Avalanche: The Interoperability Evolution and Subnet Revolution

May 4, 2022


What is Avalanche? 

Avalanche is a decentralized layer one ecosystem and smart contract platform that facilitates the creation of dApps, public blockchains, private blockchains, subnets, customizable virtual machines, and other assets. Avalanche has a tri-blockchain infrastructure consisting of 3 distinct blockchains: the X-Chain (Exchange Chain), the C-Chain (Contract Chain), and the P-Chain (Platform Chain).

The Subnet Revolution 

What are subnets? 

The term subnet is an abbreviation of the term sub-network. Subnets are highly customizable blockchains in the avalanche ecosystem with a validator set. Although the term subnets are commonly used interchangeably with blockchains on Avalanche, technically, subnets are not just blockchains but are also a set of validations collaborating to cross-validate on a blockchain or a set of blockchains to achieve agreement.

Subnets on Avalanche can be permissioned or permissionless, allowing for private and public ledgers. This feature makes it easier for regulatory compliance within specific regions and will enable them to be geographically constrained to meet jurisdictional requirements. Nearly all subnets are deployed on Avalanche’s Fuji Testnet, with a few subnets existing on the Avalanche Mainnet.

Mass Migration To The Avalanche Nation

Eventually, many of the blockchains and subnets on the Fuji Testnet will begin transitioning onto the Avalanche mainnet. This massive migration from the Fuji testnet to the mainnet will undoubtedly be accompanied by an isomorphic migration of real value.

Although this value transfer might not be reflected immediately through price action, Avalanche’s long-term value proposition and fundamentals will become apparent to even the most ardent of critics.

A second differing form of migration will likely occur in which other projects on other blockchains in different layer 1 ecosystems will migrate over to Avalanche. Projects that are disenchanted with their other L1 ecosystems could easily port over their project, dApp, or token due to Avalanche’s flexible VMs and experience the litany of advantages native to the Avalanche. In this way, we are likely to see several waves of different types of migration with similar motives setting up a new home in the layer 1, Avalanche nation state.

Avalanche Snowdrops: Airdrops Of The Future

Another likelihood is that some of the subnets adopt a Cosmos-esque airdrop model, distributing their tokens to the AVAX community for ecosystem-wide value provision and bootstrapping. This will allow any Avalanche holder to reap the rewards of some of the projects being built and become an extension of other up-and-coming communities. If you consider it likely that the airdropping model does take a foothold in the wider Avalanche community, then eventually, when more blockchains and subnets proliferate, holding AVAX for the long term is a must.

Avalanche’s Blueberry Upgrade 

Once Avalanche’s Apricot upgrade phase has finished, then Avalanche’s long-anticipated Blueberry upgrade cycle will commence. Avalanche’s Blueberry upgrade will unlock a colossal amount of value across the entire Avalanche ecosystem in terms of interoperability which will be analogous to the completion of IBC on Cosmos. Avalanche’s Blueberry upgrade allows:

  • Additional functionalities for subnets.
  • Cross-blockchain and cross-subnet asset transfers.
  • Permissionless subnets for subnets besides the “primary network.”
  • Subnet Validator rewards from blockchain not validated by the primary network.

The consequences of this upgrade are enormous and can not be understated. Once the Blueberry upgrade allows asset transfers across different subsets, it will likely be a moment of historical importance for Avalanche and the Web 3 ecosystem.

It will also allow validators on the primary subnet to earn rewards from other valuable tokens in the ecosystem. This unlocks the massive value for validators, subnets, and blockchains.

Successful blockchains and projects will be able to select the subnets which have the best and most consistent performance and ask them to validate their chains.

Validators will also be able to validate for the best performing blockchain or projects they encounter that they believe have a lot of potential or value to accrue the rewards in the project’s native token. This is essentially a win-win for both parties.

How Will Subnets Increase Avalanche’s Long-Term Value Proposition? 

Firstly, creating any new subnets or blockchains requires a 1 AVAX fee. This fee allows AVAX to indirectly capture value through its burning mechanism and make its supply more scarce the more subnets exist on its network, thus further increasing its long-term value proposition.

Secondly, in addition to all the reasons elucidated above, Avalanche’s long-term value proposition will increase because of the sheer variety, flexibility, and customizability of subnets and their constituent parts. As a result, the potential use cases and subsequent value is near endless. For example, all of the following cases are possible, and most are already occurring:

  • dApp based subnets for  DeFi, gaming, Metaverse, NFT and DAO
  • dApp based subnets with cross-chain validator sets
  • Permissioned and permissionless blockchains allowing for public or private chains for different levels of regulatory compliance
  • Due to Avalanche’s architecture, entire subnets dedicated to individual or collectivized Web 3 based technologies and dApps are highly likely to become a commonality within the ever-expanding Avalanche ecosystem.
  • Collectivized dApps may exist with a blockchain/ subnets such as a validator set dedicated to new DeFi projects or a validator set dedicated to DAOs only. They can then deploy new blockchains within the same subnet to scale.
  • Subnets with evolved levels of interoperability
  • Subnets can function as a horizontal scaling solution for dApps and projects on Avalanche
  • DAO based subnets with cross-chain transfer capabilities and interoperability functionalities allowing cross-chain DAO treasuries.
  • New blockchains and subnets will reward subnet validators with their native token allowing asset diversification within the Avalanche ecosystem.

Subnet Value Proposition Conclusion 

The culmination of all the subnet activities, cumulative migrations, interoperability between subnets, cross-chain value transfers, horizontally scalable projects, and ISOs means that the true value of the avalanche ecosystem and the AVAX token is still yet to be seen.

Initial Subnet Offerings (ISOs) 

Avalanche’s unique capabilities and architecture allow for an innovative dimension of fundraising never seen before in the crypto space: the ISO. What is an ISO, I hear you ask? An ISO is a digital fundraising mechanism similar to its web 3 precursors such as ICOs and IFOs, with the cardinal distinction being that the funds are being raised for a highly customizable subnet.

The Avalanche community, other Web 3 ecosystems, DAOs, and even traditional businesses can fundraise subnets for various purposes only limited by the horizons of their imagination. This will likely open up the floodgates to massive value in DeFi, NFTs, DAOs, Metaverses, and even sub-fields of Web 3 technologies that have not been created yet.

Many other subnets are already flooding into the scene now. This ISO model could resemble the ICO and IFO era in the future.

From Snowflake To Snowball, From Snowball To Avalanche 

There are currently 271 subnets alone on the Fuji testnet and 14 on the Avalanche mainnet (only 11 besides the primary network), with new additions bursting onto the scene every day. However, these are just the billowing of snowflakes before the real avalanche arrives, and oh boy is the avalanche coming!

Because Avalanche is still a somewhat nascent (although rapidly advancing) protocol, we haven’t even begun to see much of its untapped subnet potential unleashed to the world, but we’re starting to see it now.

As the snowflakes turn into snowballs, multiple projects such as the open-world RPG Metaverse Ascenders are being built on Avalanche with their own subnets due to the innumerable advantages and customizability available on Avalanche. The Ascenders team even stated “An Avalanche subnet gives us the flexibility to build our game execution environment and set our custom gas fee structure, which makes it the best chain to build a game on.”

An influx of other new gaming projects are beginning to spin up their own subnets for their games so they can reap the benefits such as Crabada (with its Swimmer Network subnet) and Shrapnel which indicates great interest in projects using Avalanche as a metaverse and gaming subnet.

Conclusion: Exponential growth And Exponential Subnet Proliferation 

Making correct predictions is a notoriously difficult business, primarily because it’s difficult to anticipate how other unpredicted and unpredictable events with a cascade of consequences will converge and ricochet with other near-undetectable ramifications.

However, I would like to propose one final prediction. My final prediction is that more subnets will proliferate year after year following an exponential growth trend.

As Web 3 moves to the fore and becomes the default way of interactivity across the internet, and as user adoption and real-world applicability become more prevalent with the maturity of the whole web 3 ecosystems, Avalanche’s subnets and their component pieces will rapidly grow in number, size, use, ease, and overall scale. However, the greatest Avalanche is still yet to come.


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