As the bull market rolls on, new and exciting tech continues to get rolled out. It is, quite frankly, almost impossible to keep up with it all. (Unless you are reading our research reports, of course).
If you had taken the time to read through our 2024 Thesis you would have noticed there is a mention of one of these exciting new technologies, RollApps.
Yes, we think this could be a real game-changer!
With this in mind, roll up your sleeves and whatever else you’re rolling up, and let’s find out why…
What are RollApps?
RollApp technology has recently been brought into the light by Dymension and their Dymension RDK. This RollApp Development Kit allows for the easy development of RollApps on top of the Dymension protocol. At present, they have thousands of RollApps built on their network, with almost $11.5 million in TVL between them.
These RollApps can be thought of as customizable, permissionless roll-ups that remove the consensus/settlement side and leave only a flexible and scalable execution environment. They consist of two core services, the client side and the server side.
In the case of Dymension, the client side is referred to as “Dymint” and is responsible for block production, peer message propagation, and inter-layer networking. The server side is the application side that allows the developer to implement custom features to the application with the help of pre-packaged modules.
What this does is majorly simplify and speed up the deployment of new applications that can use their own token as gas while benefiting from the underlying security and liquidity of the Dymension network.
One way of picturing the world of RollApps is by imagining a new chain that exists to host thousands of baby chains (RollApps), each with limitless potential and flexibility. The typical technical blockchain infrastructure is abstracted away, and launching any application type you wish becomes a breeze. This allows any developer to easily apply their latest application ideas to the world of crypto.
Imagine the number of ponzis we can ape.
As the internet matured, it became more modular. At the same time, base protocols were standardized and shared by everybody. On top of TCP/IP we have http & https for serving web pages. Most internet users take those base layers completely for granted.
Building on top of them, we choose modules in the form of web hosting packages, development frameworks, and database choices. On top of those, we have more modular choices, such as front-end frameworks and design patterns that shape the end-user experience.
In the past, we had a new Layer 1 blockchain for each and every new use case. From Litecoin to Namecoin, Dash, and XRP, entire new architectures were designed, built, and memed into existence for every new crypto brain fart!
If we glance into the world of Web2 today, nobody is rebuilding base internet protocols like http and TCIP/IP for every new application idea. This would be an absolute nightmare.
Imagine having to design and build your own database and web server every time you start a new online shop. That is where blockchains were before the introduction of roll-ups.
RollApps take the roll-up idea a step further and can be seen as the dawn of the Shopify legos for our once clunky space.
This paradigm shift for blockchains occurred when Ethereum gave us the ERC-20 token design. This created the ability to leverage some of Ethereum’s L1 properties, like security, for more specific applications.
After that came Arbitrum, Optimism, and a host of other L2s that leveraged the Ethereum mainnet. Soon after, Vitalik and the Ethereum community went full Rollup-centric with their roadmap.
Arguably the future of Ethereum is not just rollup-centric but also modular. Projects like Eigenlayer and other EVM parallel protocols will put more wind into these sails.
To gain a deeper understanding of the current RollApp environment, it pays to have a better understanding of what Cosmos has been doing over the past few years.
Cosmos gave us the app-chain thesis. One blockchain per application, with cross-chain swaps and native communication via the Inter-Blockchain Communication protocol (IBC) - analogous to TCP/IP in the web2 world.
The Cosmos SDK (software development kit) exists as the ecosystem’s modular blockchain toolkit, available for anybody to compose their own full-stack app chain.
All Cosmos app chains, like DYDX, Celestia, Injective, SEI, and Kujira, are connected via the Cosmos Hub. This is similar to how a router in your house connects all your devices on the same wifi network. These app chains leverage the Cosmos Hub consensus and security, like a shared firewall in your router that keeps your laptop safe from malicious activity.
RollApps take this a step further, simplifying deployment, in some cases, to a series of clicks and some basic configuration. This takes away the need for bootstrapping liquidity and extends optionality to a whole new level.
The Advantages of RollApps
How do modern web apps launch? They use infrastructure service providers like Amazon Web Services (AWS) to abstract away the infrastructure. By doing this, they can be far more cost-effective than having to own and maintain all that physical infrastructure themselves.
The same is true for blockchains. Monolithic L1s require a network of nodes to validate, come to consensus, and secure the chain. These nodes cost money to run and need to be incentivized to join the network.
Instead, RollApps leverage an existing L1 network of nodes, such as the Dymension network, for consensus, security, and shared liquidity. Not only this, but due to the availability of developer-specific kits like the RDK, they are much easier to launch than their predecessors.
By separating consensus and execution layers, modular RollApp builders can make technical choices about the critical features of their applications.
Another massive advantage is scalability.
In the new data availability and rollup world, scaling is much easier.
Scaling with RollApps will be much easier because the tooling becomes abstracted and productized. Just a click of a button to add more resources. No need for a blockchain engineer to connect all your widgets together and keep things running like a game of Jenga that threatens to fall over whenever things heat up.
If you are not living under a rock, you should have heard of Celestia by now. And if you’ve yet to read up on it, then boy, do we have the piece for you.
The greatest Celestia innovation is a new data availability (DA), sampling-driven, scaling dynamic for blockchain applications.
What does this mean?
For the first time, there is no linear connection between the number of users crowding into your application and the cost to make transactions.
For reference, here is the DA sampling genesis blog from May 2019, at a time when Celestia was still called “LazyLedger”.
Celestia’s data availability sampling is a great scalability decoupling. Block verification is reduced to data availability verification. This can be done trivially by “light clients”. Therefore something as small as a phone or as obscure as DJ equipment can verify your blocks without skipping a beat.
The old, cost-ineffective cycle will soon be a thing of the past. Chains that are cheap to use in a bear market, but mid-bull, when things get so congested at the exact time that transacting on-chain becomes most critical, we have to sell our kidneys and family members to pay for gas fees. This cycle is soon to be banished forever!
This may explain why big-brain Eric Wall said this way back in October 2022:
The Future of RollApps
The question remains as to where the magic internet beans will flow and who will manage to capture the value presented by this new technology.
Where do we position ourselves to best profit from all this RollApp action?
Here is Mustafa Al-Bassam’s take on RollApp value capture:
The following is a rough transcript from this video interview where he talks about his modular thesis.
“There will be fewer Data Availability (DA) layers than execution layers.
And there will be fewer execution layers than application layers.
The total value of application layers will be greater than the total value of execution layers and again greater than the total value of DA layers.
But the value of the biggest DA layer is potentially going to be bigger than the value of the biggest application.
Simply because there are less DA layers than application layers & applications.”
Again, the Web 2 analogy of AWS is helpful. AWS serves infrastructure to 1000’s of applications. The value of AWS is much greater than the average application built on top of it. However, the total value of applications built on AWS is much greater than the value of AWS itself.
Therefore, one can imagine that large DA layers will capture a lot of this value.
Credibly neutral DA layers provide a scarce resource, therefore they will accrue a great amount of value. DA layers like Celestia create a credibly neutral trust zone or ‘cluster’ of chains using the same service.
Mustafa Al-Bassam talks about data availability clusters here.
Within your DA cluster, you can bridge to, or compose with, other applications in a trust-minimized way. This creates a flywheel of network effects within the cluster. Inter-dependent products and services can exchange data in a trustless, frictionless way across their respective chains.
Application tokens will also capture large amounts of value, especially when used for gas on the application. For example, on Ethereum, many popular applications have a governance token, but all the gas fees go to Ethereum validators and not to the application itself.
Uniswap is the canonical example. Until they turn on the long-awaited ‘fee switch’, all those gigantic fees just amount to losses for loyal $UNI hodlers. In contrast, on Cosmos, app chains immediately reap the value they create as it accrues to the application token itself.
So, taking all of this into consideration, some obvious plays to make in order to maximize your gains from this new paradigm shift could be as follows:
The first mover and OG Data Availability layer. $TIA has been up only since it launched in October 2023. You can still stake $TIA to get some potentially decent airdrops from early-stage projects that will use them for data availability.
Big airdrop energy for this highly anticipated RaaS platform. The $DYM airdrop ends on 21 January 2024, and the token launches soon after.
By staking $DYM early, you open yourself up to potential airdrops from every future Dymension Rollapp launch, and as mentioned before, there have already been thousands!
Other Opportunities in the RollApp Space
There are many other interesting, upcoming launches happening in this space. Many of these projects will be launching on mainnet in Q1/Q2 2024 and tokens will follow.
Rollups as a Service. Token launch 17 Jan 2024
Backed by Polychain and Balajis Srinivasan.
Rollups as a Service. Production-ready, mainnet is live.
Appchains as a Service, but not Rollapps.
‘We extend Cosmos’ appchain model by introducing permissionless and automatic deployment of application-specific chains in an easy-to-use package.’
Rollup-as-a-Service Platform. Looks very slick.
‘Deploy custom chains with cutting-edge Web 2 UX'.
Celestia’s own Sovereign Rollup development kit.
Preston Evan’s ‘Internet of Rollups’
Data availability and comprehensive solution for rollups, validiums and app-chains.
Early stage, but sounds interesting. Hardware Availability Layer for the Modular Web.
From their docs:
“We're bridging the gap between traditional cloud services and decentralized aspirations, by offering a platform that virtualizes distributed systems. Your familiar developer environment with the unparalleled benefits of decentralization.”
In many ways, the RollApp is a new blockchain primitive, much like a smart contract, a token, or an NFT is a blockchain primitive. A fundamental building block within the ecosystem. The difference is that in the case of a RollApp, the core function is not to hold value like a token but to enable value creation.
Platforms like Dymension remove as much technical and infrastructure friction as possible. Allowing developers to build and capture value as quickly and cheaply as possible. This will enable the creation of millions of future application-specific RollApp chains well into the future.
Watch this space!