Breakpoint 2024: Debate: Every Large App Should Inevitably Launch Its Own L1 or L2

At Solana's Breakpoint 2024 conference, a heated debate unfolded on whether large applications should inevitably launch their own Layer 1 (L1) or Layer 2 (L2) solutions. The discussion highlighted the evolving landscape of blockchain technology and the challenges faced by growing applications in the crypto space.

Summary

The debate centered around the proposition that every large application should eventually launch its own L1 or L2 blockchain. On one side, the argument was made that as applications grow, they naturally seek to control their own economics, customize their block space, and capture more value. This perspective sees the future of blockchain as modular, with apps spinning off their own chains to meet specific needs and capitalize on their success.

On the opposing side, the counterargument emphasized the importance of ecosystem integration, composability, and the challenges of building and maintaining a separate blockchain. This view suggests that launching an app-specific chain might be appealing to venture capitalists but could potentially isolate the application from the broader ecosystem and its users.

The discussion touched on real-world examples, including World Coin on Ethereum and Helium's journey from an independent chain to a Solana-based application. These cases illustrated the complex decisions facing large-scale blockchain applications as they navigate growth, technical requirements, and ecosystem dynamics.

Throughout the debate, both sides acknowledged the rapid evolution of blockchain technology, particularly highlighting Solana's advancements in multi-proposer systems and application-specific sequencing. The conversation ultimately reflected the ongoing transformation of the blockchain space, where the lines between different approaches are increasingly blurred.

Key Points:

Arguments for App-Specific Chains

Proponents of app-specific chains argued that as applications grow larger, they are incentivized to launch their own L1 or L2 solutions for several reasons. Firstly, controlling their own block space allows apps to capture more economic value, not just from their traditional revenue streams but also from the broader ecosystem they facilitate.

Secondly, having a dedicated chain enables greater customization of the execution environment, including features like gas abstraction and higher throughput. This customization can lead to improved user experiences and more efficient operations tailored to the specific needs of the application.

Lastly, as successful blockchains like Solana face increasing demand for block space, new applications may be pushed to launch their own chains to avoid competition and secure cheaper, more readily available block space.

Arguments Against App-Specific Chains

Critics of the app-specific chain approach emphasized the value of remaining within a thriving ecosystem. They argued that the power of integration, composability, and collaboration with other projects in the ecosystem outweighs the benefits of going solo.

Building an independent chain was characterized as isolating oneself on an "island," potentially cutting off valuable network effects and user bases. The counterargument stressed that it's significantly more challenging to attract users and build momentum when also dealing with the complexities of maintaining a separate blockchain infrastructure.

Another point raised was the risk of becoming a "homogeneous app chain," vulnerable to sector-specific downturns. In contrast, diverse networks can thrive even when individual sectors face challenges.

The Evolution of Blockchain Technology

Both sides of the debate acknowledged the rapid advancement of blockchain technology. Solana's development of multi-proposer systems and application-specific sequencing was highlighted as an example of how existing platforms are evolving to meet the needs of large applications.

This technological progress blurs the lines between different approaches, with features traditionally associated with app-specific chains being integrated into main networks. The debate touched on how these advancements might influence the decision-making process for applications considering their blockchain strategy.

User-Centric vs. Value Capture Approaches

An important aspect of the discussion revolved around the balance between serving users and capturing value. The debate questioned whether the primary focus of applications should be on providing value to users or maximizing value capture for token holders.

This dilemma was framed as a choice between building for venture capitalists (by focusing on value capture through an independent chain) versus building for users (by prioritizing product-market fit and user engagement within an existing ecosystem).

Facts + Figures

• Solana's current TPS (Transactions Per Second) is around 3,000
• Global credit card payments process approximately 22,000 transactions per second
• World Coin at one point accounted for 50% of transactions on Optimism
• Applications like Zeta, Graphs, Code, and Helium have announced or launched their own network extensions on Solana
• DeFi applications were cited as potential exceptions to the trend of launching app-specific chains due to their reliance on initial liquidity pools
• Helium transitioned from being an independent L1 to an application on Solana, and has since announced plans for a network extension
• Uniswap X was mentioned as an example of DeFi applications internalizing order flow with off-chain order books

Top quotes

1. "We're rationalists, not maximalists" - Lily, President of Solana Foundation
2. "If you're building for your own app chain, you're building for VCs. If you're building on an ecosystem, you're building for users." - Ben
3. "The future of Solana is modular and that is a bright future." - Mason
4. "I'm a composability maxi" - Ben
5. "What's important is not the block space, but the value on top" - Mason

Questions Answered

Why are some large applications considering launching their own blockchains?

Large applications are considering launching their own blockchains to gain greater control over their economics and customize their block space. By running their own network, apps can capture more value from the ecosystem they facilitate, implement custom features like gas abstraction, and potentially access cheaper and more abundant block space. This move allows them to tailor their infrastructure to their specific needs and user base.

What are the main arguments against launching an app-specific blockchain?

The main arguments against launching an app-specific blockchain revolve around ecosystem integration and user acquisition. Critics argue that by leaving a thriving ecosystem, apps isolate themselves from valuable network effects, composability with other projects, and existing user bases. Building and maintaining a separate blockchain infrastructure also diverts resources from focusing on product-market fit and user engagement, potentially making it harder to attract and retain users.

How does the debate on app-specific chains relate to the broader evolution of blockchain technology?

The debate on app-specific chains reflects the broader evolution of blockchain technology, where the lines between different approaches are becoming increasingly blurred. As existing platforms like Solana develop features such as multi-proposer systems and application-specific sequencing, they're addressing many of the needs that might have previously driven apps to launch their own chains. This evolution suggests that the future of blockchain may involve a mix of modular solutions and advanced features on existing networks, rather than a clear-cut division between app-specific and general-purpose chains.

What role does DeFi play in the decision to launch an app-specific chain?

DeFi applications are often cited as exceptions to the trend of launching app-specific chains due to their reliance on initial liquidity pools and the benefits of composability within an ecosystem. However, the debate suggests that even large DeFi applications might eventually consider launching their own chains to capture more economic value from the broader financial activities they facilitate. The decision for DeFi apps likely involves weighing the benefits of ecosystem integration against the potential for greater value capture and customization.

How does the focus on users versus value capture influence the decision to launch an app-specific chain?

The debate highlighted a tension between focusing on users and focusing on value capture. Launching an app-specific chain was characterized as potentially more appealing to venture capitalists due to its potential for greater value capture. However, critics argued that this approach might come at the expense of user focus, suggesting that remaining within an ecosystem allows applications to concentrate more on product-market fit and user engagement. This dilemma reflects broader questions about the long-term sustainability and success of blockchain applications.