Appchains, or application blockchains, are specialized blockchain networks that service one application or service. As opposed to multipurpose blockchains like Ethereum or Bitcoin, meant to run many different applications simultaneously, appchains are optimized at solving specific use cases in an effective way. With this design, appchains allow for faster speeds of transactions, reduced fees, optimized consensus protocols, and customized governance models.
But specialization also comes at a price—isolated operation. Isolated operation of an appchain indicates that it will be unable to fully leverage the strengths of the greater blockchain and cryptocurrency universe, such as sharing liquidity, decentralized finance (DeFi) interactions, or multi-chain applications. Interoperability—the ability of separate blockchains to communicate with each other, exchange data, and move assets without hassle—becomes the determining factor of the success of appchains.
This piece does an in-depth dive into the mechanism that makes appchains interoperable with other networks, advantages and disadvantages, and the actual experiences of how integrations work.
Appchains Overview
To understand interoperability, let us first familiarize ourselves with what makes appchains unique:
Application-specific design: Each appchain is designed to serve a specific use case, like gaming, decentralized finance (DeFi), or supply chain management.
Better performance: Having one function, appchains can provide more throughput and lower latency than general-purpose blockchains.
Tale governance: Developers and communities can impose governance rules that apply to their application within appchains, rather than rigid forms in general-purpose chains.
These efficiency enhancements are significant, but appchains need interoperability mechanisms to connect with other networks. Without interoperability, they're isolated, which limits adoption and utility.
Interoperability Mechanisms
1. Cross-Chain Bridges
Cross-chain bridges are one of the most common interoperability solutions. They act as intermediaries, allowing the movement of assets and data between blockchains. Bridges are particularly useful for appchains since they enable:
Token trading and liquidity transfer between networks.
Smart contract deployment across chains.
Access to more extensive user bases and decentralized finance platforms.
For example, a gamechain for a gaming economy can use bridges to facilitate users in transferring gaming tokens to Ethereum exchanges, driving utility and adoption.
Benefits of Cross-Chain Bridges:
Enables direct asset transfer across chains.
Boosts reach and adoption of appchain tokens.
Facilitates cross-chain dApps.
Disadvantages:
Susceptible to security exploits when bridge protocols are lax.
Complexity increases as more chains are connected.
2. Inter-Blockchain Communication (IBC)
Inter-Blockchain Communication (IBC) protocol is an open standard that will allow for secure messaging between blockchains. Being distinct from bridges that are usually token-centric, IBC allows for more general interaction like data and state transfer.
Key benefits for appchains are:
Secure messaging: Ensures cross-chain transactions are tamper-proof and verifiable.
Asset and data transfer: Allows appchains to transfer tokens, NFTs, or other digital assets efficiently.
Modular integration: IBC can be applied by Appchains without redesigning their architecture as a whole.
As an example, Cosmos, a popular blockchain environment, uses IBC to interconnect its appchains (zones) to enable easy token transfer and communication between independent networks.
3. Shared Security Models
Shared security models, or security-as-a-service, allow multiple blockchains to share a common set of validators or consensus algorithms. For appchains, this reduces the amount of effort needed to implement independent security protocols without sacrificing network trust.
Benefits:
Reduced cost of operation: Individual appchains don't need large validator sets.
Increased trust: A shared security layer allows for greater trust in cross-chain transactions.
Ease of integration: Appchains can integrate easily with networks without the need to build sophisticated security infrastructure.
Example: Polkadot's relay chain provides shared security to parachains, allowing them to trade securely and benefit from the relay chain's robust security features.
4. Standardized Protocols
The use of standardized communication and transaction protocols is crucial for interoperability. These protocols establish uniform rules for:
Transaction formats and data structures.
Smart contract interactions.
Message verification and validation.
By following standards, appchains can make cross-chain interactions more reliable and decrease integration friction. Standardization even allows new networks to arise while having to make little change in order to connect them, future-proofing interoperability efforts.
Comparison of Interoperability Mechanisms