Key Takeaways

Elastic subnets enable immutable and permissionless blockchains on Avalanche. The subnet’s native token can now be used for staking.
Avalanche Warp Messaging (AWM) allows for communication between subnets, eliminating the need for third-party bridges to transfer data or assets between chains.
The HyperSDK is a framework for developers to easily create custom virtual machines for their subnets specifically tailored to their use case.
AWM and the HyperSDK make it far easier to create a full-featured, scalable, and composable blockchain atop the Avalanche tech stack.
All three developments further subnets’ appeal to blockchain developers, helping Avalanche to better compete with the Cosmos SDK.

Avalanche has quietly made significant technical upgrades to its infrastructure over the last few months, including the implementation of Elastic Subnets, Avalanche Warp Messaging (AWM), and the HyperSDK. These upgrades greatly enhance Avalanche's value proposition as a toolkit for developers to build custom subnet secured blockchains, allowing it to better compete with the Cosmos SDK.

The creation of highly adopted subnets directly impacts the value proposition of the AVAX token. Thus, understanding how the tech stack competes in the market is crucial for any crypto investor.

Elastic Subnets

Elastic subnets are immutable validator sets that allow permissionless blockchains to be created using the Avalanche tech stack. The new subnet type enables Proof-of-Stake (PoS) validation and rewards using a subnet’s native token. All subnets are initially created with an owner/manager who defines parameters such as selecting a chain’s gas token and initial validator set. They can also remove validators as they see fit. Upon submitting a TransformSubnetTx, which burns the owner’s key and removes their control, the subnet becomes an immutable elastic subnet.

After a subnet makes the transition, any token holder can become a validator simply by staking the subnet’s native token to the Avalanche P-chain. There may be a minimum token requirement, but validation can be a permissionless process. The P-chain underwent a major upgrade to its low-level tech to allow these changes.

Elastic subnets pave the way for creating large decentralized community-controlled blockchains. Currently, most subnets only have single or double-digit number of validators, a point of centralization that will likely change with the new upgrade. For comparison, the Avalanche primary network has over 1,200 validators. Decentralization is at the core of crypto’s value proposition, and the recent improvements to Avalanche make it possible for projects that align with this ethos to thrive.

Subnets can be customized with varying degrees of permission, from fully permissioned to completely permissionless. This flexibility allows developers to build a wide range of application-specific chains using Avalanche's technology. In a future upgrade, the platform plans to allow ERC-20 tokens to be used as an elastic subnet's gas and PoS token, potentially attracting even more developers to the ecosystem.

Notably, to participate as a validator on a subnet, one must also hold AVAX tokens and validate the Avalanche primary network, facilitating cross-subnet communication and creating better economic incentives for AVAX holders.

Avalanche Warp Messaging (AWM)

Composability is a crucial feature that allows decentralized applications (dApps) to interact and build on top of each other. This has been one of Ethereum's greatest strengths, exemplified by the "DeFi legos" concept. However, in horizontally scaling ecosystems like Avalanche, chain-to-chain composability is not offered by default, and communication protocols are necessary. Before warp messaging, this was achieved through a plethora of complex third-party external bridges.

Avalanche Warp Messaging (AWM) is a standard that allows for simple and more secure communication between subnets, eliminating the need for alternative bridges to transfer data or assets between chains. This turnkey solution makes Avalanche subnets more attractive to developers, as composability between Avalanche chains can now be a default feature.

Fragmented liquidity, siloed communities, and trusting third-party bridges in Avalanche are now things of the past. Interoperability enables a better user experience and creates a unified Avalanche ecosystem. Each subnet can now utilize technology and liquidity from other subnets. Importantly, communication between the Avalanche primary network and subnets through AWM is not yet possible.

At a technical level, an AWM message works via validators' BLS multi-signature, which can be verified by anyone on the primary network P-chain. Put more straightforwardly, the message origin subnet’s validators come together and co-sign that a message is valid. The P-chain has data stored on the total number of validators and how much each validator has at stake. The destination subnet then checks that a sufficient amount of AVAX has verified this message to determine whether it will accept it as accurate.

Unlike IBC, Subnets do not require channel creation, as all validators already share information on the primary network; a result of all subnet validators being required to validate the Avalanche primary network as well. As with any bridging technology, security assumptions and risks exist, but the destination chain can create thresholds to help verify the truth of the passed data or assets.

HyperSDK

A blockchain’s virtual machine (VM) is software that takes transaction information and executes smart contract interactions, just like a computer executes code in order to run an application. Depending on the VM used, smart contracts can have different feature sets. For example, three popular VMs include the Ethereum virtual machine (EVM), the Sealevel VM (Solana), and the Move VM, recently popularized by Libra, Aptos, Sui, and Sei. One virtual machine might be easier to code in Rust and one in Python. Additionally, one might be optimized for gaming and another for data storage. A non-customized VM may produce a bottleneck for a developer’s use case.

The HyperSDK (‘Hyper’) is a framework for developers to create custom virtual machines for their subnets. Avalanche already allows subnet creators to implement a custom VM of their choosing. However, hyper makes creating VMs more accessible thanks to a series of prebuilt modules, though plenty of customization is still possible. HyperSDK strips down runtime complexities and optimizes for a specific use case.

One of Avalanche’s most exciting features compared to other horizontally scaling ecosystems is the ability for subnets to utilize any VM of their choosing. Hyper means the amount of time for a developer to create a VM is drastically reduced and may attract more novel developments to the ecosystem.

Final Thoughts

Subnets give communities and developers full customization and control of their applications, not limited by block space or anything else. The ability to create permissionless subnets with native tokens supporting consensus, safer communication and transfer between subnets, and more easily customized VMs means the Avalanche tech stack now represents a significant competitor to the Cosmos SDK and other app-chain ecosystems.

AWM and the HyperSDK make it far easier to create a full-featured blockchain. The time to create a custom VM was significantly lowered from what could have been months to potentially a few days. For some dApps, such as gaming, a custom VM may help scale to a mass adoption level. AWM not only increases the security of transfer but also removes the need to create or integrate a bridge to warrant communication.

While this new tech stack shows great promise, subnet creation to date has been lackluster, and the question remains whether the added benefits to the tech stack will incentivize developers to utilize this technology and potentially drive value to AVAX.

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