Will app-specific chains become commonplace soon? The limitations of many Layer 1 chains have highlighted the necessity for Layer 2 networks to ease the burden on Layer 1s. The primary goal of these Layer 2 solutions is to enhance the scalability of Layer 1. Optimism and Arbitrum are perfect examples of Layer 2s built on Ethereum.
Layer 1s aim to handle all transactions directly on their network without relying on others. In contrast, Layer 2s assists the main blockchain by processing some transactions off-chain and then sending the final results back to Layer 1. This approach makes the network faster and more cost-effective.
Despite the variety of Layer 1 and Layer 2 blockchains, no single chain seems perfect for all projects. As a result, many teams are launching new chains, with one of the latest being Unichain, a Layer 2 by Uniswap. While some have benefited, others have yet to see the advantages.
This situation raises concerns about whether every successful app needs to create a new blockchain for its needs or rely on existing Layer 1 and Layer 2 solutions.
This concern was the basis of a debate held at the Solana Breakpoint 2024 where Mason Nystrom, Junior Partner, Pantera Capital; Zaki Manian, Cofounder of Sommelier; and Ben Chow, Cofounder of Meteors gave their opinions.
Nystrom observed that many Web3 applications initially operate on shared blockchain networks to attract users and funding. However, as these applications grow, they might opt to establish their own networks. He highlighted three reasons an app might want its own chain:
Firstly, having control allows an app to customize its network, reduce costs, and avoid competing with other apps for resources on a shared network.
Secondly, owning the network enables the app to capture more of the value it generates, beyond just user fees. Thirdly, a dedicated network allows the app to handle more transactions at faster speeds and lower costs.
In the DeFi arena, Nystrom noted that apps are becoming more self-contained. While this reduces their ability to interact with other apps, it provides greater control.
Composability over isolation
On the other hand, Chow warned that having a separate network could be risky, potentially isolating the app. He discussed “composability,” which refers to the ability of different apps to integrate and work together seamlessly.
Chow believes that being part of a larger network allows apps to connect with other projects and reach a broader audience, offering more advantages than operating independently.
There are examples of apps that have tried both strategies. Helium, for instance, he said initially started with its own network but later joined the Solana network. This shift helped Helium address technical issues and integrate more effectively with other projects.
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Chow also compared this situation to app development for smartphones—it’s more beneficial to create an app within an existing ecosystem rather than building a smartphone from scratch.
In contrast, Manian argued that Solana has developed its own smartphone despite already having a network, suggesting that maintaining one’s own infrastructure is preferable to being part of a broader ecosystem.
Future of Web3
Looking ahead, Nystrom noted that blockchains like Solana and Ethereum will remain critical as they offer valuable services to the apps built on them. However, over time, these apps will seek more control over their operations.
They might carve out their own dedicated spaces on the blockchain or even launch smaller versions of a blockchain. This evolution isn’t detrimental to the larger blockchains; it can actually be beneficial, Nystrom said.
He envisions a “modular” future where various system components—apps, blockchains, etc.—function independently yet collaboratively. Chow also hopes apps will continue to work together.
