Subnets and L2 Differences and Potential of Two Blockchain Scaling Solutions

Author: Kyrian Alex; Translation: Huohuo/Baihua Blockchain

In recent years, blockchain technology has received widespread attention and adoption. However, as its popularity increases, the demand for scalable solutions becomes increasingly important. Subnets and Layer 2 scaling solutions are two methods aimed at addressing scalability challenges in blockchain networks.

In this article, we will delve into the complexities of subnets and L2, focusing on their differences, advantages, disadvantages, use cases, and their potential for the future of blockchain scalability.

1. Subnets

1. Understanding Subnets

Subnets are decentralized networks within the blockchain ecosystem that operate independently and have their own set of rules, validators, and consensus mechanisms. They are designed to enhance scalability and improve performance by enabling parallel processing of transactions and smart contracts.

In cryptocurrency networks like Ethereum, the main chain can become congested due to a large number of transactions and computational demands. This congestion can result in slower transaction processing times and increased fees. Subnets address this issue by creating additional network layers or sub-chains that can handle a portion of the transactions and smart contract computations.

These subnets operate as separate environments, each with its own set of validators and block producers, running in parallel with the main chain. They can independently process transactions and execute smart contracts, alleviating congestion on the main chain and improving overall network performance.

Subnets often adopt different consensus mechanisms or customized scaling solutions based on their specific needs. For example, they may use Proof of Stake (PoS) or Delegated Proof of Stake (DPoS) mechanisms, sharding, or other Layer 2 solutions to enhance scalability and throughput. By distributing the workload across multiple subnets, overall network capacity and efficiency can be significantly improved.

2. Some of the most well-known subnets in the industry include:

1) Avalanche Subnets: Avalanche is a blockchain platform that allows developers to create custom subnets with their own rules and token economies. Some popular Avalanche subnets include DeFi Kingdoms subnet, Aavegotchi subnet, and LianGuaingolin DEX subnet.

2) Cosmos SDK Subnets: Cosmos SDK is a blockchain framework that enables developers to create custom blockchains that can interoperate with other Cosmos-based blockchains. Some popular Cosmos SDK subnets include Binance Smart Chain subnet and Secret Network subnet.

3) Polkadot Parachains: Polkadot is a blockchain platform that allows developers to create custom parachains, which are independent blockchains secured by the Polkadot relay chain.

4) Near Nightshade Shards: Near is a blockchain platform that uses a technique called sharding to scale its network. Shards are independent blockchains connected to the main Near blockchain. Some popular Near Nightshade shards include Aurora shard and Octopus shard.

5) Fantom Opera Chains: Fantom is a blockchain platform that uses a consensus algorithm called Lachesis to achieve high throughput and low latency. Fantom supports the creation of Opera chains, which are independent blockchains used for specific purposes.

Each subnet can have its own set of rules and governance mechanisms, allowing for more flexibility to try out new features, protocols, or upgrades without affecting the stability of the main chain. In addition, these subnets can enable specialized functionalities or meet specific use cases, promoting innovation and diversity within the blockchain ecosystem.

II. Layer 2 (L2)

1. Understanding Layer 2 (L2)

L2 or Layer 2 solutions refer to auxiliary protocols or frameworks built on top of existing blockchain networks. Their goal is to address scalability issues and improve the efficiency of blockchain systems.

L2 solutions handle transactions off-chain or in a more efficient manner, alleviating the burden on the main blockchain network while still maintaining the security and trustlessness of the underlying blockchain.

2. Classification of Layer 2

There are various types of Layer 2 solutions, each employing different mechanisms to enhance scalability. Here are some commonly used L2 solutions:

1) Sidechains: Sidechains are parallel chains that run alongside the main blockchain but remain connected to it. They achieve faster and cheaper transactions by processing them on the sidechain instead of the main chain. Sidechains can have their own consensus mechanisms, rules, and governance structures, providing developers with flexibility to optimize for specific use cases.

2) State Channels: State channels enable participants to conduct multiple off-chain transactions without having to publish each transaction to the main blockchain. These transactions occur privately between participants, with only the final results recorded on the main chain. State channels are particularly useful for applications that require frequent interactions and microtransactions, such as games and instant payments.

3) Plasma: Plasma is a scaling technology that creates an interconnected network of subchains, also known as Plasma chains, running alongside the main blockchain. These subchains process transactions independently and periodically submit aggregated data to the main chain, reducing on-chain load. Plasma provides scalability by aggregating multiple transactions into a single block on the main chain, thereby improving the overall throughput of the network.

4) Rollups: Rollups are Layer 2 solutions that bundle multiple transactions together and submit compressed versions of these transactions to the main chain. There are two types of rollups: optimistic rollups and zk-rollups. Optimistic rollups rely on fraud proofs, where transactions are initially processed off-chain and participants can challenge invalid transactions by submitting evidence on the main chain. On the other hand, zk-rollups utilize zero-knowledge proofs to ensure the validity of transactions without the need for on-chain verification of each transaction.

These Layer 2 solutions offer different trade-offs in terms of scalability, security, and decentralization. By moving the majority of transaction processing off-chain, L2 solutions can significantly improve transaction throughput, reduce fees, and enhance user experience. However, it’s important to note that Layer 2 solutions may introduce additional complexity, require integration with the main chain, and involve trust assumptions depending on the specific implementation.

Currently, the most famous L2 solutions are zksync, starknet, optimism, and arbitrum.

III. Comparison between Subnets and L2

Layer 2 (L2) solutions and subnets are both methods used to enhance the scalability and performance of blockchain networks. However, they have different underlying mechanisms and ways of addressing scalability challenges. Here is a comparison between L2 and subnets:

1. Scalability Methods:

– L2: Layer 2 solutions achieve scalability by processing transactions off-chain or in a more efficient manner, thereby reducing the burden on the main blockchain. Their goal is to improve transaction throughput and reduce fees by leveraging technologies such as sidechains, state channels, plasma, or rollups.

– Subnets: On the other hand, subnets focus on dividing the main blockchain network into smaller subnets or shards. Each subnet operates independently and handles a subset of the total transaction load. By partitioning the workload into multiple subnets, scalability can be achieved by allowing for parallel processing of transactions.

2. Relationship with the Main Chain:

– L2: Layer 2 solutions are built on top of existing main blockchain networks. They rely on the main chain to ensure the security and final settlement of transactions. L2 solutions regularly submit aggregated data or proofs to the main chain to ensure the integrity of off-chain transactions.

Subnets: Subnets are independent partitions or chains that run in parallel with the main chain. They can have their own consensus mechanisms, rules, and validators. However, there is still a connection between subnets and the main chain for communication, cross-chain transfers, or synchronization of certain data.

3. Trade-offs:

– L2: Compared to the main chain, Layer 2 solutions typically offer higher scalability and faster transaction processing speeds. However, they may introduce additional complexity, require integration with the main chain, and involve trust assumptions depending on the specific implementation.

– Subnets: Subnets provide scalability by allowing for parallel processing across multiple chains, but they may introduce challenges related to cross-chain communication, consensus synchronization, and maintaining the security of cross-subnet transactions.

4. Use Cases:

– L2: L2 solutions primarily focus on enhancing the scalability and cost efficiency of blockchain applications. Operating as an additional layer on top of the main chain, L2 solutions aim to improve transaction throughput and reduce fees. They achieve this goal by conducting off-chain processing or utilizing alternative consensus mechanisms. L2 solutions are particularly beneficial for applications that require high transaction throughput and low fees, such as decentralized finance (DeFi) platforms, gaming, and micro-payments. By leveraging L2 solutions, these applications can achieve faster and cheaper transactions without compromising the security and decentralization provided by the underlying main chain.

– Subnets: Subnets aim to address scalability and performance challenges in different ways. Subnets are essentially independent and separate chains within a blockchain network. They allow the network to process a large number of transactions or support various applications with different performance requirements. Subnets achieve horizontal scalability by distributing the workload across multiple chains, thereby increasing the overall network capacity. Through subnets, different parts of the network can operate with their own consensus mechanisms, governance structures, and performance characteristics. This makes subnets well-suited for scenarios that require processing a large number of transactions or simultaneously supporting various applications.

IV. Subnets and L2: Advantages and Disadvantages

Let’s discuss the advantages and disadvantages of subnets and L2.

1. Advantages of Subnets:

1) Scalability: Subnets achieve horizontal scalability by dividing the blockchain network into smaller subnets or shards. This allows for parallel processing of transactions, significantly increasing the overall transaction throughput of the network.

2) Flexibility: Subnets provide flexibility to customize specific subnets based on different use cases or applications. Each subnet can have its own consensus mechanism, rules, and validators, allowing for customization and optimization according to the requirements of the applications running on that subnet.

3) Enhanced Performance: By parallel processing, subnets can handle a large number of transactions simultaneously, thus reducing transaction confirmation time and lowering latency. This makes subnets suitable for high-demand applications and scenarios that require real-time transaction processing.

4) Increased Network Capacity: By distributing transaction loads among multiple subnets, the ability to process a large number of transactions in the network is expanded, reducing congestion and potential bottlenecks.

2. Disadvantages of Subnets:

1) Inter-subnet Communication: Inter-subnet communication can be complex and requires additional data exchange mechanisms (such as message passing, cross-subnet APIs, atomic swaps), consensus synchronization, and cross-chain transfers. Ensuring seamless interaction and interoperability across subnets can pose technical challenges.

An example scenario of subnet interoperability could be a blockchain network with separate subnets for different industries or use cases (such as finance, supply chain, and healthcare). These subnets may need to share data or assets across boundaries. Achieving seamless interaction requires developing secure data exchange protocols, implementing cross-chain transfer mechanisms for asset interoperability, and ensuring consensus synchronization to maintain network integrity. This involves a significant amount of work and exposes subnets to more potential security issues.

2) Security Considerations: The security of subnets depends on the individual consensus mechanisms and validators within each subnet. Maintaining security across all subnets and preventing potential attacks or vulnerabilities can be complex.

3) Decentralization Trade-offs: By design, subnets may involve trade-offs between scalability and decentralization. As the number of subnets increases, the number of validators required for each subnet may decrease, which could lead to power concentration in the hands of a few validators.

3. Advantages of L2:

1) Improved Scalability: L2 solutions alleviate the burden on the main blockchain by processing transactions off-chain or in a more efficient manner. This brings higher scalability, allowing for quick processing of a large number of transactions at a lower cost.

2) Cost Efficiency: L2 solutions can significantly reduce transaction costs by processing transactions off-chain or aggregating multiple transactions into a single on-chain transaction. This makes blockchain-based applications more cost-effective, especially for use cases involving frequent and small-value transactions.

3) Faster transaction confirmation: By reducing reliance on the main chain, L2 can achieve faster transaction confirmation, improve overall user experience, and achieve near-instant transaction finality.

4) Compatibility and interoperability: L2 solutions can be designed to be compatible with existing blockchain infrastructure, allowing seamless integration with various decentralized applications (DApps) and protocols. This promotes interoperability and facilitates the adoption of L2 solutions in a wider blockchain ecosystem.

4. Disadvantages of L2:

1) Security trade-offs: Depending on the specific implementation, L2 solutions may introduce security trade-offs. Off-chain processing or reliance on external entities for transaction validation may require trust assumptions and may introduce new attack vectors or vulnerabilities. Suppose we have a blockchain-based payment system aimed at improving scalability by adopting an L2 solution called a payment channel network. In this network, users can open payment channels with each other to facilitate faster and cheaper off-chain transactions. The final settlement of these transactions is recorded on the main chain.

One security trade-off introduced by this L2 solution is the need to trust the participants in the payment channel. Since transactions occur off-chain, participants need to trust that their counterparties will honor the agreed-upon balances instead of attempting to cheat.

For example, suppose Alice and Bob open a payment channel and initiate multiple transactions updating the channel’s balance. However, Bob decides to broadcast an older channel state to the main chain, attempting to revert to that state and claim more funds than he is entitled to. This is known as a “channel state attack.”

In this scenario, if Alice is not actively monitoring the network and fails to respond with the correct, updated channel state, she may lose funds. The introduction of this attack vector is due to the reliance on off-chain processing and trust assumptions related to payment channel participants.

2) Integration complexity: Implementing L2 solutions and integrating them with the main chain can be complex and may require modifications to existing smart contracts or infrastructure. Ensuring compatibility and smooth interaction between L2 and the main chain can pose technical challenges. This is because smart contracts need to be designed to support interoperability and communication between L2 and the main chain. This may involve rewriting parts of contract logic or introducing additional functions to handle L2-specific operations.

3) Limited applicability: L2 solutions may not be suitable for all types of blockchain applications. Some use cases, such as those involving complex smart contract interactions or requiring absolute on-chain transparency, may not be well-suited for L2 solutions. This is because L2 solutions typically involve off-chain processing or consensus mechanisms that allow for faster and cheaper transactions, but they may sacrifice a certain degree of on-chain transparency and security.


The choice between subnets and Layer 2 (L2) networks depends on the specific requirements of the application. For applications that prioritize high security and decentralization, subnets may be more suitable. On the other hand, applications that emphasize low latency and high throughput may prefer L2 networks. It is crucial to carefully consider these factors when deciding which option to choose, as they will significantly impact the performance and functionality of the application.

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