Introduction to Appchains and How They’ll Drive Enterprise Adoption
By the Validation Cloud Team
As an enterprise-grade Web3 infrastructure company, Validation Cloud sits at the intersection of commercial enterprises and public blockchains. Every so often, we observe foundational shifts in the toolkit available to traditional organizations to operationalize their Web3 capabilities. Appchains represent just this sort of foundational shift, allowing for the benefits of private and public blockchains to coexist in a single, hybrid primitive. We believe that appchains will accelerate enterprise adoption of blockchain technologies, ushering in the next billion users of Web3. In this post, we’ll provide a brief primer on appchains and explain why they represent endless new possibilities for organizations seeking to harness the power of blockchain-based technology.
Enterprises’ historical embrace of private blockchains — the walled gardens of Web3
According to research by Blockdata, a staggering 81 out of the top 100 public US companies are using blockchain in some shape or form. Perhaps even more surprising, the vast majority of these enterprises are utilizing private blockchains as the engines for their Web3 use cases.
Private blockchains have three main attributes that appeal to enterprises: composability, compliance, and confidentiality. As closed networks, private blockchains are typically operated by a single entity that permissions who can join and participate in the network. This provides users and applications peace of mind knowing that their data is extremely secure and can only be accessed by a handful of select participants. That said, the security and access control of these walled gardens come at the expense of interoperability with broader ecosystems and community trust. Validation Cloud believes that the absence of these attributes has hampered broader enterprise adoption of Web3 — private blockchain ecosystems just don’t scale. Even so, this does not address the shortcomings of public blockchains, as they too haven’t brought traditional organizations into Web3 en masse either.
During his time at Workday, Kasey Alusi, Validation Cloud’s Principal Software Engineer, experienced the limitations of private blockchains: “When building Workday Credentials, we wanted an interoperable and auditable ledger to store DID’s. We initially chose Hyperledger Fabric because it promised the ability to curate a selective group of members on the network and promised better transaction throughput than public blockchains at the time. While great in theory, in practice, Fabric’s selective membership mechanisms were not efficient to implement. We found that the process of establishing a consortium of partners, a legal entity to represent the consortium, and building the tooling to onboard members into the network to be far more resource intensive than we had hoped. We also found the claims of transaction throughput to be an order of magnitude worse than the project claimed at the time. We eventually moved to a new DID method which ran as a layer 2 on top of Bitcoin.”
Public blockchains and full decentralization — a bridge too far for enterprises
Public blockchains pride themselves on decentralization. While we believe that decentralization exists on a spectrum, the open source nature and community governance of public blockchains make them more technologically robust. For many enterprises, “public” is not a word they typically associate with processing transactions, especially with corporate or customer data. In fact, we’d argue that it’s scary to them — better a walled garden, than a town square! Further, one could argue that proprietary user data is an enterprise’s most valuable asset; its control and stewardship are paramount. To that end, public blockchains haven’t yet garnered the confidence of enterprises when it comes to security; and, while this likely changes over time, it remains an impediment to enterprise adoption within Web3.
What if there was a way to combine the security and access benefits of private blockchains with the superior technology and scalability of public blockchains? Enter appchains — the best of both worlds. An innovation that Validation Cloud believes will be the most effective driver of enterprise adoption of Web3 to date.
What are appchains?
Appchains are application-specific blockchains that are nested within the fabric of a mainchain. They operate their own ecosystems, running their own infrastructure. Despite this, appchains can also interact natively with a mainchain, leveraging its security and interoperability. In summary, an appchain is a network with all the trappings of a public blockchain, with the control and privacy of a private blockchain. Most importantly for enterprises, this primitive allows for permissioning of who can participate in the appchain, and thus access the data. Interoperability is a core component of appchains, allowing you to communicate with other blockchain ecosystems and the rest of Web3.
Appchains in action — a catalyst for the next billion users of Web3
Modern appchains have evolved, and in some ways matured, from their original predecessors — such as Cosmos zones and Polkadot parachains. We believe that the latest iterations of appchains will facilitate a boon for enterprise adoption of Web3 solutions. Combining the superlative qualities — customizability, privacy, composability — of both public and private blockchains gives enterprises the flexibility to define their blockspace based on their organizational needs. This flexibility and control will remove the major technological impediment for traditional organizations to adopt and deploy blockchain-enabled products and services.
Composability — superior performance on the back of open source technology, offering interoperability between other blockchains/Web3 ecosystems.
Compliance — bespoke blockchain designed for purpose (e.g., DeFi and gaming) allows organizations to customize elements such as users, validators, consensus incentives, throughput performance, and compliance.
Confidentiality — strong security and access controls over what entities and organizations can participate in each appchain, and what data they can access.
As appchains begin to gain greater visibility and proliferate among enterprises, keep an eye on a few existing blockchain ecosystems that have launched appchain concepts in the last year.
Examples of appchains
Avalanche Subnets are “sovereign network[s] which define [their] own rules regarding membership and token economics.”
- Subnets are designed to be highly configurable and mandate as few design choices as possible.
- Businesses and developers can create blockchains with the option to customize the blockchain’s virtual machine (EVM, AVM, or any other VM).
- Since subnets support private blockchain options, entrepreneurs can also develop customized blockchains without tokens, if their business models do not require one.
Polygon’s Supernets are differentiated into two types: sovereign chains and shared security chains.
- Sovereign chains are blockchains validated by their own set of validators.
- Shared security chains are blockchains validated through a provided set of MATIC-staked validators.
Other examples include further variations of appchains being built by Layer 1s like Binance Smart Chain, Cosmos, Near, Polkadot, Tron, Provenance, & Rubix and Layer 2 scaling solutions like ZkSync and Arbitrum.
This is the first post in a series about appchains. Stay tuned for deeper dives into appchains, how Validation Cloud can support appchain development, and network spotlights.
Next week we’ll outline how Validation Cloud can help you get started with appchains and why Javelin is the ideal infrastructure for appchains and enterprise adoption.
Read Validation Cloud’s case for superior Web3 infrastructure and why it's a game-changer for networks and node users.