Etna Upgrade

The Etna upgrade will be the largest network upgrade of Avalanche to date. This upgrade will introduce a new concept called Layer 1 blockchains (L1s), which will replace the current Subnet model. In this article we will discuss the current limitations of Subnets, and how the changes suggested in ACP-77 will address these limitations in the Etna Upgrade.

How Subnets Work Today

The Avalanche network has a large set of validators who all participate in running and validating the Primary Network. The Primary Network consists of the C-Chain, P-Chain, and X-Chain, and is where most of the transactions on Avalanche are processed.

A blockchain has a limited capacity for computation and data storage. Therefore, the transactions it can process in a given time frame are limited. We can use the analogy of a highway to visualize this concept. A highway can only handle a certain number of cars at a time. If too many cars try to enter the highway at once, traffic congestion will occur and they have to wait to enter the highway.

In order to scale horizontally and to offer more blockspace, a subset of validators can opt-in to validate an additional blockchain in parallel with the Primary Network: we call this a Subnet. The idea is similiar to building many highways in parallel and create additional space for cars to drive on. This allows for more transactions to be processed in parallel, and therefore increases the overall throughput of the network.

Etna Upgrade

With the Etna upgrade, Subnets will become their own Layer 1 blockchains. Instead of using a subset of Primary Network Validators, new L1s can now use a distinct set of validators.

This change maintains the short time of finality and high throughput Avalanche Subnets are known for while also enabling a new set of features with options for completely customizable staking options, gas tokens, and governance.

Economic Barriers

The Primary Network currently has a staking requirement of 2,000 AVAX per validator. If we assume a price of $20 per AVAX, a Subnet would have to have each of its validators stake AVAX worth $40,000 in addition to its own staking requirements. This is a significant economic barrier for the creation of new Subnets.

This model has created a significant economic barrier for the creation of new Subnets as validators must meet the 2,000 AVAX requirement, and a majority of Subnets prefer to run with a minimum of 5 validators.

The Etna upgrade will remove the requirement for L1 validators to validate the Primary Network and fulfill its staking requirements. Therefore, they do not need to stake 2,000 AVAX on the Primary Network, and instead only abide by the staking requirements defined by the L1 they wish to validate.

To use the interoperability features of Avalanche, L1 validators will still need to register their validator set with the P-Chain of the Primary Network. For this each L1 validator will need to pay a continous fee. This fee is independent of the number of transactions on the L1, the number of cross-chain messages, and the number of validators of the L1. Current estimations are that this fee will be around 1 to 10 AVAX per month per validator.

This will remove the significant economic barrier, giving more sovereignty to L1 creators and validators, while preserving interoperability and economic security for the Primary Network.

Running Costs

Currently, validators must validate the Primary Network in addition to each Subnet they are validating. This can lead to higher running costs for validators as they must maintain machines that can handle the load of all their blockchains.

With the Etna upgrade, validators will only need to validate the L1. This will lead to lower running costs for validators as they will not need to maintain machines that can handle the load of both the Subnets and the Primary Network.

Compliance

Many Institutions that want to adopt blockchain are struggling with exposure to public permissionless blockchains. The Primary Network is a public permissionless blockchain, and as such, it is not suitable to build on for many institutions. While institutions can launch their own Subnet as a private, proof of authority blockchain, they are still exposed to the Primary Network in some manner.

This exposure can be circumvented by performing a partial sync of the Primary Network, but is an incomplete solution. Since the validator sets of L1s will be distinct and separate from the Primary Network, institutions will be able to launch independent L1s (be it public or private) that are not required to participate in the Primary Network.

Fault Isolation

Occasionaly, there can be very high demand or a fault on the Primary Network. Because Subnet validators must also validate the Primary Network, their machines are exposed to the same congestion which can have a consequential effects on Subnet performance.

After the Etna upgrade validator sets are distinct. Therefore, congestion and faults on the Primary Network will not affect the performance of L1s and vice versa.

Conclusion

The Etna upgrade is the largest network upgrade of Avalanche to date. This change will enable more developers to get inexpensive block space for their applications, provide better fault isolation, while also enabling institutions to launch their own L1s with better compliance.

You can learn more in depth about ACP-77 by reading the ACP-77 Proposal.