What is Evergreen Subnet and why it matters for on-chain finance innovation?
Evergreen Subnet is a new feature of Avalanche, a public blockchain platform that supports smart contracts and decentralized applications. Evergreen Subnet allows financial institutions to create and join private networks within Avalanche, where they can test and deploy various on-chain finance solutions with low risk and high efficiency.
In this article, we will explain what Evergreen Subnet is, how it works, and what benefits it offers for on-chain finance innovation. We will also introduce some of the initial institutional partners that have joined the first Evergreen Subnet, called Spruce, and what they are experimenting with on this network.
What is Evergreen Subnet?
Evergreen Subnet is a type of subnet, or subnetwork, on Avalanche. A subnet is a group of validators that run a specific set of blockchains on Avalanche. Validators are nodes that secure the network and process transactions. Each subnet can have its own rules, such as consensus mechanism, validator set, gas token, and supported applications.
Evergreen Subnet is a special kind of subnet that is EVM-based, meaning that it supports Ethereum-compatible smart contracts and applications. However, unlike other EVM-based subnets on Avalanche, Evergreen Subnet has a permissioned validator set and a custom gas token to power transactions. This means that only authorized validators can join and validate transactions on Evergreen Subnet, and that users need to acquire a specific token to pay for gas fees on this network.
The permissioned nature of Evergreen Subnet makes it suitable for financial institutions that want to leverage the benefits of public blockchain infrastructure, such as transparency, security, interoperability, and scalability, while maintaining some degree of privacy and control over their activities. The custom gas token allows institutions to avoid exposure to volatile cryptocurrencies and use a stable or fiat-backed token instead.
How does Evergreen Subnet work?
To join Evergreen Subnet, institutions need to undergo an onboarding process that involves passing KYC/KYB checks and receiving non-transferable tokens (NTTs) that indicate their identity and access rights. Their wallet addresses are also embedded in an allowlist, which monitors access at the chain level. Smart contract deployers who have integrated key infrastructure and applications also need to go through the same process for their activity on Evergreen Subnet.
Once onboarded, institutions can use DeFi applications on Evergreen Subnet to execute various types of transactions, such as foreign exchange (FX) and interest rate swaps. These transactions are executed and settled on-chain, meaning that they are recorded and verified by the network without intermediaries or delays. This can reduce counterparty risk, operational costs, settlement risk, and regulatory compliance issues.
Evergreen Subnet is meant to be a testnet for institutions to experiment with on-chain finance solutions before deploying them on the mainnet. Therefore, the tokens used on Evergreen Subnet are valueless and do not represent real assets or liabilities. Institutions can use Evergreen Subnet as a sandbox to measure the performance, security, usability, and scalability of their applications and assets on Avalanche.
What are the benefits of Evergreen Subnet?
Evergreen Subnet offers several benefits for on-chain finance innovation, such as:
- Efficiency: By using smart contracts and blockchain technology, institutions can automate and streamline their workflows and processes, reducing manual errors, paperwork, reconciliation efforts, and operational overhead.
- Transparency: By using public blockchain infrastructure, institutions can increase their visibility and accountability over their transactions and activities, enhancing trust and collaboration among stakeholders.
- Interoperability: By using EVM-compatible subnets on Avalanche, institutions can access a wide range of applications and assets across different networks and ecosystems, expanding their opportunities and markets.
- Scalability: By using Avalanche's unique consensus mechanism and subnet architecture, institutions can achieve high throughput, low latency, and low fees for their transactions, enabling them to scale their operations without compromising security or decentralization.
- Innovation: By using Evergreen Subnet as a testnet, institutions can explore new use cases and possibilities for on-chain finance solutions without putting capital at risk or facing regulatory hurdles.
Who are the partners of Evergreen Subnet?
The first Evergreen Subnet, called Spruce, has been launched with an initial cohort of institutional partners that includes some of the leading names in the traditional finance sector. These partners are:
- T. Rowe Price Associates: A global investment management firm that offers a range of mutual funds, subadvisory services, and separate account management for individual and institutional investors.
- WisdomTree: An exchange-traded fund (ETF) and exchange-traded product (ETP) sponsor and asset manager that offers innovative investment strategies and solutions.
- Wellington Management: A private and independent investment management firm that serves as a trusted adviser and strategic partner to clients worldwide.
- Cumberland: A leading cryptocurrency trading and investment firm that provides liquidity and execution services to institutional investors, exchanges, and platforms.
These partners will be using Spruce as a testnet for a variety of applications and assets to measure the benefits of on-chain trade execution and settlement. They will also provide feedback and suggestions to improve the Subnet architecture, integrations, and capabilities for future mainnet implementation.
Additionally, Spruce has partnered with Qredo, a provider of institutional-grade digital asset self-custody solutions, to enable secure and seamless access to the testnet via MetaMask Institutional and WalletConnect. Qredo will also explore the use of its decentralized MPC network for cross-chain interoperability and asset transfer on Spruce.
The Bottom Line
Evergreen Subnet is a new feature of Avalanche that allows financial institutions to create and join private networks within the public blockchain platform. Evergreen Subnet enables institutions to test and deploy various on-chain finance solutions with low risk and high efficiency, while leveraging the benefits of transparency, security, interoperability, and scalability of Avalanche. Evergreen Subnet aims to address some of the challenges and opportunities for on-chain finance innovation in the traditional finance sector.
If you are interested in learning more about Evergreen Subnet or joining Spruce as an institutional partner, you can visit https://evergreensubnet.com/ for more information.