The first-generation blockchains, bitcoins and early versions of Ethereum, demonstrated groundbreaking concepts but faced challenges in terms of scalability and transaction speed. Recognizing these challenges, the blockchain community began exploring innovative solutions, leading to the development of second-generation blockchains and various scalability-focused proposals.

But just as busy highways can become congested, blockchains too can face limitations during periods of high activity. That’s where subnets come in, a revolutionary concept that adds a new dimension to the world of blockchain.

This article explores the concept of subnet blockchains, its advantages and some of the challenges they face.

What Is a Subnet Blockchain?

A subnet blockchain is a specialized architecture within the broader blockchain framework, designed to address some of the inherent challenges faced by traditional single-chain blockchains. It involves the subdivision of the blockchain network into smaller, interconnected subnets, each capable of operating semi-autonomously.

The primary purpose of subnet blockchains lies in overcoming the limitations associated with scalability and congestion. As blockchain technology gained widespread adoption, concerns regarding transaction speed and the ability to handle a growing number of transactions simultaneously became evident.

How Subnets Function within a Blockchain Network?

The complex functionality of subnets is advantageous to blockchains. To create a subnet a big network is divided into smaller pieces, each with a set number of IP addresses.

Each device in the subnet has a unique address, which guarantees effective and secure communication between devices. Creating subnets involves configuring the subnet mask, which establishes the amount of bits required to uniquely distinguish the network ID and the host ID.

A subnet ensures devices inside it can be segregated from devices outside the network while still being able to communicate with one another. To ascertain if a device is connected to the same subnet or not, the device employing data transmission requires the IP address of the target device.

If it’s on the same subnet, the sending device sends the data directly to the destination device, and if it is on a different subnet, it sends the data to the default gateway, which then forwards the data to the destination device.

Setting up a Subnet Blockchain Network

1. Define Your Needs 

The first step is to clearly define your specific goals and requirements for the subnet. What type of application will it support? What level of security and privacy do you need? How much transaction volume do you anticipate? Answering these questions will guide your decisions throughout the implementation process.

2. Choose Your Deployment Model

You can either deploy your subnet on a public blockchain platform like Ethereum or create a private blockchain infrastructure.

• Public Subnets

Public subnets are easier to set up and manage by using existing infrastructure and security measures. On the flipside, they have less control over customization and security and are subject to the platform’s fees.

• Private Subnets 

Private subnets have greater control over customization, security, and governance, that are ideal for sensitive data or confidential business operations. However, its setup and maintenance demand greater technical know-how and resources.

3. Select Your Consensus Mechanism

The consensus mechanism determines how validators reach agreement on the validity of transactions within the subnet. Popular choices include Proof-of-Stake (PoS), Proof-of-Authority (PoA), and Byzantine Fault Tolerance (BFT). Choose a mechanism that aligns with your desired security, performance, and decentralization levels.

4. Configure Your Validator Network

Validators are responsible for verifying transactions and maintaining the subnet’s ledger. Choose the number of validators based on your desired level of decentralization and security. A larger number of validators provides greater security but can also slow down transaction processing.

5. Design Your Governance Model

The governance model defines how decisions are made within the subnet, such as upgrades, fee structures, and validator selection. Opt for a decentralized governance model for increased transparency and community involvement.

6. Deploy Your Smart Contracts 

If your subnet requires custom functionality, you’ll need to develop and deploy smart contracts that define the rules and logic of your application. Choose a compatible virtual machine for your smart contracts, such as the Ethereum Virtual Machine (EVM).

7. Test and Secure Your Network

Rigorously test your subnet for security vulnerabilities and ensure it functions as intended before launching it to the public. Implement robust security measures, such as intrusion detection and prevention systems, to protect your network from potential attacks.

Benefits of Subnets on the Blockchain

Subnets offer exciting possibilities for diverse applications. Below are some of its benefits: 

1. Enhanced Scalability

Subnet blockchains stand out as formidable solutions to one of the most persistent challenges faced by traditional blockchain networks – scalability. In a single-chain blockchain, as the number of transactions increases, the network can become congested, leading to slower transaction speeds and higher fees.

By dividing the network into smaller, interconnected subnets, transactions can be processed independently. This significantly increases the overall capacity of the blockchain network.

This parallel processing capability allows subnet blockchains to scale horizontally and handle a much higher volume of transactions without sacrificing efficiency. This is particularly beneficial for DeFi platforms, high-volume gaming applications, and enterprise blockchains handling confidential data.

2. Improved Customization

Subnets empower developers to build customized avenues tailor-made for their specific needs. They can choose their own consensus mechanisms, governance models, and even virtual machines, making them ideal for niche applications like private financial networks or specialized supply chain management systems.

One of the compelling advantages of subnet blockchains is their flexibility in adapting to specific use cases. Different subnets can be tailored to meet the requirements of various applications or industries. 

For instance, a privacy subnet can be implemented to cater to industries with stringent data confidentiality regulations. This customization ensures that subnet blockchains are not one-size-fits-all solutions but can be tailored to the unique needs of diverse applications, fostering broader adoption across industries.

3. Increased Security and Privacy

Subnets implement stricter security measures and more granular access controls compared to the main chain. This makes them ideal for handling sensitive data or business operations, offering enhanced confidentiality and protection against malicious attacks.

The segmentation of the network into subnets allows for better isolation of potential threats or malicious activities. Even if one subnet is compromised, the security of other subnets remains intact, limiting the impact of security breaches.

Additionally, the decentralized nature of subnet blockchains, with multiple nodes spread across various subnets, makes it more resistant to attacks. This resilience is particularly valuable in scenarios where maintaining continuous operation is critical, such as in financial transactions or mission-critical applications.

4. Enhanced Interoperability

Subnets act as bridges between different blockchain ecosystems, facilitating cross-chain communication and asset transfers. This opens up a world of possibilities for collaboration and innovation, enabling seamless interaction between diverse applications.

This interconnectedness allows for the exchange of data, assets, or information between disparate systems, fostering a more cohesive and integrated blockchain landscape. Interoperability is particularly crucial in industries where collaboration between multiple parties is essential, such as supply chain management or cross-industry partnerships.

5. Innovation and Experimentation

The flexibility and customization offered by subnet blockchains provide an ideal environment for innovation and experimentation. Developers and blockchain enthusiasts can experiment with different consensus mechanisms, smart contract architectures, or privacy solutions within dedicated subnets without disrupting the overall network.

This facilitates a dynamic ecosystem where new ideas can be tested, refined, and implemented, contributing to the continuous evolution of blockchain technology. 

6. Improved Transaction Speed

Subnet blockchains, with their ability to process transactions in parallel across multiple subnets, offer a substantial boost in transaction speeds. By distributing the workload, each subnet can handle its share of transactions simultaneously, resulting in quicker confirmation times and a more responsive user experience.

This enhanced transaction speed not only benefits end-users but also makes blockchain technology more viable for applications requiring near-instantaneous transaction processing, such as financial transactions and real-time data exchanges.

7. Decentralization Reinforced

Decentralization is a core tenet of blockchain technology, and subnet blockchains further reinforce this principle. Interconnected subnets promote a distributed and decentralized architecture.

Each subnet operates semi-autonomously, contributing to the overall resilience and robustness of the network. Decentralization not only enhances security but also aligns with the fundamental ethos of blockchain technology by reducing the reliance or single points of failure.

8. Energy Efficiency

Traditional blockchain networks, especially those utilizing Proof-of-Work (PoW) consensus mechanisms, have faced criticism for their energy-intensive nature. Subnet blockchains, by improving scalability and efficiency, contribute to a more sustainable and energy-efficient blockchain ecosystem.

Subnet blockchains are environmentally friendly since they execute transactions across subnets in parallel, which lowers the overall energy usage per transaction.

Challenges of Subnets

1. Complexity and Management

Setting up and managing subnets requires technical expertise and careful planning. Choosing the right configurations, ensuring security, and maintaining interoperability can be challenging, especially for smaller teams or organizations with limited resources.

2. Security Concerns

Improper access control, flaws in custom protocols, or centralized validator models can create potential security risks. It’s crucial to decentralize governance structures to mitigate these risks.

3. Potential Fragmentation

The proliferation of subnets could lead to a fragmented blockchain landscape, making interoperability and communication more complex.

4. Regulatory Uncertainty

The legal and regulatory landscape surrounding subnets is still evolving, creating uncertainty for businesses and developers.

5. Sustainability and Centralization

The energy consumption of running multiple blockchains with subnets needs to be carefully considered. Additionally, centralized validator models within subnets can undermine the core principles of decentralization.