xDapps: formatting changes, redefine xDapp (1.4)

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Eric Wong 2022-09-12 16:32:14 -05:00
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Because blockchains are siloed by nature, individual cryptocurrencies being bound to their own chains has been a longtime limitation of blockchain technology. The first attempt at solving this problem was the creation of cryptocurrency exchanges like Coinbase and Binance. Today these are refered to as centralized exchanges (CEXs).
Centralized exchanges play an important role in cryptocurrency, but they are not a complete solution for cross-chain interoperability for two primary reasons: they're centralized, which is counterproductive to creating a decentralized platform, and they deal only with tokens.
As blockchains move toward being general-purpose computing platforms, interoperability will require data structures that are more complex than tokens and operations that are more sophisticated than transfers.
Centralized exchanges play an important role in cryptocurrency, but they are not a complete solution for cross-chain interoperability for two primary reasons: (1) they're centralized, which is counterproductive to creating a decentralized platform, and (2) they deal only with tokens.
To solve the centralization problems with CEXs, decentralized exchanges (DEXs) were created. A DEX operates inside a smart contract runtime and can be as decentralized as the blockchain it runs on. Unfortunately, a DEX is only able to utilize the tokens on its native blockchain. In order to obtain a token which is not native to that chain, the DEX must be used in combination with a **bridge**.
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This explains how the ecosystem arrived at its current state--CEXs are a solution to siloed blockchains, DEXs are a simple response to CEXs, and DEXs have created a demand for bridges. Each solution in this timeline is an ad-hoc patch to the previous problem, and the current landscape of fractured liquidity, double wrapped tokens, isolated userbases and wallet incompatibilities is the result.
As blockchains move toward being general-purpose computing platforms, interoperability will require data structures that are more complex than tokens and operations that are more sophisticated than transfers.
More ad-hoc solutions would only be short-term fixes for long-term problems, so it's critical to design new primatives and core infrastructure that will allow the next generation of decentralized applications to move beyond these lingering limitations.
This is why Wormhole exists. Wormhole proposes a new way of developing applications which leverages the strengths of each blockchain while mitigating the problems of the current ecosystem.
Rethinking the next generation of decentralized applications means dethroning the token as the fundamental atomic unit of blockchains. We'll expand on this change in the next section.
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## Branded Terms
In some instances, Wormhole uses general terms for decentralized, cross-chain elements as branded verbiage. In most cases, the definition of the general term does not greatly differ from Wormhole definition, though Wormhole's definitions may be more narrow than general interpretations.
**xChain** - Across the Wormhole ecosystem, the full range of cross-blockchain interoperability is referred to under the term "xChain." "xChain" is the concept that houses other branded terms, like the Wormhole definitions of xAssets, xData and xApps.
Rethinking the next generation of decentralized applications means dethroning the token as the fundamental atomic unit of blockchains. We'll expand on this change in the next section.
**xChain** - Across the Wormhole ecosystem, the full range of cross-blockchain interoperability is referred to under the term "xChain." "xChain" is the concept that houses other branded terms, like the Wormhole definitions of xAssets, xData and xDapps.

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Cross-chain interoperability then becomes a matter of creating, consuming and managing xData. Once blockchains have the ability to read and write data into a shared, global reservior, application design can take on innovative new dimensions.
Later in this document, we'll delve deeper into how Wormhole implements this [xData layer](./wormhole/3_coreLayerContracts.md) (also referred to as the 'Core' layer of Wormhole), but for now let's talk about how xData can be used to create xDapps.
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## Branded Terms
In some instances, Wormhole uses general terms for decentralized, cross-chain elements as branded verbiage. In most cases, the definition of the general term does not greatly differ from Wormhole definition, though Wormhole's definitions may be more narrow than general interpretations.
**xData** - Wormhole defines xData as "data that exists in a layer outside of Layer 1 blockchains, which is accessible by all chains." The Wormhole definition of xData presents it as a branded element of xChain.
**xAssets** - Wormhole defines xAssets as a "chain-and-path agnostic token that exists on a layer outside the blockchain ecosystem, which can be used to conduct transactions on any blockchain." The Wormhole definition of xAssets presents itself as an element of xChain.
Later in this document, we'll delve deeper into how Wormhole implements this xData layer (also referred to as the 'Core' layer of Wormhole), but for now let's talk about how xData can be used to create xDapps.
**xAssets** - Wormhole defines xAssets as a "chain-and-path agnostic token that exists on a layer outside the blockchain ecosystem, which can be used to conduct transactions on any blockchain." The Wormhole definition of xAssets presents itself as an element of xChain.

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# What is an xDapp?
The term **xDapp** is short for "Cross-Chain Decentralized Application". At first glance, this might give the impression that xDapps are simply Dapps that do cross-chain things. However, once you start building decentralized products designed to operate across a variety of blockchains and runtimes, it becomes clear that these applications are architected in a fundamentally different way than traditional Dapps.
The term **xDapp** is short for "Cross-Chain Decentralized Application". At first glance, this might give the impression that xDapps are simply Dapps that do cross-chain things. However, once you start building decentralized products designed to operate across a variety of blockchains and runtimes, it becomes clear that these applications are architected in a fundamentally different way than traditional Dapps.
xDapps have the capacity to perform all the operations of traditional Dapps, but they are also able to utilize xData. xData allows xDapp developers to build from a top-down, message-passing approach, rather than the bottom-up world of Dapp development. The Wormhole Core Layer implements xData, which acts as a shared repository of data across the entire Wormhole ecosystem.
Something we'll explore further in the upcoming xDapp Architecture chapter is the philosophy of **Protocol-First Design**. Protocol First Design is an approach to building decentralized applications where the first order of business is to lay out your application into a series of data structures, APIs and message payloads. Once you've laid out your application into a high-level protocol, the protocol acts as an agreement to which all components must adhere. From there, the smart contracts underlying the protocol can be considered an implementation detail.
Something we'll explore further in the upcoming xDapp Architecture chapter is the philosophy of [**Protocol-First Design**](./dapps/architecture/3_protocolDesign.md). Protocol First Design is an approach to building decentralized applications where the first order of business is to lay out your application into a series of data structures, APIs and message payloads. Once you've laid out your application into a high-level protocol, the protocol acts as an agreement to which all components must adhere. From there, the smart contracts underlying the protocol can be considered an implementation detail.
If you're familiar with web2 development, you might notice that this philosophy is analogous to microservice architecture. This is no coincidence, as similar problems should expect to be solved by similar solutions, and the Wormhole Core Layer has a number of parallels to the OSI Network Model.
Thus, a more fitting depiction of xDapps might be to see them as **Distributed Decentralized Applications** with multiple, specialized components working in unison to deliver a smooth, unified user experience across a variety of layer 1 ecosystems.
In the next section, we'll summarize the concrete advantages which xDapps built on Wormhole have over traditional Dapps today.
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## Branded Terms
In some instances, Wormhole uses general terms for decentralized, cross-chain elements as branded verbiage. In most cases, the definition of the general term does not greatly differ from Wormhole definition, though Wormhole's definitions may be more narrow than general interpretations.
**xApp** - In the Wormhole xChain ecosystem, the term "xDapp" has been shortened to "xApp." These cross-chain applications are largely still decentralized, but for branding and simplicity purposes, the term "xApp" will be prioritized over "xDapp" when talking about Wormhole's xChain ecosystem.
In the next section, we'll summarize the concrete advantages which xDapps built on Wormhole have over traditional Dapps today.
**xDapp** - Wormhole defines xDapps as a "decentralized application that enables users to create and/or use xData." The Wormhole definition of xDapp presents it as a branded element of xChain.

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- **Decentralization** - Cross-chain solutions today usually involve centralized exchanges or bridges. However, Wormhole has been designed to be decentralized from day one, and eventually totally trustless.
- **Increased Performance** - xDapps are able to utilize the strengths of each blockchain. With xDapps, expensive computations can be offloaded onto high-performance platforms, final settlement can take place on a preferred chain and data can be stored wherever is cheapest.
- **Increased Performance** - xDapps are able to utilize the strengths of each blockchain. With xDapps, expensive computations can be offloaded onto high-performance platforms, final settlement can take place on a preferred chain, and data can be stored wherever is cheapest.
- **Broader Market Reach** - Because xAssets move freely through the ecosystem, they can be listed on a variety of exchanges and custodied on any blockchain.