Why Subnets are so important for the sake of Avalanche network and scalability?
As understood by the title, I strongly believe that Subnets are much important for Avalanche’s scalability in terms of gas prices and network scalability.
Besides this, it’s quite obvious to me that Avalanche will fail without subnets.
Why do I think subnets are this important?
Before going into this, let’s dive into the fee structure of Avalanche mentioned in whitepaper on Ava Labs.
Avalanche burns all of the fees coming from creating contract, transactions including NFTs, all of them, are burned.
It simply causes deflationary model for long-term, the more user Avalanche has on network, the more $AVAX token is burned.
However, while community is so much important, developers and validators are no less important than them. Avalanche started its journey with 1000 validators, most of them are rewarded in Denali Testnet (i was one of them) with the required amount of 2000 AVAX for participation. As their validating process ends in 12 months, and requires another “Start” button, I know most of the validators have been quite worried about “what’s next?, should I do it?” since they have been not rewarded more than 7–12% APY in AVAX.
Yes, they are rewarded for airdrops from Avalaunch, but I think that’s not quite comparable to other networks such as Near Protocol, Ethereum(mining) anyway.
Summary: Validators do not earn much on Avalanche according to their opinion. Subnets have key role to provide them diversity between networks, so that they become able to be rewarded more while validating.
While Avalanche aims to increase its validators on both networks (Avalanche main and subnets), it also aims to lighten the burden of $AVAX token used in fees, as the congestion in the network increases, fees increase.
How? Subnets will use their own native token besides $AVAX, while $AVAX will also be used in the network probably for the only purpose of burning $AVAX in long-term.
Addition to all of these, Avalanche accepts the reality that if the network is used as much as other networks such as Ethereum, the fee structure will not be able to be scalable at the end of the day. So basically, it’s so essential to create subnets for scalability.
Summary: Fees of Avalanche network will increase, causing the same problem the users have had with Ethereum. However, subnets will lighten the burden of $AVAX by using their own token for the fees. They will also cause $AVAX token to be used in decent amount so that $AVAX is burned in long-term.
- The main importance of subnets for projects is providing the less fee as much as possible to users. But the responsibility of network congestion belongs to them, not Avalanche. To solve this, they’ll have to increase their number of validators, which will cause them either 2000 AVAX, or rewarding validators much more than Avalanche does “continuously”.
- No one still doesn’t know how to create subnets accurately as developers, is this enough? Subnet docs
- It’s still unknown if subnets are implemented through each project, including Avalaunch. The reason why I mention Avalaunch this much is because they may cause network congestion to increase in registration rounds as there are 25–30k people using the platform.
Conclusion: I still believe Avalanche is the most important L1 protocol in the entire universe. In any way, subnets have key importance for the scalability of Avalanche network, which is already mentioned by Gun and Kevin in the whitepaper a year ago. If subnets fail, Avalanche will fail eventually, in my opinion.