On Tuesday, the Avalanche Foundation unveiled hundreds of millions of dollars in incentives to encourage new forms of development on the Avalanche blockchain.
The Avalanche Multiverse program, which is supported by four million AVAX tokens (about $290 million at current rates), aims to promote the growth of subnets on the network.
The subnets are blockchains that are linked to Avalanche in the sense that they share comparable tools and features but can be adjusted to meet the needs of unique apps.
They are also isolated in terms of vying for resources, which means their speed and cost will be unaffected by events on the Avalanche blockchain, such as a popular NFT drop. Subnets can also utilize their own token instead of AVAX.
“It’s kind of like blockchain as a service,” John Wu, president of Ava Labs, told The Block in an interview. He went on to say that subnets, while app-specific, maintain “all of Avalanche’s power.”
Avalanche now competes with Cosmos and Polkadot, two blockchain operators that already provide similar features.
The announcement of the Multiverse initiative follows the introduction of a $180 million program called Avalanche Rush in August of last year, which aimed to attract DeFi developers to the blockchain. Similar incentive programs have been offered by Ethereum competitors Algorand, Hedera, and Celo, and early indications indicate that they have been effective.
The Avalanche Foundation has announced two instances of ongoing subnet projects: DeFi Kingdoms and an institutional DeFi initiative with a half-dozen crypto heavyweights.
Subnetworks for new businesses
The first subnet to earn rewards through the Multiverse program is NFT game project DeFi Kingdoms, which has been allocated $15 million in incentives. These awards will be priced in AVAX and a new DeFi Kingdoms token called CRYSTAL, which will be added to the game’s existing JEWEL token.
Frisky Fox, the pseudonymous executive director of DeFi Kingdoms, said in a statement that the team has been seeking for technology to let the project “grow and provide new features like using our native coins for gas fees, without sacrificing security or decentralization.”
Another important related project is developing regulatory-compliant access to DeFi for institutional investors.
Ava Labs, which contributes to Avalanche’s development, has collaborated with Aave, GoldenTree Asset Management, Wintermute, Jump Crypto, Valkyrie, Securitize, and others to establish the subnet. Know-your-customer (KYC) checks will be needed of all participants.
“In this scenario, a consortium can assist in governing who participates in this subnet in order to remain compliant with the norms and regulations,” Wu explained.
How the incentives function
Avalanche, which will be launched in September 2020, is a proof-of-stake system that bills its smart contracts platform as the quickest in the blockchain space. Participants in proof-of-stake systems must stake tokens in order to be randomly selected to validate transactions.
According to Luigi D’Onorio DeMeo, director of Ava Labs, developers must stake 2,000 AVAX tokens (about $144,000 at current pricing) to construct and validate a subnet.
The Multiverse initiative may be able to finance the cost of such projects provided they meet certain criteria. However, the program can also provide rewards to subnet users as well as liquidity mining incentives to companies who stake tokens to help validate transactions in subnets.
The Multiverse initiative, according to the Avalanche Foundation, would be divided into at least six phases to support different cohorts of projects.
Avalanche already has several subnets, including one established by Shrapnel, a first-person shooting game that recently raised $10.5 million in funding. According to D’Onorio DeMeo, DeFi Kingdoms is the first project to earn incentives under the Multiverse name.