The Future of Subnets

GoGoPool
6 min readMar 6, 2023

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The rapid growth of blockchain technology is shaking the world, but for those in the crypto sector, blockchain technology was already integral to the industry’s frontier (interoperability and multi-chain). Avalanche’s skyrocketing subnet ecosystem is paving the way for a new series of interconnected, diverse networks.

What are Subnets and their potential?

A Subnet is a sovereign network, meaning it defines its own rules regarding execution logic, virtual machine, tokenomics, gas fee regime, and level of security1. A subnet can also define its membership, meaning it can be as public or private as it needs to be; this includes validators securing the network.

Moreover, blockchains do not restrict subnets. A single Subnet can house multiple blockchains, becoming an L1 or L2 network2.

As sovereign networks, they don’t share execution threads, storage, or networking with other Subnets, including the Primary Network.

All of these things considered, the potential for subnets is huge! They are a highly flexible network infrastructure with the potential to be customized to fit the needs and requirements of a specific application, project, or organization. Subnets open the door for virtually any organization– from DeFi to TradFi to gaming projects– to build a sovereign network. Each Subnet, including the Avalanche Primary Network, would be completely independent. In other words, as long as they incentivize validators to secure their network, they cannot be shut down. However, as such, each Subnet would be responsible for securing its network.

As each Subnet is an independent network, it enables them to scale up effortlessly while enabling lower latency, higher transactions per second (TPS), and lower transaction costs3.

Use-Case Examples

At GoGoPool, we believe that Subnets hold immense potential to drive transformative solutions for institutions and projects.

Gaming projects may create a separate network to address congestion issues and high gas fees. This subnet will provide a smooth transaction experience for game users. Additionally, the project has the flexibility to tailor the network to its specific needs. For example, it can use a preferred programming language, virtual machine, or tokenomics and incorporate these elements into the design of the subnet.

Similarly, subnets can offer advantages for financial institutions4. Due to their versatility, institutions can configure subnets in a way that meets regulatory requirements. For instance, a financial institution can create a private subnet that only permits access to selective individuals or organizations or accredited investors. The institution can also set specific criteria for validators who want to secure the network, such as geographical location, KYC (Know Your Customer) verification, or holding a minimum amount of the network’s native token. These conditions can further enhance the security and compliance of the subnet.

Another option for institutions is to build a public Subnet. A public Subnet is open to all users as with a Layer-1 network like Ethereum or BNB Chain. Because its publicly viewable blockchain offers transparency on anything in its network, creating a strong sense of trust and regulatory compliance.

Some real-world examples of this already exist. On January 31, 2023, Intain, a structural blockchain-enabled financial platform, launched IntainMARKET on its subnet for tokenized asset-backed securities5. Intain specifically chose to build MARKETS on a Subnet because they allow institutionally-focused firms to create permissioned networks that comply with particular regulatory frameworks and other considerations6. Additionally, MARKETS aims to drastically improve investor experience, deliver real-time transparency into every single loan backing their investment, and collect returns on a more timely basis.

Projects involved in the DeFi sector can also benefit significantly from utilizing a Subnet. For example, a project on a Subnet can develop unique governance/gas tokens, and it does not need to use AVAX. Moreover, it can establish a consensus mechanism (even going so far as to have either a proof-of-work or proof-of-stake consensus), specific security measures, or devise a method for incentivizing validators to set up a secure node on its network. DeFi projects anticipating a high volume of transactions, such as thousands of transactions per second, can benefit from the absence of competition for resources and processing time.

Avalanche Warp Message: Subnet-Subnet Communication

Subnets faced limitations due to the absence of proper native communication tools. In the past, subnet projects that wanted to connect with other subnets or the C-Chain had to either develop their own bridging infrastructure or collaborate with a cross-chain bridge as a third-party entity.

These solutions, while practical, have their limits. Building a bridge is expensive, time-consuming, and can delay projects releasing their products and services. Relying on a bridge as a third party also comes with risks. In 2022, it became apparent that bridges could be exposed to persistent attacks and hacks, putting both funds and initial liquidity for the project’s token and revenue from trade fees at risk7. Furthermore, cross-chain bridges may not be suitable for subnet projects with unique, non-EVM architecture. Some projects, such as Swimmer Network, even resorted to using multiple cross-chain bridges to address this challenges.

The result has been a growing Subnet ecosystem whose communication could be more cohesive, clear, and efficient with a high UX.

However, this is all now expected to change with the launch of Avalanche Warp Message (AWM). As Avalanche’s native Subnet-Subnet communication infrastructure, it is the fifth — and final — Banff upgrade, which allows two blockchains running on different Subnets to send and verify arbitrary messages to and from each other9. A significant component of AWM is that there are no additional third-party intermediaries between Subnet-to-Subnet communication.

So, how do Subnets communicate with one another?

Firstly, take into account that AWM is not a token bridge or an oracle. Rather, It is a standard infrastructure that enables developers to build a token or oracle subnet on top of it.

That said, two major components make AWM possible– the P-Chain and the BLS Multi-Signature scheme.

The P-Chain is the core of AWM, keeping track of all stake records and BLS keys from registered validators in real-time. This enables Subnets to identify validators from other Subnets and verify messages they receive10.

A single BLS Signature is a method of verifying the authenticity of a signature using cryptography11. A BLS Multi-Signature aggregates multiple BLS signatures into one transaction by using an aggregated public key, making verification easy without the need for the original public keys12.

The idea is that a Subnet can know the validators of another Subnet to authenticate the message that came directly from that Subnet. Subnets can access or examine another Subnet’s database without incurring extra costs per connection. The validator on the targeted database can be asked to verify information such as the stake weight of a Subnet, its participants, registered BLS keys, etc. The Subnet can quickly and efficiently verify a BLS multi-signature by checking if it was signed by a required percentage of stake, which is the amount of the subnet’s native token staked by a validator.

Whew! That was a mouth full! So, what does all of this mean? By adjusting the percentage of stake, AWM allows developers to customize the security threshold of sending/receiving messages from other Subnets, meaning that some Subnets may have a higher threshold guarantee than validators from different Subnets must meet before receiving messages.

Secondly, AWM is VM agnostic, or compatible with any virtual machine. Projects building on a Subnet now have the freedom to build their own virtual machine without fear of sacrificing interoperability.

Finally, by having a standard infrastructure, cross-chain bridges can be built or integrated with it, allowing for a more efficiently interconnected ecosystem with a smoother flow of data and tokens.

Given all of these features, it should be no surprise that we have seen an explosion of Subnet activity. Currently, there are 32 active Subnets13, with around 85 Subnets on the Fuji Testnet14. Many of these were already active even before the launch of AWM! So the cards are on the table; Subnets are rapidly becoming the go-to network for many projects, organizations and institutions for the customization, sovereignty and flexibility that it offers. There is no telling how many more Subnet networks we will see become active in the future.

Stay tuned this week on Twitter and Medium to learn more about how GoGoPool plans to contribute to the future of the subnet economy! Don’t forget about to come to the GoGoPool Townhall on 3/10 at 4pm EST!

Set a reminder for the townhall here:
https://discord.gg/fnwy3P37?event=1082380739800211546

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GoGoPool

Decentralized staking protocol building for Avalanche Subnets.