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Sylvia Sanchez
Hi everyone, I'm super excited to be here today. We have a really interesting topic with a very special guest. Today we're going to be talking about subnets. And as most of you know, I will explain this whole initiative is powered by Aval Labs and we're proud to be part of the Avalanche ecosystem. And we just had to talk about subnets and everything you can do with them. And today Today we have got Connor Daly, software engineer at Avalamps, also known as the man with the most cats and cryptos. So welcome Connor, great to have you here.

Connor Daly
Yeah, thanks so much for having me. I'm really excited to talk about subnets, crypto, cats, anything you can throw at me.

Sylvia Sanchez
Amazing How many cats do you have by the way?

Connor Daly
The correct answer is too many, but if you prefer a numerical answer, four.

Sylvia Sanchez
Okay, Wow and any plans on um, expanding the family or just staying at four a while?

Connor Daly
I'm looking at reducing before before I expand you know my my fiance wants to She's always bringing rabbits and other animals into the house and I'm like you what? yeah, too few animals has never been a problem that I've felt about my life in the last four or five years.

Sylvia Sanchez
Oh wow. I bet, like cats and rabbits, I'm sure there's lots of fun all the time.

Connor Daly
Yeah, thankfully the rabbits are fosters and they go home at the end of the month or whatever. But the cats, you know, individual cats are not that much work. But when you have four, like there's always one of them that's got something going on at any given time. They're all on different types of food. They're all on different meal schedules. I think I give out like 11 or 12 meals per day. Ah, it's a lot of work I don't I don't recommend four.

Sylvia Sanchez
Wow. Ah oh Wow Well four cats! All right well, let's kick off with the basics. So at Owl Explains we're all about understanding the technology building a solid foundation and in fact, that's the first. Branch of our tree of web 3 wisdom which if you haven't checked out look it up on our website. There are five branches to guide the thinking of policymakers looking to regulate blockchain worldwide. So now that we're on the first branch of the tree of wisdom. For our listeners who may not be super familiar with the Concept. Can you explain what subnets are and how they work?

Connor Daly
Yeah, Absolutely so it all comes down to blockchain scalability and there's a lot of different approaches and ideas that people have for how to scale blockchains. How do we onboard the entire world on the blockchain. How do we make sure that we have enough chain capacity. To Handle. Ah the demands of the global financial system and ah the Nft ecosystem and everything else that that comes along as as a use case and so Avalanche's approach to scaling blockchains is called Subnets. Um, So if you're familiar with this term.. There's. Ah, something known as vertical scalability and horizontal scalability If you're familiar with what that means? um Avalanche ah subnets are a form of horizontal scaling. Um, and so to kind of explain what I mean there is. There's kind of 2 ways to make blockchains faster one you could have a single chain. And make it ah faster and faster and faster that would kind of be a vertical scaling approach. Um, the horizontal approach would actually be to take a blockchain and split it into multiple parallel blockchains operating at the same time and so that's kind of ah a horizontal approach. That's what Avalanche does. And so subnets are essentially a blockchain as a service technology that allows ah anyone to create their own blockchain on the Avalanche network and when they do that. Um, they get a lot of stuff for free. You know because you could always go build your own blockchain by yourself without.

Um, working with avalanche but ah you you could clone bitcoin or ethereum or whatever. But the reason that building a subnet is advantageous is because you get to be part of the avalanche network you get to take advantage of avalanche consensus you get to take advantage of avalanche warp messaging to talk to other subnets and so. Actually make it so that you can spin up your subnet very quickly and cheaply and be part of the system the the ecosystem where you're integrated with other subnets out of the box. Um, so it's a much faster and easier process than than building this yourself. So subnets are essentially this way of building your own blockchain. But also customizing that blockchain not just creating another fork of the evm but also making changes to specialize for your use case. So that means tweaking some of the ah regulatory constraints so that your blockchain might be compliant in your jurisdiction or. Ah, tweaking the performance characteristics so that ah it is a better fit for your users and you know, kind of you might think about you know do I want this chain to run a little bit more cheaply for me and more expensive for my users or do I want to make it more expensive for me and cheaper for my users. And so these are some of the tradeoffs that people can make to you know, build their own chain and create an ecosystem of chains that work together to create effectively infinite capacity in the blockchain ecosystem and hopefully onboard. Ah you know the next billion blockchain users.

Sylvia Sanchez
Wow, That sounds Amazing. So It all comes down to scalability and enabling people to you know, take these advantages of being in the Avalanche ecosystem and then just customizing it to whatever they may need. And what advantages do subnets offer in terms of securities and securities is a very big issue both for users and also when looking at it from a regulatory perspective. So What can you say about security and subnets.

Connor Daly
So this comes back down to yeah what I mentioned earlier of when you build a subnet you get a lot for free at Ava Labs. We've been working on developing these Subnet templates that allow users to build blockchains out of the box and give them certain customizations that they can apply that you know we are have as marked as like known safe things that we've spent a lot of time and effort ah hardening um and we put through the ringer and a lot of testing so we have a fairly good idea that these things these ah different features work. Well and. Um, you might sometimes hear these features called custom precompiles. The name's not too important. They're really just customizations but they let you do some cool things like ah for example, instead of just deploying a totally public chain that anyone can use. You can add a contract allow list or whitelist. Will make it so that only the subnet operator or their um specifically allowed parties or cooperators can deploy contracts on the subnet. Ah so that means that only ah you know instead. Ah if I create my ah defi chain I don't have to worry about a bunch of. Random people on the internet deploying their own Nft projects on my chain I can make sure that only the apps that I want running on my chain are running on my chain and similarly we can actually do the same thing for just interacting with the chain so that we can restrict who can access the chain at all. Ah, to read from it or to write to it. So for example, if you wanted to set up kind of like a kyc blockchain. That's something that's possible on avalanche where you onboard users 1 by 1 and basically you kind of have a strong gate where users have to go through some application process and then we give them the keys to the kingdom to interact with the chain.

So we have a lot of features and customizations that we can use to control. You know how does this chain work and you know who gets to participate as well as getting all the benefits of the support of you know. The main ava labs team who's been working on this for years and and doing our best to Harden the system so that anybody who participates will get a ah good implementation out of the box.

Sylvia Sanchez
Right? Wow that sounds wonderful and how does the Consensus mechanism. Um the Avalanche consensus specifically contribute to the overall performance and reliability of of subness like why. Um, what makes this consensus Mechanism. So great in part with with the selfness like how do they function together.

Connor Daly
Yeah, so there's a lot of different hard problems in in blockchains. There's a lot of different bottlenecks that can occur ah but 1 bottleneck that's extremely important is the consensus bottleneck of how quickly can you make decisions. Um, because essentially this is what consensus is for. You're trying to decide. What block comes next if I have a choice of you know, 3 blocks? How do we decide if we go a b or c and so that is one of the ah crucial bottlenecks in the system of performance if you want to you know, create blocks faster. You have to be able to pick your next block. And so this is where avalanche consensus really shines and it allows us to scale significantly more than the other types of consensus which the other types of consensus if you're interested. There's something called like classical consensus. Um, which is essentially kind of based on voting. And then there's nakamoto consensus which is the kind of bitcoin proof of work. Longest chain. Um that some of your listeners may be familiar with and so aalanche consensus is an entirely new branch of consensus algorithm that that does very different things. It actually it works by kind of like random sampling and. Ah, it has a lot of the benefits of ah both classical and nakamoto at the same time without a lot of the tradeoffs. There are there are some catches but um, basically it it allows us to overcome one of the biggest bottlenecks and in blockchain computing.

The really nice thing here is like I like I keep mentioning is that it's something that you get for free by working on Avalanche by building a subnet. You don't have to worry about making decisions about your consensus algorithm or ah building any of this from scratch. It's all provided for you by building a subnet. When you build a subnet you just need to focus on your application. Logic. You don't need to build this entire networking consensus infrastructure underneath you and it really cuts down the work for builders in the space.

Sylvia Sanchez
Wow, That's that's Wonderful. So It gives users a lot of Freedom. It's sort of like um, you've already done the hard work like you've already like plowed the field and people can just go and use the soil and build whatever they want to build without you know doing so much of the complicated things. It seems like it's. Ah, really much more convenient way right for people to take the advantages of the Avalanche blockchain of this ecosystem but to customize it to their needs without having to worry so much about all the nitty gritty.

Connor Daly
Yeah, that's exactly it I mean there's not that many people in the world who are good at building blockchains right now. Um, it's a very small field and you know we're very lucky to work with some of the best people on the planet at the at Oval Labs right now and you know.

Our goal is to figure out ways that we can you know do the hard work for the customer because there's a lot more people who want blockchains than there are people who are good at building blockchains from scratch and so our goal right now is to figure out. You know how can we make it so that you can be successful regardless of your skill level.

Anybody who comes in with a little bit of web 2 engineering experience and who knows how to use kind of basic cloud computing. How can they follow a happy path to get their perfect subnet um without having to spend a year going deep into. You know the the world of blockchains the world of ah this kind of custom development and so we're really trying to take away that that burden.

Sylvia Sanchez
Totally, I Loved what you said about the fact that there are so many people wanting to use blockchains but not everybody is good at building an actual blockchain from scratch because it entails a lot of things. So Avalanche subnis are not only very safe but also they save time for all those wanting to to build on these blockchains and following that thought I wanted to ask you what role do validators play in the operation of Avalanche subnets and how are they incentivized. To maintain the network.

Connor Daly
Yeah that's a really great question so when you kind of think about what I've I've talked about what subnets do but I haven't necessarily really talked about like what they are and they really are composed of 2 different things. 1 is a validator set and the other is a virtual machine. So basically ah the virtual machine just is a rule set that defines what happens in each block. What are the rules of the chain as far as like what constitutes a transaction. What? ah happens when there's a new block what happens when there's a new transaction. That's that's what a virtual machine is. Um, the other key piece is the validator set which you just mentioned so the validator set is who gets to participate in consensus who gets to decide what the next block is and this is where we actually get into some some pretty cool stuff that that avalanche does and I haven't really seen other people be able to do and. Avalanche has configurable validator sets for subnets. So what? what does that mean? So this means that you can pick and choose who participates in your chain and the cool thing about this is we used to live in this world where there are public blockchains and private blockchains.

And there's no like middle ground. It's a very um, kind of binary binary world. But now we kind of have the ability to make this programmable. We have the ability to say you know assign arbitrary rules to who can participate and so instead of just having to be. You know, manually whitelisted you can do things like saying you know, only us citizens can be a validator or only Eu Citizens can be a validator for this subnet and only Eu citizens can participate in this blockchain or you could say that you know only members of my company can can do this.

We have the ability to create these extensible um rule sets for who gets to be a part of the chain and who performs the the safety operations to make sure that the chain is secure. Um.

There's something called ah byzantine Fault tolerance in computer science and this means yeah you frequently might read that blockchains are are these byzantine systems and what what that means is that we we assume that there's a number of bad actors working in the space. And you make some assumptions about how many there are and you might say that this system is secure as long as 51&perc of the actors are honest and not trying to cheat and so you know when you're building these systems. You actually do care about. You know, what's the percentage of bad actors and so.

It makes total sense to me that you know regulators might be interested in. You know, can we make sure that for our chain. Um we we can define you know what is good behavior and we want to make sure that all of the participants are people we trust and if you're the us government. You might say we only trust us citizens. Or we only ah trust Nato so ah, signatory governments or something like that. So ah, in this case, it's a very cool thing for us to be able to say yes we support that we support the ability to create a system.

Where you can control who gets to determine the security of your network. Um, and alternatively if you want to build a small private network for for an internal company. You know if I'm Jpmorgan or whoever um I can just say like okay I'm going to have my internal finance. Blockchain but I'm not going to expose it to the outside world because I don't necessarily want anybody on the internet to be able to just see you know what we're doing internally but I want ah everyone that I give access to at the company and maybe some trusted partners to be able to um work with us and be part of this system and so our validator set flexibility is incredibly important important to the future of avalanche and how we scale to meet every organization's needs and not just the needs of the us market public Blockchain world.

Sylvia Sanchez
Right? So Very wide application I Love that and following that that thoughts So How do these subnets ensure interoperability with other blockchain Networks. You know of other ecosystems. What? what? what implications would this essentially have. For the broader web 3 ecosystem as a whole.

Connor Daly
Sure this is the rub. This is the hard part about subnets um is because you're running all these chains in parallel you lose out on some of the benefits of running everything on the same chain and ah you know, typically we call this interoperability.

And this is where you can do some really cool stuff like how do I or I guess um, you know how do I in 1 transaction change my ah bitcoin to ethereum and then take out a loan against that ethereum and then swap that loan to usdc then payoff. Ah, you know do this attack and then you know swap it back and trade back and so yeah, those are some like really complicated things that you can do when all of your apps are running together. But when you talk about a world of subnets and many blockchains you lose that interoperability and so. That's kind of like the key question for subnets is how can we reconstruct that how can we make it look like we're running in a single universe even though we live in this multi-chain world and it's like a problem that like we've seen in other areas of computer science before like this is the single processor multi-processor kind of problem too of. You know when you're yeah back you know Twenty Twenty years ago computers used to have just a single single processor and everything was kind of you know in 1 stream of execution. But now we live in this multi parallel processing world where you have multiple processors and they have to talk about like what you know. How do we share? Memory. How do we Um, understand what the other processor is doing so we've we've seen these problems before in computer science. But you know they're kind of hard to figure out and so what we've been working on at at at Aval Labs is something called avalanche warp messaging. Which is a protocol for talking between subnets and exchanging messages and exchanging data so that you know applications on 1 subnet can actually call applications on another and ah, you can use that to make bridges or any other application. But um, so we have some very specific. Um. Implementations that we're working on within the avalanche ecosystem. So that all subnets can can talk to each other and get the benefits of being inside the avalanche ecosystem. That being said, we're still very interested in the rest of the world because we know the rest of the world is not just avalanche. There's also ethereum there's also you know cosmos.

Sylvia Sanchez
Um, and Twitter.

Connor Daly
Pokada Solana whatever whatever, and so um, we do integrate with those technologies as well. But through like a less native ah solution and mostly we've worked with third parties on this. Um, so this is where bridges come in handy. Um, but anyways, not super familiar bridges are just ways for. Ah, they're apps that you can move tokens from one blockchain to another. They have their faults. Um, but ah, they're they're a necessary component and they're they're getting better and we have a quite good bridge in the the avalanche bridge. Um, so yeah, so we have. Applications like bridges and then there's some more generic messaging protocols something like layer zero labs is is very commonly used across the space. But yes so interoperability is a really important problem and you know we have really good solutions within the avalanche network and there's some more. Less good solutions connecting avw wench to the rest of the world but it's still a very important problem space. Yeah.

Sylvia Sanchez
Indeed Wow and I Love how you also outline the different approaches that are being taken to to access other networks and have this interoperability. Obviously you know like you can't have everything Super perfect right? at the beginning but I love that there are avenues that there are ways. And um, can you walk us through a recent use case or application of Avalanche subnets that you think is particularly interesting like how did this use case in particular demonstrate the benefits of of the technology of using subnets.

Connor Daly
Yeah, sure so one use case that's been well man there's 2 that I want to talk about so I'll kind of maybe give a brief overview brief overview of both. So the first is gamefi. Um, so if you've never heard this term yeah web 3 gaming game. Fi ah.

Sylvia Sanchez
Um, what I love that Oh okay.

Connor Daly
It's super popular. It really took off in the last um couple of years. So Originally it kind of started out as mobile games trying to kind of tokenize some of their in-game assets and ah put them make them available on secondary marketplaces. But Now. Ah, basically we're seeing this whole wave of um video games trying to integrate blockchain and in a lot of different ways and so ah, we're super excited about this because we're getting beyond the super fast Moving. Ah. Southeast Asian or Mobile game studios to some of the rest of the world is you know, really starting to catch up and we're seeing Aaa Game Developers um building in this space and so um, one that I would like to highlight is called shrapnel. Um, who I think they're doing an incredible job I'm I'm so excited for their game to come out. Um, but that's looking at how do we? um, make assets in our game actually owned by the players and not owned by us the company.

And it's all about decentralizing ownership of the the game assets so that if you earn something in a game. It's really yours and it can't be taken away from from you and this is kind of like a funny story if you listen to vitalik talk about Vitali Peter and founder of Ethereum talk about. You know what his motivation motivation for getting into crypto was it was actually um, had to do with world of Warcraft and the game developers of world of Warcraft tweaked. Ah some of the rules of the game and it ah nerfed his favorite weapon. It made his like favorite weapon in the game. Bad essentially and he was like so mad about this that he was just like there must be another way and so this is kind of actually an attempt at doing that this is a way to um, give all of the items in a game over to the players that they control them and they can trade with them.

And ah move them between different players and have secondary markets for Them. So I'm super excited to see what they do I think games are a huge area of of innovation and there's people playing with all kinds of different models I would be lying if I said like we know what the best way We know what? the exact future is going to look like Because. We're still very much in the exploration phase. Um, but ah, the reason that they work so well on subnets is because games have really high performance requirements of you know you know this is one of those things that you talk about latency of like how fast is the game.

And if it takes too long for a match to load people leave like you you have to be real time. You can't make people wait. Um, if you look if you watch video game reviews. People are always talking about like the servers take too long to load. You know that's like an absolute killer for these studios. So you know they need the.

Lightning performance that you can really only get by having a dedicated subnet for your system and also they need a lot of control over gas tokens and like how the users will be able to spend money. How can they onboard users without having them needing to go to coinbase k y seeing for a week ah figuring out how to use ah core or metamask or any of these wallets to withdraw their tokens that's far too much work so they need to be able to onboard people instantly and that's something that that avalanche really provides and then the other thing I'll highlight just very briefly is customer loyalty programs. Um, we've had a lot of success in the last few months in particular especially in ah Korea with sk planet of one of the largest companies in Korea um, trying to tokenize their their loyalty programs and you know it's like your your Starbucks points your your airline miles. Um, trying to actually let users own those so that again, it's not the company in charge. These points can never expire. You're the one in control of them. You can choose what you want if you want to transfer them to other people. Um putting customers in charge of their their loyalty programs and making sure that people actually feel ownership over them. Um, is something that these companies have found a lot of success with and are incredibly excited with and we're at the very start of our journey with those companies but they've been extremely excited about this and we're really eager to work more with them. So that's something that's definitely going to be coming out. Um, in the near future when we've had a lot of great partnerships. There. So we're excited to do more.

Sylvia Sanchez
That's amazing. Great examples I Love how they're both super different but also super relevant like with gaming. It's all about the essence of web 3 right distributing value to the users and all about that true decentralization. And with the kind of the customer loyalty programs and the miles I Think that's a very big hassle for for a lot of us like just this warning I was literally trying to redeem some of the miles. But the terms and conditions were so annoying that I lost like ten thousand miles and I was like I might as well just buy the flight with dollars and not with miles. But hopefully you know like.

Connor Daly
Both.

Sylvia Sanchez
Have more of these airlines and programs onboarding onto subnets and really using this technology which will ultimately make everything easier both for them. It makes everything faster but also for users and I think that is a great incentive for for companies because once you have that really safe scalable system. More users will want to to use whatever you're providing and will also make it easier for you. So I think it's a win-win process. Um essentially and now that we've seen all of these you know like what are subnets. What can we do with them What role can Regulators play in shaping the development and adoption of subnets. And what can the blockchain industry do to facilitate collaboration and open communication with regulators.

Connor Daly
Yeah I think this is ah a really important question especially over the last year we've really seen that um, there's a lot of lack of clarity around. Um you know what constitutes a security what constitutes. Um. Good practice for on-chain finance and so I think and from my perspective the the most important thing that we need to figure out is coming up with good processes to bring new products to market and. Figuring out you know people like tokens people people like and Nfts. But we're not always sure what they are and so there's so much innovation in this space and there's so many people that want to be compliant, you know the amount of people that I talk to that are just like screw you regulators we want, to do what we want those people are like almost nonexistent. Um, what people really want is just clear guidelines for how to be compliant so that they can do what they need to do in a way that does not take two or three years to go to market. Um, just is creating systems that are up-to-date with the current times so that um we can come in.

And say like okay I want to launch a new token I would like to sell the us customers I'd like to register I would like to prove that I'm not a ponzi I would like to do all these things. So just let me know what I need to do and I like would be happy to do them because ah you know most of the people operating in the space are trying to run legitimate businesses and. A lot of times there just is no guidance for them for how to be compliant and so they only have to you know they have to guess or just kind of make things up as they go along which can be harder to actually? um, you know which can eventually lead to some bad outcomes because I think you know there are so many good people in the space that are interested in. Um, you know building good products that ah you know that far far outweighs the bad and I think I would just say the best thing we could do is empower them to do things the right way. Um, as far as for like subnets in particular I think you know there's some really interesting stuff I know. Um. The government themselves is actually very interested in ah learning about these technologies integrating them into their own processes as well. I know we've worked with the state of Florida and ah fema federal emergency management ah association to ah, start tokenizing some of their. Um, payment programs I believe and and for their payouts which I think is really cool and there's been a lot of interest um from various state and federal agencies in getting ah blockchain systems in place to help them. So I think the more that these people learn about the technology the more that um.

We'll be able to develop better systems to ah, put them into production. So I'm I'm really excited about that as well.

Sylvia Sanchez
Absolutely I think that's a great takeaway and yeah, do you have like any closing comments any learning recommendations where can people go to if they want to learn a little bit more about subance I think this was a very good. Foundational 30 minutes of extracting subnets. Yeah, but those. But for those of us who are curious where might be a good place for them to to learn more about this amazing technology and what's happening within this ecosystem.

Connor Daly
Well there's a lot of good resources out there now I'll say a lot of them are mine. My my selfish plug. So yeah, definitely check out my Twitter account I am on Twitter Das underscore Connor. I've actually done a lot of writing about subnets and about avalanche and building in crypto learning about crypto development aimed at very ah, very intro level pieces. So if you're interested in those highly recommend checking those out I also used to be a part of a podcast called the subnet show and. We've done several episodes that were deep dives on subnets and different aspects on subnets. So we're not making any new episodes right now. But if you're interested in just learning some more where we talk about the technical aspects of subnets for you know, an hour or 2 on a couple different episodes. Um, highly recommend checking checking those out as well. They're they're very useful. Um you know would recommend just following. Um Patrick o'grady is ah is another great Twitter follow. He's constantly tweeting about the latest and greatest in subnets tends to be from a more technical perspective.

Um, I tend to write from a more beginners perspective. So ah, you know official channels as well. Ah avalanche medium avalanche Twitter are very places to get the latest news and updates on partnerships. But um and we're also we recently expanded our developer relations team. Quite significantly. So we've gone from like 1 to 4 4 or 5 people right now. So we're planning on doing a lot of technical writing in the next year to just kind of bring these concepts more into the public consciousness and really explain them for for everyone so that anybody can understand my focus in particular is very much on How do we? onboard? Ah the next generation of folks without having to make them jump through all the hoops that I did. How do we? How do we make it easy so that anyone can understand so you know that's that's really something that I that I care deeply about so hopefully somewhere in there. You can find something useful.

Sylvia Sanchez
Wonderful! yes and we'll be definitely reposting some of your your content there on that I'll explain Twitter account linking them to to your Twitter because just opening your Twitter profile. There was an amazing thread of so many things explained I think it was just like. Ah, different things. They could just click on and you continue reading like I personally love what you write on Twitter so we'll also do some retweeting for that so that it's easier for our listeners to find it and yeah, thank you so much Connor for this amazing conversation I also learned a lot just heating you just hearing your chat about. Sevenna and and answer the question. So thank you for your time and that's a wrap.

Connor Daly
Yeah, thank you so much for having me really appreciate it I'll come back.