Subnet

Subnets provide the dedicated throughput and low-latency consensus required for real-time, on-chain gaming and virtual worlds. By isolating game logic and assets, they prevent network congestion from other applications. Key features include:

• Custom gas tokens for in-game economies.
• Optimized virtual machines (e.g., for Unity/Unreal Engine integration).
• High transaction finality to support fast-paced interactions.

Examples: Dedicated gaming subnets on networks like Avalanche.

Financial institutions use permissioned subnets to deploy regulated DeFi applications, private asset tokenization, and compliant trading venues. These subnets enforce KYC/AML validators and offer:

• Privacy features for sensitive transaction data.
• Regulatory compliance as a native network property.
• Interoperability with public mainnets for liquidity access.

This architecture meets the security and regulatory requirements of traditional finance while leveraging blockchain efficiency.

Companies deploy private subnets as dedicated ledger systems for supply chain tracking, asset provenance, and automated compliance. Benefits include:

• Controlled validator set comprising known business partners.
• Custom logic for IoT data integration and smart contract automation.
• Data privacy where transaction details are shared only with permissioned participants.

This creates a single, tamper-proof source of truth across organizational boundaries without exposing data publicly.

Nations, regions, or large communities launch subnets as sovereign blockchains with their own economic policies, governance, and cultural focus. These ecosystems:

• Issue a native gas token and define their own monetary policy.
• Establish custom governance models for validator selection and protocol upgrades.
• Maintain sovereignty while benefiting from the security and interoperability of a larger network (like a primary Layer 1).

This use case enables tailored digital economies aligned with specific community goals.

Subnets are configured as application-specific execution layers for computationally intensive tasks like AI model inference, verifiable computation, or large-scale data oracles. They optimize for:

• Specialized Virtual Machines (VMs) that efficiently run particular workloads.
• Deterministic execution guarantees required for verifiable outputs.
• Resource isolation to ensure performance SLAs are met without contention.

This turns a subnet into a dedicated, trust-minimized compute cluster for a specific algorithmic task.

To support social graphs, content monetization, and creator economies at scale, platforms use subnets to manage user-specific data and interactions. This approach offers:

• Horizontal scalability by sharding user communities onto dedicated chains.
• Custom economic models for creator tokens, subscriptions, and engagement rewards.
• Improved user experience with low-cost, fast transactions for social actions (likes, posts, tips).

It moves social logic and microtransactions off the congested, expensive mainnet.

A subnet must select a consensus mechanism to validate transactions and achieve state agreement. Common choices include:

• Proof-of-Stake (PoS): Used by Avalanche subnets for energy efficiency and high throughput.
• Proof-of-Work (PoW): Less common for subnets due to energy costs, but can be implemented.
• Custom Consensus: Subnets can design their own rules, such as a permissioned BFT variant for enterprise use. The choice directly impacts finality time, decentralization, and security assumptions.

The Virtual Machine defines the execution environment for smart contracts and dApps. Key options include:

• EVM (Ethereum Virtual Machine): Ensures compatibility with the vast Ethereum tooling and developer ecosystem.
• WASM (WebAssembly): Offers performance benefits and supports multiple programming languages like Rust and Go.
• Custom VM: Allows for specialized execution logic tailored to a specific application's needs, such as a gaming engine or privacy-focused computation.

A subnet's security is not inherited from the primary network; it must bootstrap its own validator set. Critical considerations include:

• Staking Requirements: The token, amount, and slashing conditions required to run a validator node.
• Incentive Structure: Designing rewards to ensure sufficient, honest participation.
• Validator Distribution: Avoiding centralization risks where a few entities control the majority of stake. A poorly designed economic model is a primary security vulnerability.

Subnets require a native token or fee token for transaction processing and validator incentives. Design decisions involve:

• Gas Token: Whether to use the primary network's token (e.g., AVAX) or a custom, subnet-specific token.
• Fee Model: Setting gas prices and complex fee logic (e.g., flat fees, burn mechanisms).
• Economic Alignment: Ensuring the token model sustainably funds security and network operations without creating excessive user friction.

A subnet's value is often tied to its ability to communicate with other chains. This requires implementing interoperability protocols.

• Native Bridges: Using the parent network's messaging layer (e.g., Avalanche Warp Messaging) for trust-minimized transfers.
• External Bridges: Connecting to ecosystems like Ethereum or Bitcoin via third-party bridge contracts, which introduce additional trust assumptions and security risks.
• Cross-Subnet Communication: Enabling asset and data transfer between sibling subnets within the same ecosystem.

Subnets need a defined process for making protocol changes and resolving disputes. Governance models include:

• On-Chain Governance: Token-weighted voting for parameter changes or upgrades.
• Off-Chain Governance: Decision-making through a multisig council or foundation, common in early stages.
• Upgrade Mechanisms: Use of proxy contracts or governance modules to enable seamless, non-contentious upgrades without requiring a hard fork.