Avalanche Subnets Promise Infinite Scaling: A Solution to Web3 Troubles?

The Avalanche network earlier this year announced a $290 million incentive program with a focus on scaling as a solution to Web3 troubles by providing a platform –subnets – for various projects to build into an app-specific blockchain ecosystem. However, the blockchain space is not short of such huge promises (some failing to live up to the hype) and it is only fair to question if Avalanche is actually delivering.

What's the hype around Avalanche subnets?

For a better assessment, a review of the challenges that subnets were built to remedy, or rather the gaps that subnets seek to fill in, is necessary.

Roadblocks hampering Web3 development

Web3's burst into the scene came with a myriad of promises, which can't be termed empty since the potential of this alternative vision of the web remains to have a very high ceiling. But along this journey, several predicaments have faced this new iteration of the internet, and among the notable ones is the need to handle massive traffic on-chain.

In the earlier days, blockchains worked efficiently enough with low user numbers, but with traction in the count of additional users, it has become increasingly difficult to maintain stability. It is not uncommon, today, for networks to suffer long outage (downtime) hours or fee spikes on account of congestion. Admittedly, only so much blame for networks succumbing to the pressure of handling just a few million users can go to poor engineering.

These challenges have made the dream of hosting large-scale applications such as financial services serving billions of people seem unattainable. This is what Avalanche subnets seek to address.

Avalanche Subnets against Web3 barriers

By design, Subnets eliminate the need for applications to compete for resources, as they offer dedicated block spaces, meaning the developer is in control of customizing the experience offered to the user. Since Subnets eliminate congestion and random spikes in fees, a consistent user experience is therefore assured.

Further, as a scaling solution for the network, Subnets also allow developers to make decisions on several variables, including tokens to use in the Subnet, who the subnetwork validators will be, and the virtual machine put to use. Another change that comes different from the novel chains is that Subnets enjoy on-demand scaling, which enables mass-scaling of applications within hours rather than days or weeks, making the network highly lucrative.

All this adds to the fact that Subnets are structured atop a robust Avalanche network which means that in addition to their advantages, they also enjoy the security features, high throughput, and the community available at the PoS layer one.

Avalanche fees to go even lower

Initial days on the Avalanche network saw competitive fees (compared to networks such as Ethereum), but it promised lower fees with time. The launch of Subnets seemingly remedies the gas issue and is a sign that the architecture of the blockchain is one that scales.

The average gas fees recorded on the Avalanche network have been low since mid-May, falling back to October 2021 levels, and this is a party to Subnets. Even with a high transaction count still in play, the fees are falling since Subnets allow shifting of the transaction volume away from the main network.

Avalanche's position after a ‘problematic' relationship with Terra

The recent de-peg of UST and consequent crash of LUNA not only affected Terra but also spilled to entities with past and current associations to the network. Terra's decline came in the same year it partnered with Avalanche in a collaboration that saw Terra acquire $200 million worth of AVAX via Terraform Labs (TFL) and Luna Foundation Guard (LFG).

Quelling any concern over a potential cross-chain effect on AVAX, last week, Avalanche released a transparency report clarifying that the AVAX holdings under Terra remain immobilized.

TFL had acquired 1.09 million tokens, which are serving a one-year lockup period, and that amount represents less than 1% of Avalanche's weekly transaction volume. Further, Avalanche said that the fate of the 1.97 million AVAX acquired by LFG for UST reserve holdings remains undecided. However, should that change and the Foundation considers a sale, the Avalanche Foundation would develop a worthwhile trading strategy for just that.

Coinbase Wallet now supports token swaps on Avalanche

Elsewhere, Coinbase exchange said in a Monday blog that it updated the networks supported for token swaps via Coinbase Wallet and has now included Avalanche and BNB Chain. The new chains join a list having Ethereum and its scaling solution Polygon.

Going ahead, Avalanche and the tokens on its network are gaining support for Coinbase Wallet's in-built decentralized exchange trading feature. The feature enables users to dabble in significantly more tokens, particularly those unoffered by centralized crypto exchanges.

Coinbase Wallet will enable users to port their tokens but would require that they hold AVAX in their wallets for the network fees. Worth mentioning, the wallet compares figures across various decentralized exchanges to ensure it offers users the best possible network fees.

To learn more about Avalanche, visit our Investing in Avalanche guide.