If you’re familiar with Layer 1 blockchains, you’ve probably heard the term subnet or subnetwork — but what is a subnet in crypto exactly? Subnets are crucial for blockchain technology. Why? Because they can improve scalability and overall network performance.
That said, in this guide, we’ll explain how subnets work, how can they improve blockchain technology, and what types of subnets exist. We’ll also list the main differences between subnets and Layer 2 scaling solutions.
Here’s all you need to know about subnets.
What Is a Subnet in Cryptocurrency
What is a subnet blockchain? Subnet blockchain or subnetwork describes a set of smaller networks that operate within a larger network. Its goal is to improve the efficiency of the network, increase its security, and reduce congestion. In order to do that, subnets divide the network into smaller chains. One subnet can validate one or more blockchains.
Subnets are also autonomous, meaning they have their validators, as well as their consensus mechanisms and sets of rules.
Subnets are crucial to blockchains. Why? Since Layer 1 blockchains can get congested during high activity, which can result in higher fees. Subnetworks can solve congestion problems by adding additional layers that will process transactions. This will also increase the scalability of the network.
Types of Subnets
There are two types of subnetworks — classful and classless. The former uses the default subnet mask based on the device class. However, these subnets came with certain limitations, such as a lack of flexibility and a fixed number of hosts.
This is why classful subnets have been replaced by an enhanced subnet — the classless subnetwork. Namely, classless subnets can assign addresses with greater precision. They can also support more hosts.
How Subnets Work
Subnets divide large blockchains into smaller blocks, each with a unique IP address. The role of these addresses is to keep communication within the network safe and effective. Subnetworks will also be assigned masks. These masks will determine the number of bits used to recognize the network and its host. They will also prevent access to devices located outside the subnet.
If one device wants to send information to another device that’s located on the same subnet, it will use its IP address to find it. However, if the destination device is not on the same subnetwork, all information will be sent to a default device. This device will then forward the information to the destination device.
The Role of Subnets in Blockchain Technology
Subnetworks play an important role in blockchain technology. They improve the network’s scalability, performance, and security. They are also interoperable with other networks.
Scalability and Performance
Many blockchains struggle with scalability. On that note, a large number of transactions can lead to congestion, which will result in slower transactions and higher fees. Subnetworks can increase the scalability and performance of the network by breaking it down into smaller blocks. This option makes them very useful for blockchains with large trading volumes.
Moreover, subnetworks can create special blockchain nodes. Their role will be to deal with smart contracts and check the validity of transactions within the network. This will allow the blockchain to process more transactions without jeopardizing the network’s overall performance. Due to their speed and precision, subnets are primarily used within the DeFi sector.
Security and Decentralization
Another role of subnets is to make blockchains decentralized — to eliminate the need for intermediaries. In addition, subnetworks have another critical function — to improve the network’s security. They achieve this by dividing the network into smaller parts.
That said, all networks will be able to communicate with each other. However, each network will have its validators, consensus mechanisms, and specific rules. This will reduce the risk of fraud and data breaches.
Furthermore, subnetworks will allow developers to create private networks. Only authorized members will have access to these networks. This is especially important for the finance and healthcare industry, where data privacy is vital.
Interoperability
The most critical role of subnets is to enable interoperability between different networks. This will not only increase their flexibility but will also allow them to share data with other blockchains.
Moreover, subnets will enable developers to create hybrid blockchains. Hybrid blockchains are a combination of private and public networks. They’ll also get to customize their networks to suit their needs.
For example, Avalanche uses a subnet that can run on three networks — the exchange chain, the contract chain, and the platform chain. Subnets are also used by Robinhood. What is a Robinhood subnet? A protocol that allows them to divide their main network into smaller parts. Robinhood subnets are specific as they are a combination of VPNs and firewalls.
Subnets vs Layer 2 Scaling Solutions
Just as there is a difference between Layer 1 and Layer 2 scaling solutions, subnets also differ from Layer 2 solutions. Both aim to improve blockchain’s scalability and performance; however, they use different approaches.
Layer 2 solutions try to solve scalability issues by processing all transactions off-chain. The most common L2 solutions include rollups, side chains, and state channels. On the other hand, subnets try to reduce network load by dividing the mainnet into smaller networks or sub-networks. This enables them to distribute the workload across multiple chains.
Furthermore, Layer 2 solutions are protocols built on top of existing blockchains. This means that they depend on the main chain. Subnets don’t have this problem since they divide the main network into separate decentralized chains — subnetworks will use their own rules, mechanisms, and validators.
Conclusion
Subnetworks play a vital role within the blockchain ecosystem. On that note, they can divide the main blockchain into smaller independent chains that can communicate with each other. Their main goal is to enhance security and improve network efficiency and scalability.
Moreover, their autonomous nature makes subnets more flexible than Layer 2 solutions. They are also interoperable with different blockchains.