What are Avalanche subnets and why are they a big deal?

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July 7, 2022
5 min read
July 7, 2022
5 min read

Avalanche has a thriving, friendly, and engaging community. On top of that, it also has the quickest and most valuable bridge solution to and from Ethereum, with BTC onboarding shortly. Avalanche is fortunate to have a team that consistently produces and executes at the top level. It’s great for validators like us too. There’s no slashing and rewards are dependent only on uptime. Currently, the annual staking rewards are at 9.1%. This makes locking AVAX to stake appealing. The thriving ecosystem is already on display, with liquid-staking now accessible via BenQi (sAVAX, $179M in TVL) and two additional solutions on the way: LAVA and Eden Network + YieldYak. Lido is also building its liquid staking implementation for AVAX. A competitive DeFi landscape is also in operation, including TraderJoe (DEX, $179M in TVL), Platypus (stable swap, $155M in TVL), Aave (lending, $4.64Bn in TVL), and many more. Subnets now allow innovative technologies in both consensus and horizontal scalability architecture to join the network. To make the experience complete they even provide VMs as free open source code ready to be picked up by companies wishing to join the subnet movement.

What are subnets?

Avalanche mainnet is made up of two blockchains (C-Chain and P-Chain) and one DAG (X-Chain for ultra-high TPS). These are two types of distributed ledger technologies (DLTs). The P-Chain is responsible not only for dealing with Subnet and all validator information but also to create new subnets and blockchains.

Avalanche and its multiple chains

Although the term “subnet” is used interchangeably and synonymously with blockchains, subnets are a bit more complex than that. The technical definition of a subnet is as follows:

A Subnet is a dynamic set of validators working together to achieve consensus on the state of a set of blockchains, according to Avalanche’s FAQ page.

The unleashing and unlocking of subnets is an event of great importance in the wider web 3 ecosystem. It brings value from its extensive use cases and benefits:
  • Horizontal scaling capabilities for the primary network or any project that wants to scale beyond one blockchain or include multi-blockchain functionality.
  • Virtual Machine (VM) flexibility is enabled and virtual machines using EVM, WASM, B-Script, and other cross-ecosystem technologies can be used for a subnet. Also, any native blockchain token can be used for gas fees, selected by the developer.
  • Highly customizable and flexible in design so they can be compliant with regulatory and jurisdiction laws.
  • A marketplace can emerge where validators offer their services to validate subnets.
  • Virtualize entire ecosystems such as Ethereum, Solana etc. on Avalanche.
  • Because there is no competition for block space, TPS is greater because transactions in one chain are not hindered by dApps on other chains.

So if devs can decide their own token and VM, how does this help AVAX?

Verifying a subnet needs validating the mainnet (remember: C-chain, X-chain and P-chain) too. This needs AVAX. Hence, when new subnets form, more AVAX will be staked. There is a limit to how many subnets a validator may operate (due to hardware constraints), however, the number of validators inside a subnet is infinite, with a minimum of 5. Each validator can realistically operate the C-chain plus a few more subnets at most, so, validators should attempt to choose the finest subnet games out there, supporting competition and production of competitive products. The mechanism is as follows:
  • A new subnet is constructed, and the operating nodes cannot handle further subnet validation, thus new nodes are built; as a result, more AVAX is staked and the mainnet is secured further.
  • Staking is limited to a minimum of 2000 AVAX and a maximum of 3,000,000 AVAX (likely to decline) per validator. This implies that validators cannot operate a single, highly concentrated node; rather, they must operate new nodes.
  • Delegators may have up to four times the stake. This implies that you can not simultaneously operate a validator with 2K AVAX and have 1M AVAX delegated to you. This implies that you must continue staking additional nodes, enhancing the mainnet.
  • As such, decentralisation is highly incentivised.

Subnets allow anybody to quickly establish permissioned or permissionless networks with unique implementations that are powerful, dependable, and secure. Developers can use AvalancheGo or AvalancheJS, and Ethereum developers can seamlessly use Solidity to launch dApps as it is fully compatible. Avalanche includes features not seen on other chains, such as the ability to choose which validators secure their Subnet activity, which token is utilized for gas costs, bespoke economic models, and more. Subnets, crucially, stay naturally linked with the larger Avalanche ecosystem, do not compete for network resources with other projects, and are accessible in an infinite supply. With standard rules underlying all apps on a smart contract network, Web3 applications may distinguish on user experience like never before. A similar approach can be found in Cosmos with Saga and their “chainlets” approach and in Ethereum with Skale.

Why are Avalanche subnets a big deal? — Enter GameFi

GameFi, a common phrase in the crypto-verse, is a combination of the words “Gaming” and “Finance.” It covers the gamification of the working system in order to generate profit via play-to-earn crypto games. In GameFi games, items are represented by NFTs. Users may boost their earning potential by levelling up and upgrading their characters, as well as participating in tournaments. As an example, players in Axie Infinity (arguably the biggest GameFi game in 2021) earned more than $1000 worth of $SPL a month before it suffered a hack. Many of these blockchain games are communities where players may earn tokens to swap for money. It’s remarkable to watch blockchain games with a few hundred players in 2013 turn into top-grossing games like Axie Infinity with hundreds of thousands of dollars in daily trade volume. And this is just the first generation of games on blockchains.

Adoption has skyrocketed over the past years. With a large number of retail investors as well as big companies like Microsoft, Nike, Meta and many more already involved, the metaverse market is expected to grow significantly. Major investors such as Gala Games and C2 Ventures formed a $100 million venture fund for GameFi. Solana Ventures and others also launched a $150 million fund by the end of 2021. More recently, Framework Ventures has allocated half of the $400M fund to Web3 gaming. As evidence of the blockchain gaming industry’s expansion, the blockchain games and infrastructure business attracted over $4 billion in venture capital financing in 2021 alone. Blockchain gaming has grown by 2,000 percent in a year, according to the conclusions of a joint report by DappRadar and the Blockchain Game Alliance (BGA). Although this was prior to the latest crypto meltdown. The scenario might be extremely different right now. However, the crypto gaming business has already received $2.5 billion in investment this year; if this trend continues, it might reach $10 billion by the end of 2022. The report also states that blockchain games drew $1.22 million in unique active wallets (UAW) in March, representing 52% of industry activity. With all of the various technologies collaborating to build a self-sustaining ecosystem, the blockchain gaming sector is poised to become a significant income source and probably the first real utility for blockchains outside payments.

What is required for crypto games to become mainstream?

GameFi might expose a big market to crypto, but its games aren’t there yet. At least initially, players don’t need to realize the game uses NFTs and tokens. Gamers shouldn’t learn about wallets or pay great amounts until they’re addicted. For the optimal user and developer experience, games require application-specific chains. ASBs are the best way to scale block space for the next billion users. Cosmos, Avalanche Subnets, Polygon Supernets, and StarkNet Layer 3s sell block space. Application-specific blockchains provide cheaper costs, fine-tuned performance, transaction isolation, and developer control. Other requirements are:
  • Transactions per second (TPS) — A single popular game will need 1000s of transactions per second.
  • Time to finality- It is adamant. No one wants to take 5 minutes to kick a football.
  • Free gas fees for users — Users will not kick the football if the cost is more than the worth of the action. Ideally, consumers have no idea what gas or transactions are.
  • Strong financial incentives for validators — Gas costs should be used to motivate validators; otherwise, no one will operate a validator node. This is a tricky balance since it contradicts the goal of keeping gas prices low for customers.
  • Ease of development — Game designers should not be required to create their own chain. Distributed consensus is a really difficult problem. The majority of Web2 developers no longer build their own software infrastructure and instead rely on cloud companies.

Why Avalanche for games?

The key advantage of using AVAX for GameFi is the three-pronged structure, which comprises validators and subnets using the P-Chain. Subnets let projects create their own application-specific blockchains (ASBs) that do not disrupt the rest of the chain. As a result, no single game utilizes the whole network bandwidth. GameFi on Avalanche offers the best chance for blockchain games to thrive in their intended setting. Avalanche is also great for creating NFTs, which makes digital assets like NFTs easily available for P2E games or the metaverse. Users can utilize Avalanche to establish their own localized chains that run independently of other chains, allowing them to sandbox their own knowledge and technology for the benefit of their own efforts. Most developers use their own token for gas on their subnet, however, a subsidised gas fee is also an option. Avalanche allows network developers to utilize whatever virtual machine they want or to create their own. You may use EVM or any other VM you like. Aside from the EVM and AvalancheVM, Avalanche now provides SpacesVM (key/value storage), BlobVM (binary storage), TimestampVM (a minimum viable VM), and others are in the works. Modularity rules the roost. Observing web2 games moving into web3 through subnets is a great place to start.

Some of our favourite emerging Subnets

It is worth noting that Avalanche gaming developers are taking a Play-and-Earn method rather than a Play-to-Earn approach. This emphasizes the necessity for the game is enjoyable and long-lasting.

  • Shrapnel, the world’s first blockchain-enabled AAA first-person shooter game, has announced that it would use the Avalanche network as its foundation for its impending release. They want to establish a subnet devoted to the game using the Avalanche Subnet capabilities. Shrapnel is creating a novel AAA experience for gamers that puts competitive multiplayer, creative tools, and genuine digital ownership front and centre.
  • TimeShuffle is a play-and-earn turn-based strategy game in which warriors from across history battle in randomly created battlefield settings. Each player may begin his conquest with a free-to-play hero and advance his heroes as they play, unleashing the full potential of cryptocurrency gaming and the play-and-earn paradigm.
  • Ascenders is a sci-fantasy, open-world action RPG powered by Avalanche with a fully decentralized, player-driven economy. Players may participate in daily tasks for AGC tokens while also producing NFT products and land plots. The game’s development team has concentrated on developing a truly player-centric experience. The first alpha release of the gameplay is scheduled in the coming months.
  • Ragnarok is one of the most hyped initiatives in both the NFT and blockchain gaming sectors. Earlier this year, the official NFT collection debuted on Ethereum. The team is now working on creating one of the most thrilling gaming experiences to hit the Avalanche blockchain, positioning subnets as an alternative to Ethereum. The game will unveil the first 77 in-game playable characters this month. Find many more subnet projects here.

Subnet Disclaimers

  • Games on the blockchain need to be the next big thing. We still have to see a real adoption for GameFi which will test the technology.
  • The biggest drawback of subnets is that there is no Inter-Blockchain Communication (IBC) protocol yet. This means that subnets need to bridge to one another, which is less secure than IBC. This is being considered as Ava Labs announced in their first Avalanche Summit but is still in the early stages. For the time being, only projects within the same subnet are able to benefit from shared security.


Overall, blockchain games continue to be one of the most appealing parts of the dApp market. Although demand for blockchain games looks to have peaked, gaming dApps continue to drive most of the industry’s on-chain activities. Notably, subnet games like Crabada and Defi Kingdoms are still drawing players even in a difficult 2022.

VCs and investors are pouring money into Web3 gaming ventures at an all-time high pace. Furthermore, financial firms like Morgan Stanley have assessed the metaverse’s economic potential to be at least an $8 trillion business. The Sandbox’s second Alpha season, Decentraland’s Fashion Week, and the overwhelming demand for NFT Worlds indicate a positive future for GameFi. However, security risks such as the Ronin bridge vulnerability and the difficulties of attaining full interoperability remind everyone interested that widespread adoption is not yet here. Avalanche Foundation believes that subnets like Shrapnel and TimeShuffle are the solution for the next generation of gaming, thus it launched Avalanche Multiverse last March, a $290 million incentive program to accelerate the growth of the new Internet of Subnets.

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