The Avalanche Ecosystem: An Analysis of Subnet Adoption

    Matthew Fiebach

    Key Takeaways

    • Avalanche's unique subnet architecture offers applications scalability and customization, enabling a diverse ecosystem of chains from gaming to institutional finance.
    • An array of subnet features enhance the development and user experience for blockchain-based games, with many games choosing to make Avalanche home.
    • Evergreen subnets have the potential to revolutionize traditional financial operations, offering turnkey solutions for TradFi compliance onchain.
    • The engagement of prominent financial institutions like Cumberland, Citibank, Apollo, JP Morgan, and more, in Evergreen subnet projects underscores the perceived value and feasibility of subnets in addressing complex financial challenges onchain.
    • The Avalanche ecosystem's ongoing expansion and the success of subnet applications across sectors highlight the growing recognition of crypto’s transformative potential for a more efficient and secure digital economy.

    Avalanche's unique architecture allows for the creation of custom specialized blockchains, which are Proof-of-Stake networks validated by a subset of the primary network's validators. Each of these smaller groups validating a chain is known as a subnet. Though subnets refer to the validator set, the subnet nomenclature can also be used to refer to the chain itself. The enablement of application-specific blockchains is the foundation to the design of the Avalanche ecosystem, offering a scalable and flexible framework tailored to the diverse requirements of applications building on Avalanche.

    The Avalanche network is structured around three core blockchains: the P-chain (Platform Chain), C-Chain (Contract Chain), and X-Chain (Exchange Chain), all of which are validated by the same set of validators dubbed the Avalanche Primary Network. One subnet can validate many chains, but each chain has only one subnet validator set. This design ensures dedicated oversight and optimized performance for each blockchain within the Avalanche ecosystem.

    Applications on the Avalanche network often start on the C-Chain, an EVM-compatible Layer 1, to take advantage of its liquidity, users, wider network effects, and the familiarity it offers to developers within Ethereum's ecosystem. As an application's user base grows and requires higher transaction throughput at a lower cost, developers can transition to a dedicated blockchain, validated either by a new subnet or an existing subnet. Importantly, the Avalanche framework offers the flexibility to bypass the initial C-Chain deployment, allowing teams to launch their subnets initially. This path has been chosen by several projects that identified advantages in immediately establishing a dedicated environment for their applications.

    Opting for a subnet allows for enhanced governance control, tailored tokenomics, virtual machine (VM) customization, and eliminates competition for block space, aligning with the unique requirements and goals of specific projects. Avalanche's architecture has not only fostered a blossoming community of developers on the C-Chain, but has also catalyzed the growth of specialized subnets. Among these, gaming chains and institutional chains stand out as two of the most compelling use cases, showcasing the versatility of Avalanche subnets to cater to diverse and demanding use cases.


    Avalanche offers an array of features that enhance the development and user experience for blockchain-based games. At the heart of these benefits is the capacity for virtual machine optimization, which allows developers to tailor the computational environment to the specific needs of their games. This capability ensures that games run more efficiently, with customized logic and functionalities that cater directly to the gaming experience. Furthermore, Avalanche's flexible gas model, including the choice of gas token or the option to abstract gas fees entirely, streamlines transactions within gaming ecosystems.

    By addressing these technical aspects, Avalanche attempts to create an environment for both developers and players free from the traditional compromises of blockchain integration, offering a seamless play experience on blockchain rails. Additionally, in 2022, Ava Labs committed $290M in AVAX to create a fund to, in part, to help bring gaming projects into its subnet ecosystem accompanied by the existing $200M Blizzard fund VC arm to bootstrap these types of projects and more. These factors have not gone unnoticed with many gaming projects making Avalanche their home. Below we analyze a few of the most notable projects that have decided to launch an Avalanche subnet.



    Founded in 2021, Merit Circle emerged from a popular Axie Infinity scholarship program, initially enabling 500 gamers from lower-income regions to engage in play-to-earn with a profit-sharing model. This initiative laid the groundwork for the establishment of Merit Circle and the introduction of the MC token, a VC DAO dedicated to investing in blockchain-based gaming. By 2023, Merit Circle had notably expanded its footprint in the sector, establishing partnerships with a reported 60 gaming projects and creating Sphere, a dedicated gaming NFT marketplace. This momentum culminated in the launch of the BEAM subnet in May 2023, a gaming-focused blockchain designed using the Avalanche-SDK. MC tokens recently became redeemable for BEAM tokens. As investors look to gain exposure to the gaming narrative, BEAM has seen notable price action since launching in October.

    Beam is currently home to 14 game titles including Domi Online, Arcade Galaxy, Castle of Blackwater, and more, with another 7 games announced in the pipeline. Although the BEAM network has not found its hit game yet, it’s a notable contender to be the base chain for the game that eventually sparks crypto gaming adoption.


    Though it seems DeFi Kingdom's (DFK) time in the spotlight has come to an end, with its fame reaching the furthest corners of crypto in late 2021, it is a prime example of why Avalanche’s architecture is well suited for gaming. DFK is a fully onchain game blending RPG with a DeFi platform, portrayed with the aesthetic of traditional pixel art games. It leverages blockchain to create an interactive world where players can explore, battle, and engage in commerce, all while participating in DeFi activities such as swapping, liquidity mining, staking, and yield farming. Each action requires an onchain transaction and the game uses NFTs to represent a variety of in-game assets, including characters, equipment, and land, making each item truly owned by the player and tradeable on the blockchain.

    DFK experienced challenges with its JEWEL tokenomics model, which contributed to the widespread selling of its tokens. This selling pressure, in turn, led to a declining price action that significantly diminished the game's prominence within the broader crypto and gaming narratives. As enthusiasm waned, the game found itself distanced from the central conversation, struggling to maintain the attention and engagement that marked its earlier success. This exemplifies the wider industry’s need for games that people play simply because they are fun, and not as a means to profit.

    Despite its diminished presence in the current crypto gaming discourse, DFK remains a significant example of the value proposition offered by Avalanche subnets. Initially launched on the Harmony blockchain, DFK encountered challenges as the user base scaled, including prohibitively expensive gas fees and periods of downtime, creating a generally bad user experience. These issues underscored the limitations of operating on a network not fully equipped to handle a game's growing demand.

    The launch of DFK Crystalvale on an Avalanche subnet allowed DFK to leverage a dedicated blockchain environment optimized for its specific needs, significantly enhancing performance and reducing transaction costs. This transition shows the potential of Avalanche subnets to provide tailored solutions for high-throughput apps, offering the infrastructure necessary for sustaining high levels of user engagement and interaction without the technical constraints experienced on other platforms. Although DFK may not enjoy the same level of engagement and visibility it once did, its journey from the Harmony blockchain to an Avalanche subnet stands as a compelling case study. It highlights how blockchain games and decentralized applications can overcome infrastructural challenges by adopting subnet technology, ensuring their operations are scalable, efficient, and aligned with their growth trajectories.


    Shrapnel, another live gaming subnet in the pre-launch phase, stands out as an eagerly awaited first-person shooter with its token and a collection of NFTs. Developed using the Unreal Engine, the testnet release videos of Shrapnel showcase promising graphics and fluid gameplay mechanics. However, it's important to acknowledge that until the game officially goes live, fully understanding the nuances of gameplay and the overall user experience remains challenging. This anticipation builds a sense of excitement and curiosity around the game but also poses a risk to investors.  

    Shrapnel integrates its native SHRAP token within its gaming ecosystem, live on both the Avalanche C-Chain and its dedicated subnet. The utility of the SHRAP token is advertised as in-game currency, the gas token for transactions on the subnet, and governance over the platform. Reflecting a nuanced application of crypto, the game maintains a partial on-chain presence, meaning that while many aspects of gameplay are accessible without blockchain interaction, key features such as claiming and trading in-game items—like skins, maps, and insignias—necessitate blockchain transactions. This blend of on-chain and off-chain elements allows players to enjoy a seamless gaming experience while also engaging with the blockchain for specific actions, thereby leveraging the benefits of digital ownership and trade facilitated by the SHRAP token. Another interesting use of blockchain in the game surrounds player-created content. Short clips of gameplay will be minted as NFTs on the Shrapnel blockchain.

    For popular games to reach scale, the incorporation of even partial on-chain elements necessitates a high-throughput execution environment to accommodate the demands of millions of active users engaging in item trading, user-generated content such as the aforementioned short clips, and more daily. Traditional execution environments fall short in this aspect, where, for instance, the action of an unrelated NFT mint could interfere with the real-time processing of a player's notable in-game moment, such as capturing a quad-kill, due to block space competition. This scenario underscores the critical need for a more robust, scalable blockchain solution. The ease of deployment and the distinctive advantages offered by Avalanche subnets have made them an ideal choice for the Shrapnel team. Opting for an Avalanche subnet ensures that Shrapnel can leverage dedicated block space, eliminating the risk of congestion and ensuring seamless, uninterrupted gameplay and blockchain interactions. This choice not only highlights Avalanche's capability to support high-throughput applications but also illustrates the Shrapnel team's commitment to a long-term vision.


    Transitioning to institutional subnets from the vibrant world of blockchain gaming opens up a discussion on a fundamentally different but equally transformative application of Avalanche's technology. Institutional subnets represent a specialized use of Avalanche's capabilities, tailored to meet the stringent requirements of financial institutions. These subnets offer a secure, compliant, and scalable environment for executing transactions, managing data, and deploying applications that require the highest levels of trust and efficiency.

    In contrast to gaming subnets, which focus on throughput and user experience, institutional subnets emphasize regulatory compliance, privacy, and security. They enable entities to leverage blockchain's benefits—such as near-instant settlement, transparency, immutability, and decentralization—while adhering to specific industry regulations and standards.

    Moreover, the customization options available with Avalanche subnets allow institutions to tailor the blockchain's user base, validators, consensus mechanisms, governance models, and transaction parameters to fit their unique operational needs. This adaptability ensures that organizations can innovate within their sectors without compromising on compliance. By adopting institutional subnets, sectors traditionally slow to embrace public blockchains due to regulatory concerns can now explore their potential. This marks a significant step forward in the blockchain's evolution from a niche technology to a mainstream tool capable of reshaping how institutional operations are conducted.

    The growing interest in tokenized real-world assets (RWAs) and the digital transformation of financial services have positioned subnets as prime candidates for institutional adoption. Prominent institutions like BlackRock, JP Morgan, Citi, Cumberland, Apollo, and Franklin Templeton, recognizing the potential of blockchain to revolutionize asset management, settlement, custody, and trading, are increasingly exploring this space.

    Evergreen Subnets

    Avalanche Evergreen Subnets are tailored to meet the intricate needs of the financial services sector through institutional subnet deployments. This subnet framework offers a blend of customization, control, and the comprehensive tooling necessary for addressing both specific company needs and broader industry challenges. A significant feature of Evergreen Subnets is their ability to combine the advantages of public blockchain development—such as transparency and interoperability—with features typically associated with enterprise solutions, like enhanced privacy and control.

    Evergreen subnets incorporate out-of-the-box features like validator and user KYC, AML, and geofencing capabilities. This turnkey compatibility ensures that institutions can adhere to legal and regulatory standards while operating onchain. Offering this tooling and ease of deployment makes subnets an ideal choice for financial institutions looking to launch chains and products that require known and limited counterparties without all the negative traits of the walled garden typically associated with private blockchains.

    Evergreen Deployments

    The first deployment of an Evergreen subnet was dubbed Spruce with institutional participants such as T. Rowe Price Associates, WisdomTree, Wellington Management, and Cumberland as partners. Spruce is focused on facilitating swaps between institutions. Wallets are issued NFTs signaling they have passed KYB, and the chain features an allowlist so only certain wallets can use the chain. By collaborating with such esteemed institutions, Spruce demonstrates the practical applicability of Avalanche subnets in addressing the specific needs of institutional finance. Spruce not only validates the Evergreen subnet's concept but also sets a precedent for how blockchain can be leveraged to innovate and enhance traditional financial systems, paving the way for future deployments and broader adoption across the industry.

    Other explorations into Evergreen subnets have been conducted by JP Morgan and Apollo, aimed at enhancing portfolio management efficiency, and Citi in efforts to innovate in Forex trading, representing significant strides in the application of subnets within finance. These initiatives, conducted in collaboration with the Monetary Authority of Singapore (MAS), showcase the potential of Evergreen subnets to revolutionize traditional financial operations by introducing greater efficiency, less trust, and faster settlement. The collaboration with MAS underscores the importance of regulatory involvement in the adoption and integration of blockchain solutions, ensuring that these innovations not only meet industry standards but also align with regulatory guidelines. By leveraging Evergreen subnets, these financial giants are exploring the benefits of blockchain in streamlining operations and enhancing transactional security and transparency, potentially just the beginning of a long-term exploration of Avalanche and blockchain technology more broadly.


    The evolution of the Avalanche ecosystem, highlighted by the adoption of subnets for both gaming and institutional applications, underscores a significant shift in the crypto landscape. Gaming ventures like Beam and Shrapnel showcase the potential of subnets to enhance the player experience and economic engagement, while institutional explorations into portfolio management and Forex trading illustrate the profound impact blockchain can have on traditional financial operations. The introduction of Evergreen subnets and their exploration by institutions like JP Morgan, Apollo, and Citi, in collaboration with regulatory bodies such as the Monetary Authority of Singapore, marks a new era of crypto and finance. These developments not only demonstrate the versatility and scalability of Avalanche's technology but also its ability to meet the complex demands of various sectors.

    As we look to the future, the continued expansion and refinement of the Avalanche ecosystem, particularly through initiatives like Evergreen subnets, hold the promise of broader adoption and deeper integration of blockchain technology across more traditional industries. The collaborative efforts of developers, institutions, and regulatory authorities signal a growing recognition of blockchain's potential, paving the way for more efficient, transparent, and secure systems. In this evolving narrative, the subnet ecosystem stands out as a notable contender in the interconnected and accessible digital economy.

    This research report has been funded by Ava Labs. By providing this disclosure, we aim to ensure that the research reported in this document is conducted with objectivity and transparency.  Blockworks Research makes the following disclosures: 1) Research Funding: The research reported in this document has been funded by Ava Labs. The sponsor may have input on the content of the report, but Blockworks Research maintains editorial control over the final report to retain data accuracy and objectivity. All published reports by Blockworks Research are reviewed by internal independent parties to prevent bias. 2) Researchers submit financial conflict of interest (FCOI) disclosures on a monthly basis that are reviewed by appropriate internal parties. Readers are advised to conduct their own independent research and seek the advice of a qualified financial advisor before making any investment decisions.