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It's time to imagine a multi-chain era with application chains

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Application chain or change the landscape of Web3 innovation

Cross-chain, it seems, is starting to be mentioned again.

However, unlike the 2019 hype, the current chain does have cross-demand.

For players, Ethereum's performance issues need not be described, everyone has a personal experience, "aristocratic chain" three words summed up enough.

Solutions began to emerge, but when we looked at the current situation, we found that there was still a need for cross-chains, because multi-chains seemed inevitable.

Multi-chain view from expansion point of view

First, look at the current state of Ethereum.

In order to scale up, the layer-2 solution is generally considered a top priority.

However, DEFI applications rely heavily on the composability of applications, but cross-domain interaction between Layer 2 networks remains an unsolved problem. Of course, there are also teams like Celer Network that have proposed solutions.

However, from the current two-layer trend, it is very likely that the final situation is that the leading DeFi project will move into the same universal two-layer network, and then the ecology will continue to expand around the leading project. But the throughput of a single two layer network is ultimately not enough to meet the rapidly expanding DeFi user base.

This gives a premise for multichaining.

So we see Solana, Near, Avalanche, and even BSC. These successive public chains, whether or not they support EVM, all have one thing in common: they all support Ethereum cross-chains.

Solana has the "wormhole" cross-chain bridge, Near has the "rainbow" bridge, and BSC has the gateway.

Placeholder partner Chris Burniske recently tweeted that the current implementation of multi-chained forms reminds me of POS in 16/17. People are realising that multi-chaining is the way of the future, although it will take some time for it to be implemented on a large scale.

In the era of multi-chain, not only the public chain represented by smart contract can exist, but also new models, such as application chain.

Application chain emergence logic

The idea of a cosmic computer taking people from Web2 to Web3 seems unrealistic, and multi-chain coexistence has become an inevitable trend. As cross-chain leaders, Polkadot and Cosmos not only want to use cross-chain to solve the problem of capacity expansion, but also to provide a new application implementation idea for the Web3 world -- application chain.

Before we talk about the future of apps, let's revisit the history of on-chain apps. Bitcoin, as the first centralized application on the chain, opened up a new way of thinking about the innovative development of Web3.

Later, people branched the Bitcoin code base and innovated the on-chain application of payment based on the inadequacy of Bitcoin. However, Bitcoin's rigid architecture and poor scalability limit its room for innovation in non-payment applications. And at that point, there was no interaction between chains, no composability between applications at all.

Then came Ethereum, which implemented on-chain applications with smart contracts, which greatly reduced the cost and threshold of on-chain application development and allowed contracts to interact with each other at will. People do not need to spend energy in the bottom communication network, consensus protocol, just complete the upper application logic can be.

With the progress of technology, the new generation of smart contract public chain with far better performance than Ethereum provides developers with better infrastructure options. Various cross-chain Bridges enable Ethereum assets to seamlessly cross domains. With Polkadot's Substrate and Cosmos's Cosmos SDK, developers can customize a blockchain for their applications quickly and with low barriers to entry. With the help of the universal cross-chain communication protocol IBC, chain-to-chain interaction within the same framework is no longer an issue.

From bifurcated Bitcoin to smart contracts to app chains, the ways of app innovation are constantly iterating. Smart contracts and app chains are by no means the opposite of each other. Apps will choose according to their own needs.

Implement the application with smart contract

According to Electric Capital's 2020 Developer Report, Ethereum's monthly active developers have grown 215% over the past three years, reaching 2,325 monthly active developers by the end of 2020, far outpacing the Bitcoin community (361 monthly active developers). Of the 2,325 Ethereum developers, 925 are active in Defi.

Image Credit: Electric Capital Developer Report (2020)

As we can see in the figure, the Ethereum development community saw the largest increase in numbers in Q3 2019 compared to Q3 2020, far outnumberingthe other tech communities. The Poca tech community also saw significant growth, while the other tech communities remained almost unchanged. In terms of the number of active developers, the total number of active developers in Ethereum exceeds the total number of active developers in other technology communities combined.

An active technology community creates a rich application ecology. According to the State of the DApps, there were 2,579 decentralized Ethereum applications as of February 2021.

The platform effect and network effect of Ethereum make Ethereum smart contract ecology form a positive spiral development. First of all, developers are more willing to develop in the form of smart contracts on Ethereum. Mature infrastructure and ecology allow more interactive choices for applications on Ethereum. Rich interactions may mean infinite imagination space for application scenarios, especially for applications like DEFI that attach great importance to composability. At the same time, the network effect of Ethereum has made Solidity language even more accessible to developers. Secondly, from the user's perspective, Ethereum offers a full range of application choices, and users can meet all their needs only by interacting with a single Ethereum network. The increase in users has, in turn, attracted more developers. From the perspective of capital, capital is more inclined to invest in the mature ecology with low risk. There are countless high-quality assets incubated by Ethereum, which also makes more and more capital surround the periphery of Ethereum ecology.

From another point of view, applications based on smart contract can enjoy the security guarantee of the underlying public chain, but applications within the same system need to share limited computing and processing resources, which is also the performance bottleneck of the public chain based on smart contract. At the same time, this limits the variety of Web3 applications. Due to the limited resources on the chain, active applications are limited to the profitable DEFI applications, and because of the high cost, these applications only generate more wealth for the large owners with large amounts of principal. This means that non-Defi apps that don't already have a lot of users are marginalized, and retail investors who don't have a lot of capital can't participate in Defi's game of making money.

At the same time, in order to protect the verifiability of processing logic, the smart contract platform usually does not allow the smart contract to be upgraded, because the developer's unilateral modification of the smart contract will destroy the fairness of the verifiability. This makes the governance of smart contracts another bottleneck for decentralized applications. The key point is that smart contract belongs to the "one size fits all" solution, that is to say, intelligent contract application need to compromise on the underlying framework, developers can't fully implement specific application requirements, for example, some applications require specific consensus agreement, virtual machine or governance environment, these are intelligent and chain can't satisfy the contract.

Implement the application with the application chain

Compared to smart contracts, app chains have much more options. Both Cosmos's Cosmos SDK and Polkadot's Substrate provide developers with a modular framework that allows them to customize or replace modules to create their own blockchain for their applications.

From a performance perspective, both the Cosmos SDK and Substrate's application chains can reach thousands of TPS, which means that a single application can enjoy 100 times Ethereum's performance. At the same time, the application chain supports smart contract, which means developers can develop a smart contract application chain with a very low threshold, and the application suitable for the implementation of smart contract can be deployed on the smart contract application chain. From the interaction point of view, IBC Universal Cross-Chain Protocol will support both COSMOS and Substrate application chains, so that application chains built on these two frameworks can interact seamlessly. With the support of cross-chain bridge, there will be no problem for the application chain to interact with other public chains. From the perspective of security, Polkadot network implements the shared security mode, Substrate chain can be added to Polkadot system to share the security of the relay chain if the parallel chain slot is obtained, and Cosmos will also implement the shared security mode in the future. From the perspective of governance, developers can customize governance modules according to requirements, and the application chain supports on-chain governance without forking upgrades, making protocol iteration transparent and efficient.

At the same time, Polkadot Ecology's Acala and Cosmos Ecology's Ethermint are EVM-compatible application chains, and Ethereum's smart contracts can be seamlessly deployed on the application chain to interact with the multi-chain ecology.

For the Polkadot technology community, although Substrate uses the Rust language, and the high barrier to entry has made developers scarce, there has been an influx of capital in the app chain and the Polkadot ecosystem, which has made many developers willing to start over in the Rust community. At the time of writing, the Boca community has 385 thriving projects. The Cosmos ecosystem is also supported by the OKEx Chain and Binance Chain.