Appchains, sidechains and layer 2s (L2s) are off-chain scaling solutions. While they are all designed to optimize the underlying blockchain’s usability by enhancing its speed and scalability while minimizing gas fees, there are key distinctions between them.
This article reveals all the fundamental variances between these three decentralized application scaling networks.
What are Sidechains?
Sidechains are blockchains that connect to a mainnet or parent blockchain using a two-way bridge. They are intended as blockchain scalability solutions, using a bridge to transfer assets between the two blockchains. Sidechains are sovereign, as they use their own consensus protocols. This means that if the sidechain is compromised, it will not affect the parent chain.
Examples of sidechains include:
- Bitcoin sidechains: Rootstock, Liquid Network
- Ethereum sidechains: Gnosis Chain, Polygon, Alpha.
Generally, the two chains have a “parent-child” relationship, with the “child” network entirely reliant on the “parent” chain, deriving all its assets from it. However, the two blockchains can operate independently of each other, with each regarded as the other’s sidechain.
What are layer-2 scaling solutions?
The layer-1 (L1) blockchain is the base cryptocurrency network. It handles decentralization and security and provides data availability. An L1 uses a consensus mechanism like proof-of-work (PoW) or proof-of-stake (PoS) for the processing and security of the network. Examples of L1 blockchains include Bitcoin and Ethereum.
In contrast, a layer 2 (L2) network is a secondary, offchain blockchain or technology built or layered on top of the base L1 blockchain. The goal of an L2 framework is to assist in scaling and enhancing the transaction speed of the L1 blockchain. Layer 2 security frameworks are typically reliant on the underlying network.
Layer-2 solutions usually run using smart contracts. Examples of layer-2 scaling solutions include:
- Bitcoin layer-2 scaling solutions – Bitcoin Lightning Network
- Ethereum layer-2 protocols – Optimism, Arbitrum, Base.
There are different types of L2 solutions:
1. Rollups
Rollups batch multiple transaction executions and verify them off the main chain, then send them to the mainnet after verification. They could be either optimistic rollups, which use fraud proofs, or zero-knowledge (ZK) rollups, which rely on validity proofs.
2. Ethereum plasma chains
Merkle tree and smart contract scalability solutions create endless branching of child chains that are copies of the Ethereum main chain. They allow the computation of transactions off the main chain.
3. Validium
Validiums store transaction data offchain while maintaining the security of the underlying blockchain through validity proofs. They offer high scalability and lower transaction costs, making them suitable for applications requiring frequent and inexpensive transactions.
4. State channels
State channels allow participants in a transaction to conduct multiple transactions offchain, with only the final state being recorded on the blockchain. This reduces congestion and transaction fees on the main chain while still maintaining security.
What are appchains?
Application-specific blockchains (appchains) are specialized blockchains tailored to meet the specifications of one particular business need or use case, unlike general-purpose blockchains that operate multiple applications designed to accomplish different tasks. Although they can work independently, appchains usually operate on top of a layer-1 blockchain.
Appchains rely on the layer-1 chain to provide security and an operational network. Since they don’t compete with other apps for storage and computation, this allows greater freedom for the governance structure, consensus algorithm and economic structure of appchain development.
This leads to a customized architectural design that is streamlined to the business requirements and has greater efficiency than general blockchains, better cross-chain interoperability, and enhanced security and privacy. Appchains are typically optimized to provide faster and higher transaction volumes and offer more stringent security measures while handling sensitive data.
Examples of appchains are:
- Cosmos Zones
- Polkadot parachains
- Avalanche subnets.
Differences between sidechains, appchains and layer 2s
Although they look similar at first glance, there are glaring differences between them on closer inspection:
Security
Layer 2s usually rely on the security framework of the mainnet (L1). Appchains are also dependent on a public blockchain for their security. Sidechains have their own inherent security model.
Operational model
A sidechain is an independent network with its own consensus protocol. It comprises coin-backing nodes and a public block explorer, with users having the ability to operate nodes corresponding to the mainnet. A sidechain connects to the mainnet via a two-way bridge.
An L2 is reliant on an underlying protocol, and it only manages scaling and specific transactions from the main chain. The L2 shares the load of layer 1 and can be used to provide additional functionality to the underlying protocol. Unlike a sidechain, the L1 controls the export of funds on an L2.
As for appchains, they have the same operational model as a sidechain but are devoted to a single use case. Both appchains and L2s are layered on top of the L1, while the sidechain is completely autonomous.
Public members
Sidechains are sovereign blockchains, so they allow for public members. An L2 can have the architecture to either have public members or not. Appchains are typically closed-off infrastructure that is not open to public members.
Public blocks
Layer 2 and sidechains allow for public blocks, but appchains’ infrastructure does not support public blocks.
Customization
A sidechain is separate from the mainnet, with its own rules and protocols that could be different from the main network. This makes it easier to tailor to specific use cases without affecting the main chain. Developers can use the sidechain to test new technologies and features without disrupting the parent chain.
An L2 is built on top of an existing blockchain, so it is not as versatile. It is reliant on the mainnet for operations and security, so developments on the L1 would affect it.
Although built on top of a layer 1, appchains are highly customizable. They don’t compete with other applications for resources and are built for a single purpose, which offers greater leeway for development. This gives developers more control over their projects’ appchain tokenomics, consensus mechanisms and governance.
Compatibility
A layer 2 is layered on top of an L1, so they incorporate into the infrastructure without the need for developers to change the underlying protocol.
Appchains are also highly compatible due to their modularity. They allow for easy modification as core modules can be expanded or forked.
Since sidechain consensus mechanisms could be different from the mainnet’s, developers must build interoperability protocols to enable cross-chain compatibility.
Benefits
Apart from fulfilling all the needs of a specific use case, appchains allow autonomy to opt for PoS or proof-of-authority (PoA) consensus. The autonomous functionality of sidechains enables experimentation without interrupting the main blockchain.
Layer 2 slows down transaction output, relieving pressure on the main chain and lowering transaction fees.
Future trends of sidechains, L2s and appchains
Sidechains, L2s and appchains enhance the functionality of existing blockchain platforms. They predominantly solve scalability and speed limitations of the underlying blockchains.
The three scaling solutions will continue to contribute to the development of traditional blockchains, minimizing inefficiencies and enhancing the appeal of decentralized networks. As more individuals and companies seek solutions catering to their unique needs, these three could provide the framework addressing all their specific applications, be it security or decentralization