Staking Hub: Ava Labs AMA

Ava Labs’ Denali incentivized testnet is currently running, and its mainnet is expected to launch in Q3 2020. On June 4th, Kevin, Stephen, and Dan joined us to answer all of our Avalanche questions.

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Quick Takes

• Permissioned and permissionless subnets can be created
• All validators must validate the “default subnet”
• Incentive structure for validators can vary across subnets
• No slashing
• On-chain governance is limited
• Interoperability between existing chains is in development

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Avalanche Primer

Avalanche is an open-source platform for launching decentralized finance applications within an interoperable, highly scalable ecosystem. Developers who build on Avalanche can easily create powerful, reliable, and secure applications and custom blockchain networks with complex rulesets or build on existing private or public subnets.

A Network of Customizable Subnets

Anyone on Avalanche is able to create their own permissioned or permissionless subnet, which are fully customizable. This includes the number of nodes within the subnet, who is able to communicate and interact with the subnet, and setting specific requirements for running a node on the subnet. These requirements can include geographic location or a real world agreement, like a legal contract, in how they function within the subnet (i.e. not sharing information, uptime requirements, or contract length).

"We've gotten really good feedback from companies we've been talking to about how this lets them kind of ease themselves into the blockchain space. Without needing to transition to a fully permissionless architecture." - Stephen Buttolph, Senior Systems Architect at Ava Labs

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Use Cases of Permissioned Subnets

Highly customizable subnets lead to plenty of use cases within the traditional finance sector that would not benefit or be compliant if running on permissionless architecture. Financial institutions are able to be fully compliant with local laws and regulations like know your customer, anti money laundering, and risk management by running on permissioned architecture, while still benefiting from the grander Avalanche network.

“By running a private Avalanche subnet, users can configure who can be part of their network and how information is released. However, because they are registered on the greater Avalanche network, they can still communicate with other subnets, even permissionless ones.” - Stephen Buttolph, Senior Systems Architect at Ava Labs

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Validators Have Options

All validators on Avalanche must validate on the “default subnet”.

This subnet consists of three chains:

• Platform Chain - This chain stores the network metadata (i.e. what subnets and blockchains exist, who is validating what, etc.).
• Exchange Chain - This chain supports asset creation and trading.
• Contract Chain - This chain is an Ethereum Virtual Machine instance that runs on Avalanche’s Avalanche consensus.

Outside of this requirement, validators are free to choose which subnets they want to validate on, and they do not have to run multiple nodes to validate on multiple subnets, unless it is a requirement by the subnet. Validators do not get paid additional AVAX for joining subnets, which means subnets will create their own incentive structures to attract validators to their subnets. 

“A permissioned subnet will likely not have any on-chain incentive structure. The nodes may just have legal contracts and could get paid out by their local currency. For permissionless subnets, the subnet can provide incentives with an internal asset that the validators feel has value. Or, they could even incentivize nodes by providing AVAX rewards for validating.” - Stephen Buttolph, Senior Systems Architect at Ava Labs

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The AVAX Token

At the base level, the AVAX token will be used for -

• rewarding validators for validating on the default subnet
• paying for transaction fees on the default subnet
• creating a new subnet or blockchain
• sending an asset to the X-Chain
• on-chain governance participation

Outside of this, the Ava labs team expects that the AVAX token will become a unit of account and means of transfer and value across the entire network.

‍Governance

The Avalanche governance model will be similar to Tezos with a couple key differences:

• only a few features will be subject to governance
• those features are limited to bounds

Although still being decided upon, the Ava Labs team expects to have aspects of its economic model be subject to governance (i.e. min/max stake amount, min/max staking duration, reward rate, and uptime requirements).

Slashing

There will be no slashing or bonding/unbonding periods on the default subnet. That being said, subnets are able to set their own slashing penalties and bonding/unbonding periods. 

Future Developments

The Ava Labs team is gearing up for mainnet launch, which is scheduled for July. Users will be able to stake, validate, and send transfers at launch.

The team is also currently working on interoperability between existing chains like Ethereum.

Special Thanks

Thank you Kevin, Stephen, and Dan for spending an hour with us!

Thank you Gavin for co-hosting and thanks to our Staking Hub community for all of your wonderful questions. 

Feel free to join our Staking Hub Telegram group if you haven’t already.