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The phrase 'Merge' has sparked the imagination of many in the crypto world for quite some time. The Ethereum Merge has been on the minds of key individuals in the cryptocurrency industry, and many have shared their views and perspectives on one of the most meaningful actions in the brief history of blockchain technology.

### What Is The Ethereum Merge, Exactly?

On September 14th, 2022, the Ethereum blockchain's consensus technique will change from proof-of-work (PoW) to proof-of-stake (PoS) (PoS). Vitalik Buterin, Ethereum's creator, discussed this upgrade in public blogs during Ethereum's initial coin offering (ICO) in 2014, long before the network's launch in July 2015. Although Ethereum has successfully overcome numerous testing challenges since then, periodic delays have dampened excitement. The upgrade's testnet went live in early May 2019, and the new 2.0 chain started functioning in parallel in December 2020.

Validators "stake" the blockchain network's native coin by putting it into a private smart contract. Then, validators are selected randomly to validate each new block and earn the delegated payment.

### The Merge from ETH 2.0

The Merge is part of what was formerly known as "ETH 2.0," a set of enhancements that rebuild the blockchain's essential characteristics. It is also regarded as the second step of Ethereum's multi-part upgrade to increase scalability, security, and energy efficiency. It will do this via sharding and rolling out upgrades to boost scalability.

Ethereum has been actively improving since late 2020 when a testing version of the Ethereum PoS blockchain known as the Beacon Chain was launched. Because ETH2 is the next version of Ethereum, the transition from ETH PoW to ETH PoS has been dubbed "The Combine." During The Merge, the PoW chain and the Beacon Chain will merge to form a single blockchain.

The PoS consensus technique is more environmentally friendly than the PoW consensus mechanism, in which miners compete for new blocks by squandering massive amounts of computer power and energy. Aside from the environmental impact, many believe that switching to PoS would reduce the risk of over-centralization by making the validator function available to everyone with Ether to stake rather than simply those with expensive mining equipment.

### What Will Change After the Merge?

More individuals and firms who aren't currently involved in the cryptocurrency sector, particularly institutional investors, will be able to join the Ethereum market. DeFi protocols, NFTs, and the Web3 ecosystem are now available to millions (if not billions) of consumers. This is almost probably positive news for the Ether price.

It will change Ethereum and make it the industry's premier Proof-of-Stake (PoS) blockchain, but not without a protracted and expensive development phase.

In this section, we will look at some of The Merge's possible implications and the on-chain indicators that observers may use to track these effects.

How Does Staking Keep the Network Safe? And why is it so pricey?
Billions of dollars are being invested in securing, stabilizing, and scaling the Ethereum PoS network. So far, the total amount of Ether invested has surpassed 13 million ETH. In other words, before the Merge, users (also known as Validators) staked their Ethereum and committed almost $29 billion to the network's security.

The Validators' reward may not seem enticing right now, but it will increase from 4% to 10% in the near future. The amount of Ethereum staked surpassed Solana's market value, the most extensive PoS network at the moment. However, not all validators are decentralized since some are controlled by centralized exchanges, custodians, and staking pools like Lido and Rocket.

However, validators should be aware of technical concerns with such a significant shift. For inappropriate conduct, a Validator's stake may be reduced. Validators, for example, may face repercussions for dishonesty. They may also be ejected from the network owing to slashable infractions such as duplicate proposals, competing proposals, multiple voting, and downtime (offline penalty when more than 1/3 of the nodes are unavailable).

### The Ascension of Ultrasound Money

The elimination of miners from the Ethereum ecosystem is also something to think about since the need to pay large block rewards will no longer be an issue, significantly limiting the generation of new ETH. User payments are partially burnt and partially allocated to validators throughout the process. This is the Ether burn strategy employed in the EIP 1559 London hard fork, which burned over 2.25 million ETH, or more than $5.6 billion.

It will lower inflation from 4% to -1%, making Ether deflationary anywhere network activity increases. This gives rise to the phrase "Ultrasound money," which some community members have already dubbed Ethereum.

To address scalability concerns, the original design called for sharding procedures to be carried out prior to The Merge. However, with the emergence of layer 2 scaling solutions, the emphasis has changed from proof-of-work to proof-of-stake through The Merge.

Sharding tactics are constantly evolving. However, this may no longer be required if layer 2 technologies become increasingly prevalent for expanding transaction processing. Today, sharding strategies are mainly concerned with equitably distributing the burden of storing compressed call data from rollup contracts. Proof-of-stake implementation is required for exponentially rising network capacity.

### What About the Myths of the Ethereum Merge?

Not everything you read or hear about the merger is accurate. Here are a few prevalent beliefs that have been disproved.

"Node operation requires the staking of 32 ETH" This is not true. Who may sync their own verified copy of Ethereum is unrestricted (i.e., run a node).

"Gas costs will be much lower following the merge" is likewise false. The Merge is a change in the consensus technique, not an increase in network capacity, and it will not result in lower gas costs.

"Transactions will be much faster after The Merge" is likewise inaccurate. Despite modest changes, the transaction speed on layer 1 will remain constant.

"After The Merge, you may withdraw staked ETH" This remains wrong. The Merge does not yet support staking withdrawals. Withdrawals from staking will be allowed in the next Shanghai upgrade.

"Until the Shanghai update, validators will not be rewarded with ETH when withdrawals are allowed" False. Fee tips/MEV will be credited to a validator-controlled Mainnet account and made promptly available.

"When withdrawals are permitted, all stakers will go at once" This is also inaccurate. For security concerns, validator departures are rate restricted.

"The staked APR will grow thrice after The Merge" False. Recent projections predict a 50% increase in APR after the Merge rather than a 200% increase.

"The Merge will disrupt the chain" This is incorrect. The Merge upgrade is designed to facilitate a smooth transition to proof-of-stake.

### Staking and Ethereum Network Upgrades in the Future

One of the first questions is whether The Merge will enhance staking activity on the Ethereum network.

More than $30 billion in Ether has been staked on the PoS Beacon Chain, making it the most valuable PoS blockchain even before it replaces the Ethereum PoW Network. Staking requires installing specific software and hardware, which may be obtained from third parties. Many other people have staked by contributing ETH to a staking pool. Staking pools, like mining pools, allow several users to combine their resources in order to boost their chances of being chosen to propose a new block and split the profits.

For various reasons, staking will become an even more enticing choice after The Merge. Users will likely feel more at ease staking once PoS is fully introduced and PoW is banished to the past. The notion that Ethereum PoS would be more ecologically friendly may assuage investors who are concerned about long-term sustainability. This is especially true for institutional investors.

The Merge also establishes the foundation for future Ethereum developments. The contract cannot be retracted if ETH is deposited directly on the beacon chain. Some staking systems provide liquid, synthetic assets that function as a receipt for users' staked ETH, albeit these synthetics may not always be pegged 1:1 to ETH. While The Merge will not immediately change this, a future update known as the Shanghai upgrade will allow users to withdraw staked Ether, increasing stake liquidity and making staking a more enticing proposition overall. Other scalability enhancements, like sharding, that seek to reduce gas prices and speed up transactions are also on the horizon after The Merge.

These changes, starting with The Merge, should make ETH a more appealing asset to own and, by extension, to stake.

Ethereum is establishing itself as a viable institutional investment option.
In addition to a general increase in staking, we will be looking for institutional investors like JP Morgan to begin or increase their Ethereum staking activity.

We've previously highlighted how the valuations of crypto assets like Bitcoin have become increasingly closely linked to tech stocks and other high-risk, high-reward assets. After The Merge, the price of ETH may decouple from other cryptocurrencies since its staking incentives will make it equivalent to products that carry a premium, like bonds and commodities. Validators may expect annual payouts of 10-15% in ETH from staking incentives and transaction fees without even considering the chance that the price of ETH may rise, increasing revenues in terms of fiat money.

These returns may make staking Ethereum more appealing to institutional investors than bonds. Despite rising over the prior year, the one-year US Treasury bond yield is 3.5% as of September 2022.

According to the statistics, the number of wallets pledging at least $1 million in ETH, often known as institutional stakers, has been steadily increasing.

It will be interesting to see whether the number of institutional-sized stakeholders rises faster following The Merge, as Ethereum demonstrates itself as a viable PoS yield-generating option.


The switch from PoW to PoS will need changes in mining operations. A significant number of miners and mining pools are now mining assets across many blockchains, dynamically splitting their hash rate based on market movements. However, the bulk of mining is focused on Bitcoin and Ethereum. Ethereum miners will be forced to relocate, but Bitcoin is unlikely to be an option.

Several Ethereum blockchain-based businesses employ the power of distributed GPUs to do specified computing tasks decentralizedly, compensating GPU owners in return for ETH or ERC-20 tokens. So, does this mean that millions of previously productive GPUs would suddenly cease processing transactions, denying their owners the ability to earn from cryptocurrency? Perhaps not in every case. Consider the following two scenarios:

Livepeer is a decentralized video streaming service that pays GPU owners for content transcoding.
Render network provides a comparable service for 3D graphics generation and allows GPU owners to earn money by sharing their gear with others.
Non-cryptographic uses for GPUs include data center computing, gaming computers, and other heavy-duty devices. Despite the recent drop in on-chain activity, it will be interesting to watch whether these and related networks see an increase due to an influx of GPU owners looking for yield alternatives after The Merge. Some miners may decide to sell their GPUs to industry participants.

Meanwhile, as application industries thrived during the 2020-1 bull market, the Ethereum network became overburdened with a high transaction volume, and transaction fees surged. Other protocols, such as Binance Chain, Solana, and Avalanche, were able to grab Ethereum's market share as a result.

The announcement of the update's projected delivery date removed uncertainty and fueled expectation that Ethereum will reclaim market dominance. Since then, the price of Ether has more than doubled, and the volume of Ether options has surpassed that of Bitcoin options for the first time, with the ratio of calls (bullish stance) being around four to five times that of Bitcoin.

### What Are the Advantages?

The following are the primary benefits of a successful merger:

Enhance the Ethereum network's efficiency
reducing energy use by more than 99%
Operating costs will be lower since validators will not be needed to make major hardware expenditures.
Because a portion of transaction fees is burnt, issuance of Ether will be reduced by roughly 90%. (destroyed).
It is becoming simpler to participate in network security.
You just stake your assets and receive transaction fees.
Given these advantages, it's logical to expect Ether to outperform Bitcoin in the foreseeable future. Ether's price in BTC is presently just 45% of its all-time high and 10% of its annual high, which was set in December.

If the second biggest blockchain system successfully transitions to proof-of-stake, it will influence the continuing discussion between proof-of-stake and proof-of-work approaches. The significant energy consumption of proof-of-work blockchains (including Bitcoin) may further skew public opinion against them. If Ether is successful in "flipping" Bitcoin and becomes the dominant cryptocurrency, Bitcoin's supremacy will surely wane.

And although Ethereum's cautious approach to the update has resulted in significant delays, it also provides confidence that the technical concerns will have been significantly addressed by the time the upgrade goes live.

### What Are the Risks?

Despite Ethereum's meticulous approach to releasing the proof-of-stake upgrade, new technologies always have the potential for errors and difficulties.

The price performance of Ether may be most vulnerable to a widespread misunderstanding of what The Merge will accomplish. The switch to a proof-of-stake network is merely the first step in Ethereum's evolution. And, although the date is set in stone and the prospect of future delays is remote, an unexpected delay would negatively influence Ether's price.

Following the change, there is a slim likelihood that authorities may classify Ether as a security. This is unlikely, given that the bulk of blockchain systems are already proof-of-stake. As a result, Ethereum is not the first to provide this capability. Furthermore, such a negative regulatory response would be at odds with Western regulators' typically welcoming and friendly attitude. However, the legal grounds are murky, allowing arbitrary regulatory action.

The most significant risk is that The Merge will not make transactions faster or cheaper, and this improvement will not be fully realized for at least a year. On the other hand, the medium-term potential of a well-thought-out, complete upgrade of the (by a wide margin) most widely used smart contract platform is enormous.

### Surrounding Market Trends

Ethereum futures expiring after the projected Merge go-live date have been trading at a discount to the market price – the most significant gap since the March 2020 crisis. This might be seen as market participants preparing themselves for "buy the rumor, sell the news" trades, suggesting that the good news has already been priced.

However, the downturn in Ether futures is more likely the result of an arbitrage trade (long spot/short futures) aiming at benefitting from a projected fork of Ethereum's proof-of-work version. Prominent miners want to retain the existing system and provide a new currency for free to Ether holders.

### Conclusion

Finally, the Merge is analogous to changing the engines of a flying airplane, which is unfathomable to the human mind. However, the success of the Merge would be a win for every individual, institution, and organization in the blockchain ecosystem since it would offer up even more prospects for the welfare of humankind in ways that most people could not imagine.

This merger is considered one of the most significant and anticipated events in the bitcoin business. It is set to take place on September 14th. The countdown has started, and the excitement is intense. "Are we ready for it?" the question lingers.

The Merge might substantially impact the price of ETH and its overall attractiveness as an asset, affecting staking, mining, and institutional adoption of cryptocurrencies. The Merge's impact on crypto markets starts with on-chain data. Although it is difficult to predict the specific market reactions or how strong they will be, the on-chain techniques indicated above may help monitor them after The Merge.



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The Ethereum Merge: Everything You Must Know

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Decentralized finance (DeFi) signaled the beginning of a new era in the history of crypto assets. Unlike conventional finance, it does away with the necessity for centralized middlemen, lowers the barrier to entry into financial markets, and enables the seamless flow of assets.

DeFi, on the other hand, is infamous for staking incentives, which may lock up crypto assets for a lengthy period of time, restricting profit potential. Enter Liquid Staking, which enables extremely liquid and interoperable financial services.

The rise of DeFi shows that this new, open financial industry is expanding. DeFi Pulse estimates that the total value of DeFi systems will reach $100 billion by 2022. However, statistics alone do not do justice to the remarkable innovation that the DeFi sector has produced in such a short period of time since its inception.

Despite this outstanding track record, crypto-staking smart contracts have a number of severe issues when it comes to DeFi use. They have a special impact on liquidity investors while striving to grow the DeFi economy.

One such issue is the inability to generate any interest on staked assets. As a consequence, DeFi Markets now offers liquid staking.

### What is the definition of Liquid Staking?

Staking in PoS-based projects has historically sought to lock one's assets in a single network for a lengthy period of time in return for a fixed, preset staking income. While it guarantees the investment return on staked assets, it also limits token owners' capacity to produce higher returns on those assets via the DeFi ecosystem, similar to a bond.

### What distinguishes it from regular staking?

If you've staked all of your cryptocurrency holdings, you're in a liquidity crisis and won't be able to invest in or trade in more profitable crypto pairings on exchanges.

This method works by tokenizing stakes, which allows token holders to use them as collateral in other financial applications. Tokenized stakes, also known as staking derivatives, work similarly to derivatives in that they may be freely exchanged between people, places, and blockchains. As the name implies, it allows you to employ your staked crypto assets in different accessible trading or investment possibilities to obtain the best of both worlds: the expected return on your staked assets and the APR, earnings from new trading/investing opportunities you discover.

That is the underlying reason behind the recent spike in popularity of Liquid Staking. Several new projects with liquid staking are sprouting in the DeFi ecosystem, and crypto token holders want to increase the value of their holdings as well. Here, we'll take a look at one such project that has lately received a lot of attention.

### What has it to do with DeFi?

DeFi is a breakthrough that allows you to maintain your crypto assets while benefitting from their liquidity. Whether to earn interest, borrow funds, or increase agricultural produce. This is in sharp contrast to traditional finance, which states that once you have invested in a stock or other investment vehicle, you may only benefit when the asset's price rises or falls. Liquid staking is essentially an extension of that concept, with the core premise being that idle assets should be able to be used as collateral in other financial applications.

As a consequence, it broadens investment alternatives and, as a result, the connection to DeFi. For example, you might take the bulk of assets staked on a blockchain, tokenize their staked positions, and then incorporate them into other protocols. Staking investors may utilize this to restrict their risk exposure while earning additional returns on staked crypto assets.

It also allows Tokens to move freely between users as tokenized assets, from different places, or even on other chains. When everything is said and done, a DAO (decentralized autonomous organization) may manage jointly tokenized stakes. The rights associated with tokenized stakes may be divided and retained by separate organizations formed for a specific purpose.

This asset flexibility is an essential component of DeFi, and it has been proved to boost creativity in the Ethereum ecosystem. For example, MakerDAO provides DAI currency that can be borrowed and loaned via the Compound protocol. This advancement in DeFi has given rise to new motives to invest as well as new investment techniques. Essentially, it automates interactions between the two protocols, resulting in enhanced profits and lower risks for token holders participating in such transactions. To recap, tokenizing staking provides token holders greater influence over their crypto tokens while also accelerating DeFi innovation.

### What are the challenges?

In theory, liquid staking is another kind of derivative that may assist investors in gaining liquidity rapidly. However, such staked derivatives are not always fungible, and the condition of the underlying risk is not taken into account. In actuality, while analyzing a staking derivative, we evaluate speculation, appreciation, network adoption, and reliability. As a consequence, such inequalities and correlations make it difficult to price and fully account for the risks they provide. It will be difficult to aggregate them successfully since they are significantly more complicated than a simple sum.

In theory, a validator might short its own derivative currency and profit from price declines. A validator entity may also profit from this decline when borrowing big amounts since it may pay back the borrowed tokens at a lower price.



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Liquid staking: The DeFi upgrade

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Most blockchains, such as the Ethereum network and other EMV-compatible networks, are permissionless, which implies that anybody may access, build on, and participate in the network by hosting a node. These permissionless blockchains run on a transparent, public ledger that is shared by all network nodes. However, there is another less-explored blockchain: a permissioned network. This post will look at what a permissioned blockchain is, what sectors and use cases it can be used for, and how it can be linked with Ankr App Chains. Let us begin!

### Overview of Application Chains

First, a short review on App Chains, which are dedicated sidechains allowing developers to modify their own blockchain protocol with plug and play tools to meet their specific demands. They're effectively a blank canvas for developers to construct products with no limits and complete customizability, which are then anchored to some of the largest blockchains in existence, such as BNB Chain, Avalanche, or Polygon. However, because of their versatility, they might be difficult to design if you don't have a lot of Web3 programming knowledge. That's where Ankr's App Chain solution comes in to support people in need. This service tackles the most difficult aspects of developing, deploying, and growing dApps on App Chains.

While developers and commercial customers may tremendously benefit from operating their projects on App Chains with Ankr, we think there is also a market fit for enterprise-level users like as banks, private firms, and even governments and CBDCs.

But, before we go too far into permissioned App Chain connections, let's first go over what permissioned blockchains are, how they function, and who may want to use them.

### What Are Permissioned Blockchains?

Permissioned blockchains are blockchain networks that incorporate an access control layer. That implies there is a central authority in charge of controlling who may access and utilize the blockchain. Users will require unique access keys in this system to see data, interact with data, or validate transactions on the network.

Permissioned blockchains, often known as private blockchains, are similar to blockchain networks but lack the decentralization. That may sound strange. Who would want to utilize anything like that? Private blockchains are being considered by a number of sectors, including some of the world's biggest.

### Permissioned Blockchain Use Cases

Enterprises are the most likely candidates for permissioned or private blockchains. They may desire the usability advantages of blockchain technology but must keep some data secret for regulatory concerns or not share critical business information with rivals.

### Private banks

Banks are a big prospective consumer of private blockchain networks. Blockchain technology enables banks to conduct cross-border transactions rapidly and seamlessly. However, it is uncommon in conventional banking to show account balances in a public database or shared ledger. In blockchain, however, a simple block explorer can tell you the balance of any wallet address.

Many banks, including City, HSBC, and JPMorgan, have already begun investigating and implementing varying degrees of blockchain technology integration. JPMorgan, for example, established the Interbank Information Network (IIN) in 2018 to promote the seamless, worldwide transmission of data between banks with improved data access control. In other words, it's a mechanism that allows banks to communicate some information with one another while keeping other information secret. It is an endeavor to reduce friction and allow participating banks to send important information instantly in order to achieve speedier payment completion — and more than 300 institutions have already indicated their desire to join this network.

### Central banks and CBDCs

Central bank digital currencies (CBDCs) are digital versions of a country's official currency issued by its central bank. Unlike conventional cryptocurrencies such as bitcoin (BTC) or ether (ETH), the monetary supply policy of a CBDC is governed by a central authority: the central bank. CBDCs are so distinct from the digital assets found on public, transparent blockchain networks such as Bitcoin and Ethereum. Having said that, numerous central banks have indicated an interest in establishing CBDCs utilizing blockchain technology – private, permissioned blockchain technology, of course.

### Supply Chain

As supply chains investigate the potential of blockchain technology, the requirement for permissioned blockchain architecture becomes evident. Permissioned blockchains are a viable solution that is gaining traction in this market for keeping supply chain data correct from end to end and limiting access to only trustworthy parties.

### Insurance

Private blockchains may also aid the insurance industry's transition to Web3 and the adoption of blockchain technology by improving privacy for sensitive, evidence-based data and allowing better-permissioned data exchange through a complex network of linkages. Insurance companies profit considerably from incorporating blockchain technology, which allows automated claim payments, fraud reduction, and the possibility to significantly decrease overhead costs by lowering the number of intermediate parties required to process claims.

### Healthcare

The healthcare business, like the insurance industry, deals with extremely sensitive data that is regulated and safeguarded by the strictest regulatory frameworks. As a result, medical data access control is crucial. However, it is equally vital that medical data be shared safely, securely, and rapidly across various healthcare institutions such as hospitals, offices, and medical experts that may be situated in completely different regions of the globe. The data transmission requirements of the healthcare sector as a whole reflect the kind of massive throughput that necessitates sophisticated enterprise-grade infrastructure solutions.

### The Future of Private Blockchains

These are just a few of the numerous sectors that blockchain technology may enhance by enhancing automation, decreasing latency and friction across businesses, and lowering overhead costs – all while maintaining safe data access control through permissioned blockchain infrastructure. Enterprises may get the same security, immutability, and transferability that comes with a public distributed ledger while still preserving additional steps to manage access to sensitive data via permissioned blockchains.

Given the massive magnitude of the sectors interested in and researching permissioned blockchain technology, assisting in the onboarding of these business customers would be a huge advantage to the Web3 ecosystem as a whole. There will always be a need for private data (such as medical records, insurance claims, bank statements, supply chain records, and so on), thus we feel we should assist in integrating such requirements inside the greater Web3 framework of blockchain technology. Just because there is a huge need for decentralized blockchain networks doesn't imply there isn't also a huge demand for private networks in specialised businesses.

We think that banks, government agencies, and privacy-related companies will not go away. In reality, there will almost certainly always be a demand for privacy-focused data sharing capabilities in areas such as insurance, health care, supply chain, and others. However, we think that these entities will eventually migrate to Web3. Rather of resisting their involvement, we should make it simpler for them to join and give them with the tools they need to better their operations and become more efficient.

### Permissioned Blockchains as Ankr App Chains

Ankr thinks that whenever these businesses shift to Web3, these are the sorts of networks they will most likely seek. Furthermore, these sectors represent long-established conventional firms whose whole tech stacks reside in Web2 – implying that they are unlikely to have significant Web3 knowledge or competence. These businesses also generate enormous volumes of data and transaction processing due to their scale. These characteristics combine to make them ideal candidates for permissioned blockchain infrastructure linked with Ankr App Chains.

For a few essential reasons, App Chains stand out as a distinct and strategic option for business users. App Chains, specifically, provide:

### Massive enterprise-grade throughput

High customizability to meet the unique demands of these sectors
The main problem for these conventional organizations wishing to join Web3 is a lack of technical experience and Web3 understanding, which is where Ankr's App Chains solution shines. With our solution that manages everything from start to finish for consumers, Ankr can considerably decrease the technical barrier to developing a dedicated App Chain.

Typically, building a blockchain — sidechain, mainchain, or otherwise — includes bootstrapping all of the infrastructure for validator nodes, RPC nodes, block explorers, testnets, faucets, staking mechanisms, and more. However, with Ankr's new App Chains, any Web3 developer can quickly establish a new App Chain, complete with all of the infrastructure mentioned above.



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AppChain Use Case: Permissioned (Private) Blockchains

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Kevin is a business writer, journalist, and avid explorer of the blockchain and tech industry. His work has been covered across crypto and traditional media as Ankr’s Senior Writer, with topics spanning the big picture of “Web3,” tech breakthroughs, and how blockchain is changing our digital lives. Working with some of blockchain’s most talented engineers daily, Kevin gains unique insight into what advances we can expect next and the implications they hold for us all.

Technical Writer

Kevin Dwyer

## Blockchains for Application: Greater Flexibility and Scalability for Web3 Development
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### Introduction
All inventive scaling methods have emerged in the continuous attempt to make blockchains sufficiently scalable for enterprise-level traffic. The most recent advancement in scalability is the use of application-specific blockchains, sometimes known as "subnets." In this post, we'll define subnets, discuss how they're presently utilized, how they make dApp development more flexible and scalable, and discuss Ankr's role in aiding their continuing growth and success. Let's get started!

### What Are Application-Specific Blockchains, also known as Subnets?
Application-specific blockchains are precisely what their name implies: blockchain networks devoted to a single application. These application-specific blockchains function as child chains connected to a mainchain or parent chain. With this design, the application-specific blockchain may have its own consensus mechanism, process its transactions, and retain much of the security and provenance are given by its parent chain.

Under somewhat different titles, a few ecosystems are pioneering the concept of application-specific chains. Polygon is introducing "Supernets," Binance Chain is developing "BAS," and Avalanche just refers to them as "Subnets."

### The Benefits of Subnets: Flexibility and Scalability
So, why would a developer construct their decentralized application (dApp) on an application-specific blockchain (or subnet) rather than on top of an existing blockchain like as Ethereum utilizing smart contracts? There are many causes for this.

For starters, smart contract development might be more rigorous than most developers want. Without going into too much depth, smart contract creation is dependent on certain programming languages and the limits of specific virtual machines such as the Ethereum Virtual Machine (EVM). Developers have far more freedom by creating on a subnet. They have the option of using several programming languages, consensus processes, and development frameworks. If a ready-made solution isn't appropriate, they may alter and adjust the components as needed. More security may be applied if necessary. They can employ proprietary cryptography if they wish to.

Second, subnets are meant to be more scalable, which means they can process more transactions faster and more cheaply than smart contracts on a Layer-1 blockchain. Because smart contracts on Layer-1 are all operated by the same virtual machine (e.g., EVM), they compete for resources. Consider a future in which hundreds or thousands of dApps are all depending on a single virtual machine and attempting to service their individual communities simultaneously – network congestion quickly accumulates.

When considering high-throughput use cases (such as decentralized gaming), which involve millions of concurrent users processing hundreds of millions of transactions (think avatars, items, NFTs, and other in-game transactions), the need for extreme scalability provided by subnets becomes abundantly clear. There is presently no blockchain capable of sustaining the network load of a massively popular Web2 video game. Not in their present form, at any rate.

### Subnets in Action
Developers have maximal freedom and sovereignty with application-specific blockchains. They may choose which programming languages to employ, which framework to create their state machine with, and which consensus mechanism to utilize to manage their application-specific blockchain. Subnets are also a novel technique of scaling dApps to serve enterprise-level network traffic with optimum performance since dApps on application-specific blockchains no longer compete for common resources.

This technical advancement is based on the phrase "one chain, one game," yet its applications go well beyond decentralized gaming. Any dApp may benefit from existing on a blockchain that only runs one application. As a result, there is no rivalry for storage or computing, and scalability may flourish.

Although previously unnoticed, industry-leading networks, including Cosmos, Avalanche, and now Binance, have identified the intriguing potential for subnets to increase blockchain scalability and spur more Web3 development in general.

The Role of Ankr in the Development of Application-Specific Blockchains
Ankr stated in March 2022 that it collaborated closely with Binance Smart Chain (BSC) to launch the first Binance Smart Chain Application Sidechain (BAS) testnet with Celer and NodeReal. The BAS testnet is a platform for developing application-specific blockchains tailored to dApps in the ecosystem of the BSC blockchain. Ankr is excited to continue supporting the Binance ecosystem as an infrastructure partner and to usher in the new age of scalable development using subnets.

With the adoption of BAS in 2022, dApps operating on BSC sidechains may anticipate very cheap or near-zero transaction fees, as well as better throughput and more development freedom. BAS, in particular, will enable far more data- and volume-intensive apps, like as Web3 games, to operate concurrently inside the Binance ecosystem without hitting scaling limits.

Developers may get started right away since Ankr has already created the first BAS testnet!

### Subnets' Future, Scalability, and Ankr's Involvement
Though still a relatively new scaling option, subnets have the potential to significantly boost the throughput of specific dApps and the overall pace of Web3 development by providing developers with additional tools and freedom to do what they do best: create.

And, as one would expect, as the number of distinct blockchains devoted to particular dApps grows, so will the need for node infrastructure. A single dApp may need hundreds of servers, nodes, endpoints, validators, and other components to function as an application-specific blockchain. Therein lies the tradeoff and another potential for Ankr to meet market demand.

Ankr intends to provide more node infrastructure for application-specific blockchains in the future, as well as possibly expand its present validator node services into a validator-as-a-service offering to assist in the establishment of new subnets. Ankr is uniquely positioned to service the infrastructure demands that will undoubtedly develop with the spread of application-specific blockchains as the fastest growing — and more decentralized — Web3 infrastructure provider.



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