Avalanche Subnets vs. Polygon Supernets

There have been several recent developments in blockchain launchpads with Avalanche’s release of subnets and Polygon’s release of supernets. While supernets and subnets share many surface-level similarities in name and function, they have several key differences. Before diving into a comparison, let’s examine the problems they address. 

Subnets and supernets enable the creation of application-dedicated blockchains (app-chains). App-chains allow for better user experiences through reduced fee variability, increased transaction speeds, and tailored network incentives impossible with monolithic blockchains. Without these platforms, launching an app-chain is expensive, risky, and knowledge-prohibitive for most builders. Furthermore, to ensure security, builders must also overcome the challenge of properly incentivizing decentralized validator participation. 

Avalanche’s subnets and Polygon’s supernets have emerged to address these issues by abstracting away the blockchain-domain knowledge required to launch application-dedicated blockchains and providing blockchain-as-a-service. 

According to Avalanche, subnets are a dynamic set of validators that work together to achieve consensus on the state of a set of blockchains. In other words, subnets are the infrastructure that enable app-chains by providing validators that can be shared between blockchains. Subnets, in the most general sense, give developers, builders, and entrepreneurs the ability to create fully customized blockchains within the Avalanche ecosystem. Subnets were released in May 2022. If you are interested in the technical details of Avalanche’s subnets, here is a primer.

Subnets are designed to be highly configurable and mandate as few design choices as possible. Businesses and developers can create blockchains with the option to customize the blockchain’s virtual machine (EVM, AVM, or any other VM). Since subnets support private blockchain options, entrepreneurs can also develop customized blockchains without tokens, if their business models do not require one.

Colloquially, supernets refer to both a program offered by Polygon that assists developers, builders, and entrepreneurs in launching their own app-chains and the resulting app-chain. 

This program provides access to a professional set of validators, third-party services for implementation, design, and management, and tooling for instant integration (including block-explorers, wallets, and KYC providers). The technology that underpins supernets is Polygon Edge, Polygon’s modular and extensible framework for building Ethereum-compatible blockchains. 

Since the release of the first deployed Edge project in May 2021, there have been 35 Edge projects built since.

Polygon Edge provides a customizable consensus layer and has two supported consensus types: Istanbul Byzantine Fault Tolerance (IBFT) Proof of Authority (PoA) and IBFT Proof of Stake (PoS). Both IBFT consensus protocols are permissioned protocols that require a set of trusted validators prior to consensus, and IBFT consensus protocols have a theoretical maximum limit of 100 validators that can participate in consensus. IBFT PoA is suited for private networks where trust among validators is high, such as in many enterprise use cases. IBFT PoS, on the other hand, allows any validator approved in the trusted validator set to participate in consensus. 

IBFT consensus ensures stability, provided that less than a third of validators are behaving improperly - either through malicious behavior or downtime. More consensus protocols are expected to be supported over time. The current consensus mechanisms of Polygon Edge offer instant finality and community members can delegate to Polygon validators.

Supernets come in two forms that are both optionally managed by a certified third-party: sovereign chains (blockchains validated by their own set of validators) and shared security chains (blockchains validated through a provided set of MATIC-staked validators).

One of the primary differences between subnets and supernets is the core consensus protocol. The snowman consensus protocol used by Avalanche enables theoretically infinite decentralization and scalability by providing probabilistic consensus among validators. Polygon’s IBFT consensus protocols guarantee consensus, but at the cost of decentralization and loss of permissionless participation. 

Another difference between the two technologies is that Avalanche requires all validators to validate the primary network in addition to validating the subnet, while Polygon supernets do not have this requirement. Comparatively, this does not substantially impact hardware requirements.

Points of comparison on security and performance are summarized in the chart below:

Let’s expand on the difference between Avalanche and Polygon's views on slashing. Slashing is the idea that a network can penalize malicious validators by taking stake from bad actors. This has famously been a debate between the Avalanche and Ethereum communities. 

The Ethereum argument for slashing is that bad actors have greater economic repercussions for their actions. Those that have more to lose economically are more likely to demonstrate good behavior. Conversely, the Avalanche argument against slashing is that delegators to stake pools do not necessarily have control over validator behavior. If the validator acts maliciously (either intentionally or through downtime), the delegators’ stake is at risk. This could lead to the centralization of staking to professional validators. This is undesirable for those that value decentralization. 

To illustrate the utility of platforms like subnets and supernets, let’s examine the case of Axie Infinity. As Axie Infinity’s transaction volume and the cost of Ethereum’s blockspace simultaneously skyrocketed last year, the Axie Infinity team created the Ronin sidechain for scaling their application. However, the Ronin sidechain had only 9 validators (RPC Nodes), and hackers managed to attack 5 of them. This led to the largest ever crypto hack at the time, with a loss of $600MM+ worth of Ether ($ETH). 

With a subnet or supernet platform, the creators of Axie Infinity could have created a sufficiently decentralized blockchain using platform-provided validators. This would have made their blockchain much more difficult to seize control over.

Community builders have launched their initial projects on subnets and supernets. DeFi Kingdoms (DFK) and Crabada are the first two blockchain games joining the Avalanche subnet ecosystem.

Subnets allow you to use either $AVAX, Avalanche’s native token, or a subnet-native token for paying gas fees. By using the subnet native $JEWEL token as gas, the DFK Team created DFK-specific incentive structures by adjusting tokenomics:

- 50% of the gas fees are burned

- 25% are rewarded to validators

- 25% are sent to the Quest Fund as an additional participation incentive for the community.

Crabada is another GameFi project that deployed their own subnet to enhance their users’ experience. From the following chart, we can see the difference in the average gas fee paid for in-game transactions. Crabada users on the Swimmer Network, Crabada’s subnet, paid on average 1/120 or 0.83% of the amount they paid on the initial C-Chain deployment.

As transaction volume migrates towards subnets, transactions on the C-Chain begin to dip. The following chart shows transactions on the C-Chain over time. 

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Source - Snowtrace

However, if you include the transactions on the subnets, you can see that transaction count continues to increase in the overall Avalanche ecosystem. 

Source - Kevin Sekniqi, Avalanche

This behavior is part of the project development cycle that the Avalanche team outlined. Initially, projects will launch on the C-Chain. As demand for the project grows, C-Chain fees will increase. This will drive projects to move to their own subnet for lower and isolated fees. C-Chain traffic is then reduced, and gas prices lessen. The cycle repeats as new projects mature in the Avalanche ecosystem. 

Source - AvaxIntern, Avalanche

SX Network, Uttarakhand State Government medical device solution, and Zo World are all projects that highlight Polygon Edge's capabilities and use cases.

SX launched its SX.bet prediction market dApp on Ethereum in March 2018. When SX network demand grew, the SX team pivoted to building with Edge because of the low transaction costs and EVM-compatibility. 

According to Andrew Young, project lead at SX Network, there are now over 25 protocols and applications across the prediction market, DeFi, and NFT space deploying on SX. Currently, SX network has 2 second block time, 6 validators, 13,806 total transactions, and 706 wallet addresses participating on their blockchain.

[Read more: How SX Network is Launching Its Own Chain Using Polygon Supernets]

The local government in Uttarakhand, an Indian state in the foothills of Himalayas, needed a way to track medical equipment in seven of its medical colleges. The government deployed a SettleMint network with Polygon Edge integration. The resulting solution tracked assets through RFID, decreased downtime for scheduled maintenance, and automated supply and ordering processes. It is currently deployed as a pilot program. 

Zo World is a decentralized travel project from Zostel, one of the biggest backpacking hostel chains in India. The team has mapped over 10 million real world locations where users can complete quests, mint NFTs, and earn the $DOPE token.

The team chose supernets because of the Polygon ecosystem, low transaction fees, responsiveness with 2-second block time, minimum investment into development operations, and easy maintenance.  

[Read more: Zostel Building Its Zo World Travel Metaverse On Polygon]

Although these platforms provide decentralization and scalability, both platforms have limitations. First, Polygon has a theoretical limit of 100 validators that each supernet can include in consensus. For context, there are several major cryptocurrencies that have similar theoretical limits like Cosmos or Oasis Network. For many projects, this level of decentralization is sufficient. Since decentralization is a critical factor in determining a blockchain network's security, projects should consider this limitation during project design, especially for high value blockchain projects. 

Second, while these platforms can theoretically enable interoperable public and private blockchains, cross-chain bridging is still a new concept. Hence, they could bear security risks that might be costly, especially in cases that involve smart contract bridging. Both Avalanche’s subnets and Polygon’s supernets currently use smart contract cross-chain bridges. Both teams are exploring protocol-level bridging, which would lead to a more cohesive user experience and increased security. 

Finally, because each application-dedicated blockchain has its own level of decentralization, it is the responsibility of the user to understand the risk of each application. Most users do not know or care about the level of decentralization or security of the services they use, and there is no minimum level of decentralization these platforms enforce. There remains insufficient tooling to provide this information for every application created, especially for projects with a customized VM. 

This report is for informational purposes only and is not investment or trading advice. The views and opinions expressed in this report are exclusively those of the author, and do not necessarily reflect the views or positions of The TIE Inc. The Author may be holding the cryptocurrencies or using the strategies mentioned in this report. You are fully responsible for any decisions you make; the TIE Inc. is not liable for any loss or damage caused by reliance on information provided. For investment advice, please consult a registered investment advisor.