What is a Subnet in Cryptocurrency?
A subnet describes a smaller network inside a much larger network. In Internet Protocol (IP) networks, for example, it is a logical partition of a bigger network into several, smaller segments. This reduces the distance that network traffic must travel to arrive at its destination, eliminating unnecessary routers.
In the cryptocurrency context, a subnet is a discrete sovereign protocol designed to operate within a layer 1 blockchain, such as Ethereum and Avalanche. A single blockchain can have hundreds or thousands of subnetworks running in unison to complement the mainnet.
A subnetwork comprises a group of nodes that perform a similar function or process unique transactions and data. These nodes come together to form smaller individual decentralized networks within the larger network, known as “chains of blocks”.
Blockchain subnetworks are autonomous, with their own set of rules, consensus mechanisms, and validators to ensure the overall network security.
So why are sub-networks important to blockchains?
During periods of high activity on layer 1 blockchains, the network can become congested and overwhelmed by computational demands, resulting in high gas fees. Subnetworks create sub-chains or extra network layers that tackle subsets of the transactions and execute smart contracts. This improves the network’s speed and efficiency. Distributing the data load across several subnetworks also significantly enhances scalability and overall network performance, and lowers transaction costs.
Examples of Subnetworks
Some popular subnetworks in the blockchain space include:
- Avalanche subnets: Avalanche has three major networks within the entire ecosystem. This includes Exchange Chain (X-Chain), Platform Chain (P-Chain), and Contract Chain (C-Chain). P-Chain coordinates validators and Avalanche’s Snowman consensus mechanism, the C-Chain exclusively deals with smart contracts, and the X-Chain is responsible for the creation and exchange of digital assets.
- Cosmos SDK subnetworks: Includes Secret Network sub-network and Binance Smart Chain sub-network.
Subnetworks can potentially extend the utility of blockchains by enhancing their scalability and enabling the flexibility to create user-defined functions. They also facilitate upgrading the network without jeopardizing the stability of the main chain.