Avalanche's success and meteoric growth is no secret. Early on, the team distinguished itself by introducing a new consensus protocol - Snow*.
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Comparison graph between three known consensus protocol families
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AVAX breaks into top 5 with rising bridging asset TVL
Given that the economics of adoption driven by subnets are directly related to the value-add of Avalanche, it is worth exploring what makes subnets unique and attractive.
Subnets allow Avalanche to scale by allowing large numbers of validators to actively participate in consensus. A chain is verified by only one subnet, but a subnet can verify multiple chains. Each subnet has its own governance and may require its validators to have specific attributes (ie: KYC/AML checks, country location, licenses). Validators stake AVAX tokens to join the main network, which validates Avalanche's built-in chain. These built-in chains include:
Exchange (X) Chain
Platform (P) chain
Contract (C) chain.
X Chain is a decentralized platform for creating and trading AVAX assets. The chain runs on the Avalanche Virtual Machine (AVM). The C chain allows smart contracts to interact and create, and run on the EVM. The P-chain keeps track of all active subnets and supports the creation of new subnets.
Subnets do not share their network load with the main network, resulting in lower latency, higher transactions per second (TPS), and lower transaction costs. So, thanks to subnetworks, validator CPU and disk usage did not increase as transaction throughput increased.
Assets can move freely between subnetworks due to a high level of interoperability; this means no beacons or relay chains. Subnets are also free to choose which virtual machines to run on. Here is a chart that breaks down the differences between the Avalanche VM and the Ethereum Virtual Machine.
At this point, you might be wondering: "What's the difference between an L2 solution and a subnet?" First, the L2s cannot interoperate with each other, and liquidity fragmentation begins to occur. For example, Ethereum and its L2, Arbitrum or Optimism liquidity pools are completely independent.
Asset transferability is critical when developing a network that will be used at scale. This is a big reason why we are currently witnessing a battle for dominance among DeFi protocols. Avalanche subnets, on the other hand, provide an aggressive scaling method.
Subnets also present a very lucrative proposition for validators. Today, it is very difficult to become an "early adopter" and get a stake in a project, mainly due to the increase in the number of market players. New projects launching on new subsets require validators from the main network, allowing one to constantly expose themselves to new and exciting opportunities. Avalanche expects new projects to leverage this “initial subnet offering,” combined with a gradual token offering to attract validators. In this sense, validators will become the new scarce resource.
On the other hand, if all subnet validators also validate on the P-chain, the subnet only shares the security of Avalanche, which involves a higher level of hardware requirements.
Use Case: GameFi
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DFK's popularity steadily rises
Crabada
Another large GameFi project running on the Avalanche subnet is Crabada, who decided to create a subnet dedicated to gaming called the Swimmer Network. Through their initiatives, Crabada expects to reduce operating costs for players by approximately 85%. A key innovation of Swimmer Network is their "fee model". This feature aims to reduce friction of entry by allowing players to play without acquiring gas tokens, a bit like contemporary free-to-play corporate structures. Games will subsidize gas on behalf of players at the discretion of the game maker. Swimmer Network is still in alpha, so it will be interesting to see how the GameFi community reacts to this novel entry system.
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As the scarcity of block space continues to rise, it is more important than ever to work towards a secure scaling solution that is ideal for decentralization. To that end, Avalanche has taken a giant leap forward in implementing its subnetwork design. DFK's switch to Avalanche opened the floodgates, predicting that Avalanche will be more than just another blockchain.
Right now, we are witnessing an impressive amount of unique projects being built. I'm personally very excited about DeepSquare, a high-performance computing ecosystem. Essentially, the project aims to build a decentralized supercomputer that implements efficient neural network modules. I recently had the opportunity to sit down with the team at DeepSquare to understand their thought process.
I'm curious what prompted them to launch on a nascent system like Avalanche Subnets, rather than a more established platform. “We set out to create a system that is as decentralized as possible,” emphasizes business development director Diarmuid Daltùn, adding, “The subnet allows for a cost-effective platform.” Beyond that, we sought a platform that prioritized energy efficiency, as our core idea was to create a clustered supercomputer entirely around renewable energy. "
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