Andre Cronje: L2 Appchain Costs Are Too High

Andre Cronje, co-founder of Sonic Labs, raised concerns on Oct. 13 about the practicality of Layer-2 (L2) appchain infrastructure for developers, citing several challenges. 

In a post on X, Cronje pointed to high infrastructure costs, fragmented liquidity, and a lack of sufficient support as significant issues that limit the adoption of appchain projects. Appchains are blockchains designed for specific decentralized applications (DApps) or functions, but Cronje’s critique calls into question their effectiveness for builders.

Why L2s as appchains are not logical for builders:

– Barely any infra when deploying (stable coins, oracles, institutional custody, etc)
– No foundation/labs to help support
– Centralised and open to attack
– Fragmenting liquidity and forcing it onto bridges
– No community of…

— Andre Cronje (@AndreCronjeTech) October 13, 2024

Cronje’s main point of contention was the high cost associated with appchain building. He revealed that his team’s infrastructure expenses have already reached $14 million this year due to ongoing costs related to regulatory compliance and oracles. He noted that these expenses often divert resources from application development, making it difficult for developers to focus on building their core products and serving users.

Hilmar Orth, founder of Gelato Network, disagreed with Cronje’s assessment of appchain costs. Orth argued that the necessary infrastructure for appchains has become accessible through rollup-as-a-service (RaaS) providers. According to Orth, developers no longer need to build infrastructure from scratch, as RaaS providers and framework teams already offer the support required for appchain development.

Most of these things can be solved:
– Create an interop solution that includes native infra for all connecting chains (as will be the case with the AggLayer).
– Create a culture around an interop solution of helping others so the tide lifts all boats. Polygon Labs is the first…

— Marc Boiron (@0xMarcB) October 13, 2024

Cronje also highlighted concerns about liquidity fragmentation in app chains, arguing that liquidity is forced onto centralized bridges vulnerable to attacks. He suggested that this approach to liquidity management could pose security risks for app chains.

The Future of Appchain Solutions

Marc Boiron, CEO of Polygon Labs, suggested AggLayer as a solution to the liquidity challenges raised by Cronje. Boiron explained that the AggLayer creates an interoperable network of appchains, which helps manage liquidity across different chains and reduce fragmentation risks. Orth echoed Boiron’s viewpoint, adding that rollups come with built-in bridges and market makers that improve liquidity.

Most of these things can be solved:
– Create an interop solution that includes native infra for all connecting chains (as will be the case with the AggLayer).
– Create a culture around an interop solution of helping others so the tide lifts all boats. Polygon Labs is the first…

— Marc Boiron (@0xMarcB) October 13, 2024

Cronje also raised the lack of community and network effects surrounding L2 appchains. He stated that app chains lack the necessary user and developer base to succeed. Boiron countered this claim, asserting that community efforts around AggLayer are thriving, with many members contributing to the network’s growth. Orth, however, expressed skepticism, suggesting that developers often compete with each other for users, making community-building efforts more challenging.

Overall, the ongoing debate between Cronje, Orth, and Boiron continues to stir the discussion in the blockchain community, particularly on X, as developers and industry leaders weigh in on the future of L2 app chains.