Staking Circle
Staking Circle
Mar 1, 2024
9 min read

L2 Chains from the Perspective of a L1 Chain w/ Avalanche

L2 Chains from the Perspective of a L1 Chain w/ Avalanche

Avalanche shared more than just updates during our recent AMA session; they also unveiled an intriguing 2024 roadmap that centers on breaking new ground in the blockchain industry. They're stepping up with faster transaction protocols, customizable networks that could alter the way blockchains communicate with one another, and initiatives that might lead to the development of top-notch blockchain gaming.

In addition to the tech talk, there were whispers of possible press releases, worldwide expansion, and a closer look at DeFi. Prepare for a deeper look at their plans to turn 2024 into a significant year in blockchain:

X Spaces: L2 Chains from the Perspective of a L1 Chain



  1. Avalanche Features and Differentiation
  2. Consensus Gossiping Mechanism
  3. Avalanche Staking Mechanism
  4. Institutions and Tokenization
  5. Avalanche Future Plans for 2024
  6. L2 Chain Focus Shift
  7. Shift in Priorities for Blockchain

1. Avalanche Features and Differentiation

  • Nadim mentioned that Avalanche is more of a Layer 0, allowing deployment of Layer 1 blockchains and some public blockchains within the primary network:

“Avalanche really is more of a layer zero in a sense, where it allows people to deploy their own layer one blockchains. Of course, there are some kind of public blockchains that exist within Avalanche, within the primary network. And that's probably what most people interact with at first, like the Avalanche C-chain. That's why some people will think, oh, Avalanche, it's like layer one EVM compatible chain.”

  • First key aspect: Avalanche Consensus, a third-generation protocol, scales to a vast number of validators and ensures fast finality since nodes don't have to communicate with every other node:

“The first one is Avalanche Consensus. It's the reason it all happened. It's the third generation of consensus protocols. It has a few very interesting properties that no other consensus protocol has in kind of combination. It's kind of our way to scale. The first one is that it can spread to a very large amount of validators. It doesn't really have a validator gap. And because of how consensus is done with gossiping, it actually also has very fast finality, as you increased the validator set, because you don't need every single node to communicate with every single other node.”

  • Second key aspect is Avalanche subnets, allowing validators to deploy customizable blockchains. He highlighted the Hyper SDK's goal to create custom VMs with examples like Aptos, Sui, Cosmoism, and Solana VMs:

“the second innovation behind Avalanche is Avalanche subnets, where you essentially have an Avalanche primary network. But then validators can organize to form subnets whereby you can have subsets of validators that decide to deploy their own customizable blockchains. And we're really kind of diving deep into the customizability piece for those blockchains. So the Hyper SDK is something that we're working on where you can really create your own virtual machines. There are a lot of teams building kind of custom VMs based on other virtual machines out there. You can think of like Aptos, Sui, Cosmoism. Solana VMs, all of this could exist under Avalanche consensus”

  • The last feature is native interoperability between subnets and the primary network, enabling cross-chain messages without extra trust assumptions due to shared validators:

“last real interesting feature of Avalanche is that there is native interoperability between the subnets and any blockchains on Avalanche and the primary network. And this is enabled by the fact that we can have this very large validator set and any subnets shares validators with any other subnet or the primary network, which means that you can send messages cross-chain without requiring additional trust assumptions”

2. Consensus Gossiping Mechanism

  • Each node communicates with neighbors during sub-sampling rounds. Nodes sample a portion of the network, gain opinions from some nodes, and establish a consensus with high probability after enough rounds:

“how it happens like at a high level is that every node talks to its neighbors over kind of sub sampling round. So like it will sample part of the network, it will get the opinion from some nodes, and it will do this over a few rounds until it has like a very high probability it knows that the network thinks one way or another. And every node does this over, you know, a parameterized amount of rounds. And so as you have everyone do this, you can very quickly get to a point where the network thinks, okay, this turns out this block should go through or shouldn't go through.”

3. Avalanche Staking Mechanism

  • Nadim details that setting up a validator on Avalanche requires a minimum of 2,000 $AVAX. Staking rewards are retrievable at the end of the staking period, which ranges from a minimum of two weeks to a maximum of one year:

“There's a minimum requirement to stake within a validator of 2000 of Avax, and that's how you become that validator. And then you get staking rewards. Minimum duration is two weeks. Maximum duration is a year.”

  • There's no slashing in Avalanche, but validators must maintain an 80% uptime to receive rewards:

“You only have a requirement of uptime. So you need 80% uptime for your validator to receive the reward throughout the entire period. So if you got that, you'll get the full reward. If you didn't hit that point, then you will get zero as a reward. And that's basically how it works.”

4. Institution and Tokenization

  • Nadim talked about Avalanche's work with traditional institutions using compliance-focused evergreen subnets for permissioned use cases. Recent announcements include collaborations with JP Morgan and Citibank for deploying evergreen subnets on Avalanche and exploring interoperability:

“And we do love to say institutional to say a lot of different things. But we've done a lot of things to just kind of onboard more traditional institutions on chain. And that really also is centered around subnets and specifically evergreen subnets, which are. Compliance subnets, or at least subnets that have a lot of features to allow compliance with regulation (...) One of the most recent announcements was about JP Morgan, as well as Citibank deploying their own Evergreen subnets on AvLaunch for their own use cases. And also kind of testing interoperability between those chains, which I think. It's probably the main reason why people move from like either their native chain like Onyx for JP Morgan or different chains that were like more permission that have been around for a while."

  • Nadim brought up the Avalanche Foundation's support for tokenization, with a focus on providing liquidity for initiatives such as real estate and non-USD stablecoins:

“We have announced a pretty large program to essentially allocate liquidity from the foundation. Avalanche vStat towards tokenization initiatives. And so we have been pushing a lot of like new assets on chain. It could be real estate. There's some stuff around that. We've also done a lot of stuff around non-USD stable coins and just onboarding more currencies on Avalanche. And we'd love to support anyone who's also doing anything around tokenizing off-chain assets on chain.”

5. Avalanche Future Plans for 2024

  • Efforts are concentrated on entering new geographies, developing consumer apps, NFTs, and deepening enterprise involvement, including partnerships with Fortune 500 companies:

“So we are set up in different verticals that all try to push different things. So there's like the NFT vertical, DeFi vertical, institutional enterprise. You know, you get the gist here. But a few things that we're going to be pushing this year, like purely from a BD standpoint, I think is going to be kind of new geographies. So last year we were kind of really pushing into Asia. We're still going to do this this year. I think Latin America and Africa are going to be part of the focus just so we actually do have a global reach (...) There's a bunch of other stuff like on the enterprise and NFT side, we've been doing a lot with kind of more Fortune 500 partners”

  • Plans to enhance DeFi features, particularly payments, cross-border transactions, remittances, and on-chain FX:

“On the DeFi side, obviously, we'll still be trying to be at the cutting edge of DeFi, but I think we're really looking at payments and cross-border payments, remittances, stablecoins, on-chain FX. There's all going to be important topics for us this year”

  • Gaming is a significant focus, with excitement for AAA-quality games expected to launch:

“And obviously gaming is a pretty big one for us just because a lot of the games that we've been waiting for for a long time are starting to come live or at least starting to be ready. And so really excited for a few of those launches where we should show the rest of the kind of blockchain gaming ecosystem what a AAA game on-chain looks like.”

6. L2 Chain Focus Shift

  • Nadim believes that many of their predictions have been made obsolete this year due to changes in the market. The excitement is about a shift in trend from chain infrastructure development to application build-out on L2:

“But I'd say what I'm excited for this year is I think last year, or at least during this whole bear market, kind of at least the last year and a half, there's been this huge focus on infrastructure and really like. Chain infrastructure, so layer twos being a huge thing, restaking as you see again, data availability, we're building subnets, other teams are building other app chain stacks.”

  • Infrastructure projects were the main recipients of funding, with fewer developers building on those ecosystems:

“And people stopped really building applications on top of that, where most of what got funded for a long time were just the infrastructure projects and the enablers. But then there isn't necessarily people building on top of those ecosystems. So what I'm excited is About this to like basically see a shift in this”

7. Shift in Priorities in Blockchain

  • Nadim anticipates a shift from prioritizing infrastructure to valuing applications built on top of it. The practical functionality of new applications will take precedence, regardless of whether they are L2s or subnets:

“But I think we're going to start seeing less of a premium placed on infrastructure and more of a premium placed on the applications that are being built or stuff isn't necessarily going to be like it's not going to matter if you're an L2 or subnet necessarily. It's just going to matter that your stuff is kind of working right.”

  • The importance of practical applications that solve real problems using the current robust infrastructure is emphasized. Highlighting that infrastructure is now in a good spot, enabling the development of practical applications, which wasn't necessarily the case two or three years ago:

“And then that you are building an interesting application with an interesting use case versus trying to. Think about very complex ways to solve problems that don't necessarily really exist. And so I think that the infrastructure has has made a lot of progress recently. It's in a really good spot right now in terms of what's possible versus, you know, if you looked at like two or three years ago and we really need this kind of influx of builders building real life kind of retail facing or business facing.”

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