Building your own blockchain network used to be a complex task, requiring significant technical and capital resources. However, things have changed, and now it's much more accessible. With the help of blockchain toolkits available in the market, you can create your own blockchain by setting up a server, forking an existing code base, and deploying different modules.
These new-age blockchain toolkits offer modular options, allowing you to choose different components such as DA, Settlement, Consensus, and Execution layers. For developers looking to build application-specific chains with plenty of customization, these toolkits are a great solution. They no longer need to worry about bootstrapping network security, which has been a significant concern for many older chains.

With the emergence of L2 solutions and Ethereum restaking launch by Eigenlayer, new chains can now focus on innovation. Technical architecture and chain security can be taken care of by toolkits and middleware services like Eigenlayer. This opens up opportunities for developers to explore unique use cases and build more efficient and secure blockchain networks.
Overall, blockchain toolkits are empowering developers to create their own tailored solutions without the complexity and resource-intensive process of building a blockchain network from scratch.

Types of Blockchain Toolkits

There are 4 types of Blockchain Toolkits are available in the market right now.

• L1 Specific
• L2 Specific
• L3 Specific
• Hybrid

L1 Specific Blockchain Toolkits

L1 specific blockchain toolkits provide SDKs to launch application-specific L1 blockchains, allowing developers to choose the security and token design for the network. Providers like Cosmos and Polkadot offer options for using their consensus algorithms. For instance, appchains built using the Cosmos SDK can utilize Tendermint POS by Cosmos.
Moreover, application-specific chains developed with these toolkits have the opportunity to join interconnected networks of appchain ecosystem. This integration can enhance liquidity for the newly formed chains, promoting their growth and usability.

Appchains/Cosmos SDK

Status: Live with 60+ Chains
Cosmos pioneered the blockchain toolkit market, holding over 90% market share back in 2020. The Cosmos SDK is a public good offering by Cosmos, and it has been utilized by many popular L1 blockchains like BNBChain.
Additionally, Cosmos provides the Inter-Blockchain Communication (IBC) protocol, allowing appchains to join a network of interconnected chains through the Cosmos Hub. This integration enables secure and seamless communication and asset transfers among the interconnected chains.
To date, more than 60 appchains have joined the IBC network, including prominent names like Axelar, Secret, Osmosis, Injective, and Cronos. This further demonstrates the robustness and adoption of Cosmos's blockchain toolkit and IBC protocol in the blockchain ecosystem.
Some of the upcoming projects like DYDX Appchain, Berachain, Sei, and Celestia are also using Cosmos SDK to build their blockchain networks.
Competitive Advantages

• Access the liquidity network of over 60+ chains through the most secure cross-chain protocol.
• Access to Shared security Through Interchain Security.
• Discover the most proven blockchain toolkit to build an L1 chain from scratch.
• Enjoy the flexibility to choose the security and token design from your own end.

Substrate By Polkadot

Status: Live with 50+ ParaChains
Substrate by Polkadot is an easy to use blockchain toolkit, which has been adopted by over 200+ projects so far. Notable examples include Astar, Moonriver, and Bittensor.
Polkadot offers cross-chain communication and a shared security model to L1 chains built using the Substrate framework. To utilize the shared security of the Polkadot network, projects participate in Parachain auctions, bid to win the parachain leasing slot, bond DOT supply, and then leverage economic security during the leasing period.
Recently, Polkadot unveiled its vision for Polkadot 2.0. Moving forward, they will discontinue parachain auctions and transition into a large blockspace, providing core blockspace rental to projects that require it.
Competitive Advantages

• Large developer ecosystem
• Their recent transition into a large blockspace could attract projects, especially those with significant demand for blockspace in their use case.

Subnets by Avalanche

Status: Live with 15+ Subnets
Avalanche is a large blockchain network composed of smaller networks called subnets. These subnets are independent sovereign chains connected with primary network of avalanche. Avalanche subnets offer an alternative approach to L2s. With the Subnet Framework, projects can choose to set up their own validator network, or they can also stake 2000 AVAX to borrow security from the Avalanche P chain.
Avalanche has launched a no-code blockchain builder, Ava Cloud, in partnership with AWS, which allows developers to launch subnets in minutes. They also promise to reduce blockchain deployment costs by 85%.
Alibaba Cloud has recently launched an Avalanche subnet, Cloudverse, specifically designed for metaverse use cases.
Competitive Advantages

• Avalanche launched $290M to push adoption for Subnets
• No code custom blockchain builder offering
• Partnership with AWS, and Alibaba cloud.

L2 Specific Blockchain Toolkits

L2 Specific Blockchain Toolkits provide tools and libraries to build custom EVM-compatible L2 blockchains. These L2 blockchains can follow a modular blockchain architecture and have the flexibility to decide on DA and Settlement layers. Additionally, these custom L2s can join a network of interconnected L2s that share unified security, governance and liquidity.

OP Stack by Optimism

Status: Live with 15+ Subnets
Optimism is an Optimistic Rollup-based L2 blockchain that has open-sourced its technology and launched an open-source framework for projects to build custom L2s. OP Stack went live a few months back and has already been used by over 10+ projects. OpBNB, Mantle, and Base are a few notable examples that chose Op Stack to launch a custom L2 blockchain.
Optimism is also working on a roadmap to introduce an ecosystem of L2s that would be interconnected with each other, following shared liquidity, governance, and security.
Anyone can launch a custom L2 chain using the freely available OP Stack, but for joining the Superchain ecosystem, projects might need to pass proposals from the Optimism Collective DAO.
Competitive Advantages

• First mover advantage
• Supports Modular Blockchain Architecture

L3 Specific Blockchain Toolkits

L3 specific blockchain toolkits provides tools/libraries to build app specific L3 chains which borrow security from L2 chain, and settle transactions on it. Arbitrum launched a L3 specific blockchain toolkit few weeks back.

Orbit by Arbitrum

Status: Live
Arbitrum has built a technical stack called Arbitrum Nitro, which allows developers to launch custom L3 Rollup or Anytrust chains tailored to their application-specific needs. Arbitrum will also introduce Stylus VM, enabling projects to write code in any programming language while remaining EVM compatible. Orbit chains will have the flexibility to choose their own token design according to their requirements.
Additionally, Arbitrum has plans to launch a network of interconnected L3 chains that share liquidity and security. To join the network of Arbitrum orbit chains, projects may be required to pass proposals in the Arbitrum DAO.
Competitive Advantages

• Arbitrum offers both Rollup and Anytrust-based tech stack, making it a versatile solution.
• As the largest L2 project in the web3 space, Arbitrum boasts over $2B in TVL.
• Arbitrum's Stylus feature could give them a competitive edge among its peers.

Zk Stack by ZkSync

Status: Yet to be released
Zk Stack by Zksync is an open source tech stack which will allow developers to launch Zk Rollup based L3s according to their specific needs. Zk Stack provides composability, modularity, and access to Battle tested Zk Proof tech. Zk Stack is yet to be launched in the market. ZkSync also have plan to create a network of Zk L3 chains calling them “Hyperchains”.
Competitive Advantages

• Access to Battle tested Zk Proof Tech Built by Zksync.
• Zk Based L3s can achieve better scalability in near future.

L3 Stack by Starkware
Status: Live
StarkEx is the framework to launch application-specific zk rollup-based L2. Some of the notable app-specific rollups like Dydx and ImmutableX used StarkEx to launch their Custom L2s. StarkEx is now planning to create the framework for L3s, where custom L3 could settle transactions directly on the Starknet Blockchain.
Competitive Advantages

• Allow users to choose between Rollup or Validium chain for each and every asset they own.
• StarkEx supports ERC-1155 tokens on L2.
• StarkEx has been the most reliable L2 tech stack.

Hybrid Toolkit

Live with 10+ Supernets
Polygon provides a hybrid blockchain toolkit called Supernets, which allows developers to deploy blockchains based on their specific needs on both the use case and architecture side. Polygon Supernets is a modular tech stack that allows developers to launch a custom sovereign chain with their own validator sets.
Alternatively, They could also stake 20,000 MATIC and borrow security from Polygon, or choose to launch a zk-rollup based L2. More than 10 projects are building using Supernets, and some notable examples include IDEX and Gnosis Pay.
Competitive Advantages

• Polygon has built one of the best Business Development teams in the web3 space.
• Polygon Supernets offers more flexibility to developers, providing different options for them to choose the best solution according to their use case requirements.
• Polygon also offers multiple infrastructure partners that can help projects bootstrap their networks faster.

Value capture for L2 Tokens

Blockchain toolkits are here to stay, and some of them may dominate the market as well. However, investing in tokens behind these toolkits with the assumption that project usage will automatically increase token prices is a delusional thought. Making investment decisions based on such assumptions could lead to poor choices.
The same mistake was made by many investors in the past with ATOM. They believed that as the usage of Cosmos SDK grew, the price of ATOM would also skyrocket. However, that did not happen, and ATOM underperformed compared to other altcoins during the previous bull cycle.
Tokens of these blockchain toolkit providers will only increase when there is enough demand for the tokens of the network itself. This demand could come from either the governance side or from L2s/L3s built using these toolkits choosing the L2 token as the gas token. There is no other way to bring value capture for the token of the blockchain toolkit provider from projects that are using it to launch their own chains.
For example, OP and ARB are governance tokens, and projects that will launch Superchains and orbit chains may be required to pass a proposal in their respective DAOs. To do that, they need to acquire a decent supply of tokens to potentially influence the voting process. The value capture will be through active demand for governance in the case of ARB and OP.
For AVAX and MATIC, some projects that may require the use of shared security of the primary network will stake a decent supply of tokens to borrow security from these respective chains.
In the case of DOT, projects that want to rent out blockspace from Polkadot will pay fees in DOT.
Regarding ATOM, the value capture is currently missing, but Cosmos will announce more utilities for the ATOM token in the near future.

Who will win Blockchain Toolkit Race?

Many interesting L1s/L2s will be launched in the market soon, and some of them have used Cosmos SDK, Supernets, Subnets, Orbit, and OP Stack. The first wave of the Blockchain toolkit war will mainly be between these five players on a broader level.
However, when we go deeper, we will find that preferences of projects on which toolkit to be used will be based on the specific use cases they are building.
For higher-level DeFi use cases, I believe launching an L1 using Cosmos SDK will make more sense, and that's what we are seeing with Sei, DYDX, and Berachain - all of them chose Cosmos SDK.
For gaming-based use cases, I believe launching an L1 using Subnets or launching an L2 using Orbit or OP Stack would make more sense.
For DeFi primitives and scaling-focused use cases, I believe launching an L2 using Polygon supernets would make more sense.
For general-purpose L2s, OP Stack has become the top choice for now, but we could see some more traction on supernets too.
I think Starknet and Zksync based blockchain toolkits will take their own time to become mature in the market, but once they gain sizeable traction, they could accelerate the adoption faster.
That's it, folks! I tried my best to pen down my thoughts around this theme. I will be writing more on this topic in the near future. If you enjoyed reading this newsletter, please show your support, and feel free to share your thoughts on this topic in the comments.
Disclaimer: I am not offering any kind of financial advice here, and it is recommended to use the information provided in this letter for educational purposes only.