INTRODUCTION TO AVALANCHE
A comprehensive overview of Avalanche's novel Subnet design
to scale blockchain networks.
On Avalanche, a Subnet—short for “subnetwork”—is a set of nodes (or validators) collectively responsible for reaching consensus on the transactions associated with one or more blockchains. It can be thought of as a network inside a network or, alternatively, a network built on top of a larger one.
Subnets are the second major breakthrough used by the Avalanche network (the other being Avalanche Consensus). They empower parties to build custom, app-specific blockchains and allow Avalanche to scale infinitely.
The Avalanche platform consists of the Primary Network—which is a Subnet in itself—and a variety of custom Subnets. The total number of Subnets on Avalanche changes continually, as subnetworks are added on an ongoing basis. Similarly, the number of validators on any given Subnet is generally not fixed, as nodes can usually come and go freely.
Every validator on an Avalanche Subnet is required to become a member of the Primary Network, which involves staking a minimum of 2000 AVAX. This ensures that the Primary Network is always well supported by a healthy supply of validators, bolstering Avalanche’s security and decentralization. In addition, nodes can belong to one or more custom Subnets.
The Scalability Problem
Scalability has been a persistent obstacle for blockchains, as their surge in popularity has also meant a surge in transaction volume. This has led to higher gas fees and slower validation times, among other operational issues that directly impact the user experience.
One solution that has proven somewhat successful in the blockchain world is the implementation of so-called Layer 2 (L2) protocols. Embraced by the Ethereum community as a means of solving scalability issues, L2 is essentially a supplementary blockchain operating on top of the mainnet blockchain (Layer 1).
Among the most useful L2 features is the "optimistic rollup" (ORU), which executes transactions on Layer 2 before sending the data to Layer 1 for consensus. Transactions are assumed to be valid unless challenged—that is what “optimistic” means in this context. "Rollup," meanwhile, refers to the process of bundling multiple transactions together. Arbitrum and Optimism have established themselves as the two premier L2 rollup solutions.
Rollup solutions provide several key benefits to users, such as substantially faster transaction speeds and lower gas fees. However, these features also have drawbacks that should not be overlooked. Any transaction that is challenged can be effectively frozen for up to a week. Smart contract bugs or vulnerabilities can cause funds to vanish. Furthermore, Layer 2 transactions are dependent on Layer 1 to provide security and verification.
On Avalanche, Subnets represent another, and potentially more viable, solution to the scalability problem by diverting a significant amount of traffic congestion away from the Primary Network while also offering blockchain designers customizable options that L2 solutions cannot match.
In March 2022, the Avalanche Foundation launched the Avalanche Multiverse, a $290 million incentive program intended to foster the growth of Subnets on the platform.
Benefits of Subnets on Avalanche
As already noted, Subnets provide substantial aid to the Avalanche platform by operating separately from the Primary Network and reducing its traffic burden, but they do much more. Subnets provide a number of advantages, both for their creators and the Avalanche platform itself.
Easy scalability - Every Subnet is essentially an independent entity with its own execution thread, with no need to compete with other Subnets for network resources, so new subnetworks can be added with ease.
Decreased gas fees - Blockchains without Subnets must contend with traffic bottlenecks. Relieving the burden of network traffic via Subnets lowers transaction costs.
Increased transactions per second - Subnets cut down on response times and, as a result, raise the capacity for number of transactions per second (TPS).
Interoperability - Users can participate in cross-chain transfers without the need to interact with the X-Chain, thereby bolstering the subnetted system as a whole. (This feature is expected to arrive in late 2022.)
Validator selectivity - In a subnetted system like Avalanche, validators have the freedom to participate only in those blockchains of relevance to their concerns. This keeps Avalanche validators from becoming overburdened by the performance demands imposed by non-relevant blockchains.
Extensive customization options - Users have enormous flexibility to tailor their Subnet in conformity with their requirements. See the “Customization Options” section below for more details.
Furthermore, Subnets share in the operational benefits that belong to the greater Avalanche network, including fast time-to-finality and strong security.
Uses of Subnets
Subnets can effectively support a variety of projects and activities. Decentralized gaming is one field that stands to benefit enormously from Subnets. Games can operate on Avalanche without interference caused by traffic congestion on other Subnets or the greater network.
The popular play-to-earn game DeFi Kingdoms was an early beneficiary of the Avalanche Foundation’s incentive program, which provided $15 million in funding for the DFK Chain.
Apart from encouraging the development of blockchain gaming, the Foundation is also targeting the NFT and decentralized finance (DeFi) sectors. Avalanche Subnets provide the best environment for these kinds of protocols.
Launching an Avalanche Subnet
One of the most attractive features of Subnets is their accessibility: Anyone can launch one, and the procedure is fairly simple. Subnets are commonly built with the Ethereum Virtual Machine (EVM), but they can also be created by any other virtual machine, such as Subnet-EVM, AvalancheVM, or TimestampVM.
To reduce the incidence of fraudulent activity, the Avalanche platform levies a fee for certain types of transactions. Creating a Subnet is among those transactions that require a fee—in this case, only one AVAX.
Although Subnets technically need only one validator to operate, the recommended minimum number is five in order to ensure continuous functionality. Relying on only one or a few validators is risky, as Subnet activity will cease if all go offline simultaneously.
Subnet creators can set up their own custom parameters that validators must comply with, such as:
Token/fee structure - Each Subnet has its own transaction fees, which can be paid in AVAX or another token.
Permissioned/permissionless - Subnets can be open only to select nodes (permissioned) or open to anyone (permissionless).
Validator performance requirements - Subnets also have wide latitude in granting access only to those nodes that meet certain specifications. For instance, nodes may be required to comply with hardware performance minimums in order to ensure optimal validation speeds.
Privacy - Subnet creators can determine whether a blockchain is viewable to the public—a useful option commonly deployed by private organizations that need to conceal their activities from open scrutiny.
Validator incentives - Because Subnets have their own validators, it's important to provide nodes with incentives for their participation. This can be achieved in various ways, such as awarding AVAX.
When it comes to Subnets, developers are practically unbound by any predetermined rules. Subnets can accommodate a broad spectrum of custom implementations.
The Future of Subnets
Subnets are the most powerful solution yet devised for the problem that has been called the "blockchain trilemma": the traditional inability to develop a blockchain that can adequately address and balance the needs for security, scalability, and decentralization without sacrificing any one of those components.
With Subnets, it’s possible to maintain a virtually unlimited number of secure, scalable, and properly decentralized blockchains on the Avalanche platform. By encouraging the participation of validators, Subnets should also stimulate the value of the AVAX token.
However, the potential benefits of subnetting aren’t exclusive to the Avalanche network. This is an advance in blockchain technology that should substantially benefit the wider crypto community as well, inspiring a variety of innovations that we can expect to arrive in the not-so-distant future.