Why DAGs Inevitably Lead to Specialized, Application-Specific Chains

DAGs like Avalanche and Fantom achieve ~4,500 TPS by parallelizing transaction processing. This exposes the real constraint: application logic and state contention. A shared execution environment becomes the new bottleneck, capping performance for high-frequency dApps like order-book DEXs or gaming worlds.

• Key Benefit 1: DAGs prove horizontal scaling is possible, but only at the network layer.
• Key Benefit 2: They shift the bottleneck upstream, making the case for dedicated execution environments (appchains).

On a shared L1, successful apps like Uniswap or Aave generate millions in fee revenue but pay it all to the base layer as gas. Appchains, enabled by frameworks like Cosmos SDK and Polygon CDK, let applications capture their own MEV, transaction fees, and governance value. This creates a ~30-50% higher profit margin for the core protocol by internalizing the economic stack.

• Key Benefit 1: Flip the model from 'paying L1 rent' to 'capturing app-chain revenue'.
• Key Benefit 2: Enables sustainable tokenomics where fees accrue to the protocol treasury and stakers.

General-purpose chains enforce a one-size-fits-all VM (EVM, SVM). Appchains allow for bespoke VMs, mempool rules, and data availability layers. dYdX migrated to Cosmos for a custom order-book built in CosmWasm, achieving ~1,000 TPS and sub-second finality. This technical moat is unreplicable on a shared L1 where every dApp competes for the same constrained resources.

• Key Benefit 1: Optimize every layer (consensus, execution, DA) for a single application's needs.
• Key Benefit 2: Build defensible infrastructure that cannot be forked and deployed on an L1 with equivalent performance.

General-purpose L1s like Ethereum and Solana force all apps to compete for the same, shared, and expensive global state. This creates a zero-sum game for block space where a single NFT mint can congest DeFi. DAGs structurally reject this model, enabling parallel execution paths.

• Key Benefit: Eliminates state contention between unrelated applications.
• Key Benefit: Unlocks predictable, app-specific performance and cost.

Projects like Aptos (Block-STM) and Sui (object-centric model) demonstrate that DAG architecture naturally optimizes for specific data models. This isn't a side-effect; it's the core thesis. The future is thousands of app-specific chains or sub-DAGs, not one chain to rule them all.

• Key Benefit: Native support for high-throughput verticals (e.g., gaming assets, orderbook DEXs).
• Key Benefit: Custom fee markets and governance isolated from network noise.

The real value accrual shifts from consumer-facing dApps to the interoperability and shared security layers that bind specialized DAGs. Think Celestia for data availability, EigenLayer for cryptoeconomic security, and LayerZero for cross-DAG messaging. These are the picks and shovels of the modular, DAG-centric future.

• Key Benefit: Infrastructure bets have wider moats than application-layer bets.
• Key Benefit: Captures value from the entire ecosystem of specialized chains.

The EVM is a compatibility crutch that perpetuates monolithic thinking. DAG-native apps, like those on Fuel or Sui, can architect around user intents (e.g., "swap this for that") rather than simulating sequential execution. This enables UniswapX-style batch auctions and Across-style optimistic bridging as first-class citizens.

• Key Benefit: Drastically better UX through abstracted complexity.
• Key Benefit: Enables novel MEV capture and redistribution models.