Exploration of the Origin, Development, and Prospects of AppChain

The development of AppChain has become an inevitable trend due to the maturity of modular technology, the widespread validation of general Rollup Layer 2 networks, the increase in RaaS platforms and the improvement of services, as well as the competition for public chain blockchain space resources by dApps, the optimization of transaction costs for end users, and the demand for customization of token economies.

Regarding this trend, we believe that dApps upgrading to AppChain will not immediately transform into a high-valuation infrastructure layer, as dApps and AppChain are more of a technical choice rather than a decisive factor for success. The advantage of AppChain lies in facilitating more high-frequency on-chain transactions through low-cost transactions, utilizing data accumulation to enhance user product experience, forming user stickiness, and thus achieving network effects. Therefore, the core of AppChain development still lies in its unique application barriers and traffic.

The Origin of AppChain

Cosmos is a pioneering project in the AppChain field. It is known for its modular and pluggable design philosophy, which separates the virtual machine and consensus engine, allowing developers to freely choose the framework for building the virtual machine and customize the key parameters of the consensus engine. This design enables various applications to exist in the form of independent chains, showcasing unique advantages in flexibility and sovereignty.

However, the overall growth trend of Cosmos AppChain has not continued, and the number of new AppChains has not significantly increased. This is mainly because Cosmos grants too much sovereignty to AppChains, and before the launch of the ICS plan in Atom 2.0, the high security, startup, and maintenance costs of AppChains were the main reasons.

Catalyst for New AppChains

The rise of the new AppChain is mainly attributed to:

1. Popularization of the modular blockchain concept
2. The Maturity and Widespread Validation of General-purpose Rollup Layer2
3. The Development of Interoperability and Liquidity Aggregation Layer
4. The Rise and Improvement of RaaS Platforms

These factors have lowered the entry barrier for AppChain, while the current application dilemmas in the primary and secondary markets are also intensifying dApps' exploration for a breakthrough.

Advantages and Disadvantages of New AppChains

Advantages:

• Modular design
• Optimize performance
• Enhanced value capture

Disadvantages:

• Liquidity Fragmentation
• Interoperability and composability issues
• Increased complexity

The Moat Construction and Development Route of AppChain

The moat of an AppChain is always its own application business. The key to success lies in deeply exploring market pain points and building PMF product applications. Simply relying on the narrative of the AppChain's underlying infrastructure is not an effective way to build a moat.

The AppChain should focus on development as the main priority and promotion as a supplementary effort. The accumulation of user data, the cultivation of user habits, and the iterative updates of product features are not achieved overnight, so a steady and solid development approach is more suitable.

Token Gameplay Design Concepts

When building the token economic model for the AppChain, we advocate for a naturally evolving strategy (Organic). The core of this strategy is to reduce human intervention and avoid reliance on short-term incentives. Our hope is to align the circulation and value growth of the tokens with the expansion of the application itself and the increase of the user base.

Tokens can serve as a tool for attracting users in the early stages of an application, but the key lies in designing efficient and attractive mechanisms to convert users into long-term users. The growth in the number of token holders should align with the expansion of the user base to ensure the healthy development of the token economy.

Investment Analysis Framework

When conducting investment analysis, we adopt the following framework:

1. Industry Understanding and Market Positioning
2. Target Customer Group
3. Product Delivery and Iteration Speed
4. User Retention and Business Model

Outlook

We hold an optimistic expectation for the development prospects of AppChain. As the core platform that supports user activities, AppChain can play an important role in diversified fields such as social networking and gaming. In the future, these AppChains will not only provide users with rich interactive experiences but also promote innovation and development in related industries through their unique technological advantages.