Three major solutions for dApp: application chain, return value, and specific application ranking

Author: Pavel Paramonov, Source: Author Twitter @paramonoww; Compiler: Deng Tong, Golden Finance

Is everything really moving towards AppChains?

Well, yes, but not really.

The main reason dApps are moving to sovereign chains is that they think they are being robbed.

This is not far from the truth, as most dApps are not profitable.

You can consider the example of @zkxprotocol, which was recently closed, and many other applications in the past, such as @utopialabs_, @yield, FujiFinance, etc.

But is the business model really that flawed, or has the protocol really been robbed?

The main source of income for dApps (and often the only source of income) is fees. Users pay fees because they directly benefit from them.

However, users are not the only party that benefits from the use of dApps.

There are several players that profit from the transaction supply chain, but they are primarily block proposers, even though they are the last to see the transaction. In the case of L2, these are sequencers.

MEV is being extracted in large quantities, which is not always a bad thing, but the value created by dApps is being taken away, so they cannot receive the full value they provide.

There are currently 3 ways to solve this problem:

1. Become an application chain.

2. Choose an L1/L2 that returns value.

3. Implement application-specific ordering.

Like everything in crypto, every solution has its tradeoffs.

1. Becoming an appchain: high cost + high value

You get countless advantages: extract as much value as possible, control your own network (if you are L2), easier to scale, avoid fighting for block space, etc.

Disadvantages: It's really expensive, really expensive. And it's hard to do because you have to make both an app and a chain.

Even if you want to build an L2 and use a solution like @alt_layer.

The argument that every app will eventually become an appchain is generally untenable for 3 reasons:

- Not every dapp is big enough to move to an appchain.

- Some dapps benefit directly from the architecture of the underlying chain.

- Dapps feel comfortable on another chain.

2. L1/L2 that returns value: low cost + moderate value

It’s much cheaper to deploy an app on a rollup or L1 because you don’t have to implement new rules for validation, inclusion, consensus, transaction flow, etc.

For rollups: It’s really easy (most of the time) to bring your app from Ethereum to a rollup because rollups are either EVM-compatible (e.g. @arbitrum) or EVM-equivalent (e.g. @taikoxyz).

You still need to consider the architecture of the underlying chain, but you don’t have to build it from scratch.

Maybe in the future we will have true chain abstraction and developers won’t have to care about anything except their dapps, but that’s another story…

Developers get medium value in return because it’s not high (you don’t own the chain economy) but not low (you get some return in addition to fees).

There are almost no implementations at the moment because sharing MEV with dapps is still a complex process and we need to do more R&D.

3. Application-specific ordering: medium cost + uncertain value

The concept of application-specific ordering is fairly new and people often confuse it with application chains, the difference between the two is simple:

- Application chains care about ordering and execution.

- Self-ordering dapps only care about ordering and “outsource” execution to L1/L2.

It’s medium cost because in addition to dapp building you have to consider ordering transactions, and the value is uncertain because the concept is fairly new and has different concerns.

First, because of the inclusion game, you are still dependent on the proposer: you can send any bundle you want, but the decision to include your bundle is up to the proposer.

If you will accept all MEV, the proposer has no clear incentive to include your bundle in the block.

So it opens up another incentive market for the proposer. They (dapp + proposer) should cooperate, otherwise none of them have any value or power.

It also has uncertain value, because we are not sure whether the shared value of L1/L2 will exceed the value created by dapps for themselves by ordering transactions.

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

Is everything really moving towards AppChains?

1. Yes (some dapps have a better chance of having their own chain than staying on an existing chain).

2. No (there are other solutions that fit the needs of dapps)

The forest is large and all options can be explored.

There is some diversity in every landscape (crypto) in the world, so choose the one that better suits your needs or build your own solution!