An Analysis of Three Paths for DApp Development: Application Chains, Value Return, and Autonomous Sorting

Original Title: “Is everything really moving towards AppChains?”

Author: Pavel Paramonov

Compilation: Deep Tide TechFlow

Is everything really moving towards AppChains?

Yes, but not exactly.

The main reason dApps are turning to sovereign chains is that they feel they are being treated unfairly.

This is not without reason, as most dApps are operating at a loss.

You can refer to recent examples, such as the shutdown of zkxprotocol, as well as many other past applications like utopialabs_, yield, FujiFinance, and so on.

But is this because the business model is truly flawed, or are there indeed issues with the protocol?

The primary source of income for dApps (often the only source) is transaction fees. Users pay these fees because they directly benefit from the service.

However, users are not the only participants benefiting from the use of dApps.

In the transaction supply chain, there are multiple participants profiting, primarily block proposers, even though they are the last to see the transactions. In the case of L2, these participants are referred to as sequencers.

MEV is extracted extensively, which is not always a bad thing, but the value created by dApps is stripped away, preventing them from capturing the full value provided.

Currently, there are three ways to address this issue:

1. Become an application chain.
2. Choose an L1/L2 that can create value.
3. Implement a sorting mechanism specific to the application.

Like everything in the crypto space, each solution comes with its trade-offs.

1. Become an Application Chain: High Cost + High Value

You can gain many benefits: extracting as much value as possible, controlling your own network (if you are L2), easier scalability, avoiding competition for block space, and so on.

The downside is: it is really expensive, and it is more challenging to implement because you have to build both the application and the chain simultaneously.

Even if you want to build an L2 and use solutions like alt_layer.

The argument that "every application will eventually become an application chain" is often incorrect for three reasons:

1. Not every decentralized application (dapp) is large enough to warrant migration to an application chain.
2. Some dapps directly benefit from the architecture of the underlying chain.
3. Dapps adapt well on other chains.

2. L1/L2 That Can Reimburse Value: Low Cost + Moderate Value

The cost of deploying applications on rollups or L1 is much lower because you do not need to establish new rules for validation, inclusion, consensus, transaction flow, etc.

In the case of rollups, moving your application from Ethereum to a rollup is usually quite simple, as rollups are either EVM-compatible (e.g., Arbitrum) or equivalent to EVM (e.g., TaikoXYZ).

You still need to consider the architecture of the underlying chain, but you do not have to build from scratch.

Perhaps in the future, we will achieve true chain abstraction, where developers only need to focus on their dapps, but that is another topic.

Developers receive moderate value in return because it is not high value (you do not own the economic system of the chain), but it is also not low value (in addition to transaction fees, you will receive some other returns).

Currently, there are almost no such implementations, as sharing MEV with dapps remains a complex process, and we need more R&D.

3. Application-Specific Sorting: Moderate Cost + Uncertain Value

The concept of application-specific sorting is relatively new, and people often confuse it with application chains; the distinction is simple:

Application chains focus on sorting and execution.

Self-sorting decentralized applications (dapps) only focus on sorting, outsourcing execution to L1/L2.

This is of moderate cost because you need to consider the sorting of transactions, not just building the dapp, and the value is uncertain because this concept is still quite new and involves different considerations.

First, you still rely on proposers because there is a game of inclusion: you can send any bundle you want, but whether your bundle is included in a block depends on the proposer.

If you are going to capture all the MEV (maximum extractable value), then proposers have no clear incentive to include your bundle in the block.

Thus, this creates another incentive market for proposers. They (dapp + proposers) should collaborate; otherwise, they will lose value and power.

Moreover, its value is also uncertain because we cannot determine whether the shared value from L1/L2 will exceed the value that the dapp creates for itself through sorting transactions.

Any chain is a dark forest (not just Ethereum!). So back to the initial question:

Is everything really moving towards AppChains?

1. Yes (some dapps benefit from having their own chain more than staying on existing chains).
2. No (there are other solutions that suit the needs of dapps).

This forest is vast, and it is worth exploring all options.

Every landscape in the crypto space has some diversity, so choose the option that best fits your needs, or build your own solution!