Andre Cronje Discusses Appchains: Innovation or Over-Engineering?

The technological innovations in the DeFi sector continue to emerge, and the introduction of Appchains has sparked widespread discussions in the industry. Andre Cronje, the founder of Yearn Finance, recently shared his views on this new technology in an article, delving into the practicality of Appchains. Drawing from his extensive experience, Cronje analyzed the potential and challenges of this technology, providing a thoughtful assessment of its future development.

Inspiration from a Tweet

Andre Cronje's article started with a tweet, which sparked a series of discussions and product recommendations about new technologies. Among them, a particular product that caught his attention allowed him to build his own "Appchain" in just a few minutes. This technological experience excited Cronje as he was exposed to many innovative technical solutions, providing an excellent opportunity for someone eager to learn new technologies.

Appchains: Ideal Concept vs. Realistic Challenges

Cronje delved into the potential of Appchains. He pointed out that the concept of Appchains is to provide developers with a complete technical stack, including native stablecoins, oracles, proof systems, bridging technologies, and cross-chain interoperability. However, everything is not as perfect as it seems, especially in terms of automation and cost.

Challenges of Native Stablecoins and Oracles

Cronje focused on two challenges he found most daunting: issuing native stablecoins and trusted oracles. He mentioned that in his recent Sonic project, he spent over $5 million to achieve these functions, so hearing about getting these technologies for free made him feel both humbled and embarrassed. Specifically, Noble.xyz, a platform claiming to provide native USDC and CCTP for any IBC-supported chain, Cronje pointed out that this is not truly native issuance but a bridging technology achieved through IBC.

He further mentioned other recommended solutions like LayerZero and AcrossProtocol, which, while technically impressive, are also not native issuances. For chains aiming for scalability and trust, native issuance is the ideal solution, albeit at a high cost.

Challenges of Oracles: Integration and Costs

Regarding oracles, Cronje received recommendations including SkipProtocol, StorkOracle, and Redstone_defi. Unfortunately, these oracles are not immediately usable and require additional integration work, potentially incurring costs. He believes that for developers aiming to be at the forefront of L1 or L2 blockchains, this could pose a significant challenge as most new chains aspire to lead the market.

Development Tools and Wallets: Potential Operational Friction

While development tools and wallets are compatible with new blockchains, Cronje pointed out that users and developers need to manually configure RPC remote procedure call endpoints. While this may seem simple, it adds unnecessary friction to the user experience.

Blockchain Browser Choices: Free or Paid

Concerning blockchain browsers, Cronje mentioned that Blockscout is an excellent representative among free options, but paid products like Etherscan, supported by professional teams, usually offer more competitive services.

Network Effects and Interoperability Still Need Solutions

Cronje emphasized the importance of network effects and interoperability for the blockchain ecosystem.

Using Unichain as an example, even with a strong network effect, if it is the only chain using Uniswap, its actual transaction volume may be limited. This is because most trading volume comes from arbitrage trades with other AMMs, clearing positions, etc. Therefore, Cronje believes that interoperability and composability are crucial factors driving blockchain economic activities, and standalone chains struggle to generate sufficient fees.

Uniswap launches Layer 2 designed for DeFi, data exposure Unichain may lead to Ethereum inflation

Practicality of Appchains: Engineering Solutions or Overdesign?

Despite the exciting concept of Appchains, Cronje questions its practicality. He noted that launching one's L1 or L2 blockchain with all technical functionalities in just a few minutes is indeed an impressive technical feat, but does it truly solve practical problems?

Cronje specifically mentioned Uniswap's performance on Ethereum, where the application has generated over $2.4 billion in gas fees for validators, fees that could have originally gone to the application itself. He believes that if the value capture problem could be addressed more practically through other means, perhaps technologies like Appchains, aiming to decentralize network effects, may not be necessary.

Conclusion: Technological Innovation or Value Capture Issue?

In conclusion, Cronje views Appchains as an exciting technological innovation but sees it more as an engineering technology seeking solutions for problems. He suggests that value capture for applications could perhaps be achieved through simpler means like revenue-sharing models, avoiding the various challenges that come with running one's blockchain and related technologies.

As a tech enthusiast, Cronje is passionate about Appchains, but as a practical builder, he questions their real necessity. His perspective prompts deep reflections on the future development of Appchains.