liquidity does seem like an option other L1s might follow.
- Traditional organizations or large corporations are also launching their L2 rollups instead of deploying to existing chains, with Soneium as one of the examples. Another example is Nubank, a Brazilian neobank that recently achieved $8M in revenue and reached 100M users. Out of 100M users, approximately 30M are interacting with the bank’s private chain deployed on Polygon Edge for a loyalty and internal payments program. The SIMBA chain also falls into this category, running government and private enterprise blockchains, including some that are used by the US military.
The role and importance of ecosystem clusters
The interoperability and interactions with other chains were an important consideration and a potential obstacle for appchains. Fortunately, the very nature of the Ethereum ecosystem and the community’s direction toward ensuring EVM equivalency provides a sustainable solution for ensuring the interoperability of appchains deployed as L2s.
The role of ecosystem clusters such as Optimism’s Superchain, Arbitrum’s Orbit, Polygon’s AggLayer, and zkSync’s ZK Stack is particularly important for ensuring interoperability and facilitating asset bridging. Appchains built on top of these ecosystems can now be deployed faster and more easily, with community support, natively integrated tooling, and ready-made yet modular tech stacks.
Even other ecosystems, such as Polkadot and Cosmos, are working on better supporting EVM execution environments. This will further improve the interoperability between ecosystems, enabling non-EVM chains to interact with high-scale dapps deployed as EVM appchains.
Infrastructure as stability amid expansion
As new appchains and ecosystem chains continue to launch, they need a strong foundation and support to reach scale and sustainable growth. Here, the role of infrastructure and RaaS providers comes into play. Teams launching their dapps on dedicated appchains require comprehensive, reliable, and scalable infrastructure solutions that will allow them to focus on other critical aspects of managing L2s for their dapps.
Teams managing self-hosted rollups have new considerations regarding chain maintenance, protocols, tokens, and governance. Of course, they also need to build an actual product, nurture a community, and ensure sustainable growth. For this reason, managing the underlying infrastructure shouldn’t be an obstacle. The underlying infrastructure should be in place, with infrastructure partners offering different levels of support to empower appchain growth.
For instance, Tenderly has been designed for a multichain ecosystem from the very beginning, ongoingly increasing the number of supported chains and providing different integration offerings. We dedicated a lot of time and resources to support the most common tech stacks that are often used to spin up new chains. So, many teams that launched their dapps on dedicated L2s rely on Tenderly to meet their infrastructure needs while enabling it for their users.
With Tenderly, appchains have a complete, end-to-end solution for product development and on-chain management. This support becomes even stronger through collaboration with other essential infrastructure providers, such as indexing services, oracles, and development frameworks.
The trade-offs and considerations
With an increasing number of application-specific and general-purpose chains, the ecosystem sees many benefits. However, it should also be prepared to accept the potential trade-offs or new considerations that arise in a multichain environment.
- Fragmentation of liquidity: While liquidity becomes more fragmented as the number of chains increases, we simultaneously see L2 appchains, such as Unichain, designed to unify liquidity across the multichain ecosystem. Additionally, Vitalik himself recognizes this problem and highlights that Ethereum shouldn’t compete with its chains for liquidity. I’d add that Ethereum should also not compete with L2s as an execution environment because they are superior performance-wise in that regard.
- Transaction atomicity: The L2 roadmap for Ethereum sacrifices transaction atomicity across the ecosystems and leaves it for general-purpose chains. Atomicity will probably remain reserved for a single chain, and only pseudo-atomicity will exist across aggregated liquidity clusters.
- Infrastructure considerations: As the underlying infrastructure becomes one of the foundations for appchain growth, teams running their own L2s need to invest in these infrastructural components early on. While this use case is more clear-cut for appchains, as both teams and their users benefit from this investment, ecosystem chains are still exploring different business models.
Appchains as the infrastructure of the new internet
To support the growth of Web3, we should expect the appchain thesis to finally come to life as the infrastructure for the new internet. This is the only way for Web3 to keep the core internet concepts, such as net neutrality, intact while adding the value of data ownership and self-recovery of fault-tolerant systems that blockchains bring.
The future of the free and collaborative internet relies on fault-tolerant systems being able to handle the compute and storage needs of the 21st century, and moving most of those to L2s is the most logical way to go.
Tenderly truly wants to be a part of this revolution and is dedicated to providing the core infrastructure needed to support the appchain growth. In addition to expanding our network support as the multichain ecosystem grows, Tenderly will continue to be a technology partner for Web3 teams, enabling them to focus on appchain development and management with their infrastructure consolidated under one roof.
