Avalanche9000 has been referred to as the single most important network upgrade to the Avalanche blockchain in the project’s history, going back to its mainnet launch in September 2020. The upgrade represents Avalanche’s attempt to tackle the challenges of building ultra-scalable and interoperable blockchains ready to accommodate mass adoption. Interestingly, it also shows how Avalanche has adopted a fundamentally different philosophy in its approach to network infrastructure design than many of its primary competitors.
Through Avalanche9000, Avalanche has fully embraced an integrated network architecture rather than a layered network architecture design found on Ethereum. For Avalanche, this design establishes solutions for builders attempting to scale applications, projects, and tools without significant congestion or constraints. Additionally, it ensures that the whole ecosystem built atop Avalanche is readily connected rather than siloed within different layers of the system.
Overall, Avalanche9000 introduces several critical updates that focus on making its L1 blockchain deployment by builders, projects, and businesses more economically feasible, customizable, and scalable.
To that end, Avalanche9000 includes:
- Customization: The upgrade allows developers to create custom L1 blockchains (previously referred to as subnets) with greater flexibility in terms of staking, tokenomics, and validator sets. This flexibility lowers the cost and complexity of launching L1s, reducing barriers for businesses and developers alike.
- Interchain Messaging (ICM): A standout feature of Avalanche9000 is the introduction of Interchain Messaging, which facilitates seamless communication and shared liquidity between different L1s. This improves interoperability across the network, allowing L1s to operate independently but still benefit from the collective strength of the ecosystem.
- Core Integration: Avalanche9000 incorporates the Core wallet system, enabling users to interact with the growing number of L1s via a browser extension and web app. This system also improves bridging between L1s, making interactions faster and more efficient.
- Etna Upgrade: Part of Avalanche9000, the Etna upgrade includes several community-driven proposals (ACPs) to improve the network's scalability and functionality. A major change here is the reduction of validator staking requirements, making it easier for developers to maintain L1s.
Existing L1 Design
Avalanche is unique in its innovative approach to blockchain architecture and scalability thanks to the concept of L1—dynamic sets of validators that reach consensus on specific blockchains. Each blockchain is validated exclusively by one L1 within the Avalanche ecosystem, although a single L1 can validate multiple blockchains. The Primary Network, consisting of the P, X, and C-chains, is responsible for everything within the Avalanche ecosystem, including L1s. The P-Chain specifically is a blockchain that is used for L1 coordination/administration and staking, it is also now used to register BLS signatures for Avalanche Warp Messaging.
L1s give developers more flexibility and customization options compared to the C-chain to support their needs and use cases. Unlike other networks that have a single virtual machine (VM), such as EVM in Ethereum, L1s in Avalanche can have multiple VMs, including Ava-VM, EVM, WASM, and more.
They can also support multiple programming languages, fee structures, KYC requirements, gas tokens, and more. L1s provide all this optionality while leveraging Avalanche’s fast finality, network effects, and liquidity, allowing for seamless communication between L1s. Avalanche’s long-term scalability strategy is to have hundreds to thousands of L1s. This distributes the network load and prevents any L1 from reaching capacity.
Problems with the Current Design
Under the current L1 creation protocol, an individual or entity wishing to establish a L1 on the Avalanche network must first become a primary network validator. This role requires a substantial staking requirement of 2,000 AVAX, which is a significant financial barrier for most startups. While some workarounds do exist, like GoGoPool or Benqi’s Ignite program that help to lower the requirement, they are not engrained at the protocol level.
Additionally, this process involves complex interactions between multiple chains within the Avalanche ecosystem: the X-chain, C-chain, and P-chain. Each serves distinct functions, from asset creation and exchange to smart contract execution and platform management. The necessity for token transfers across these chains to meet staking requirements adds layers of complexity and potential points of failure that can deter innovation.
The success of the C-Chain might hurt L1s’ ability to flourish. L1 validators need to validate the C-Chain, and as the C-Chain and its transaction history grow, those validators will need more and more powerful hardware to keep up. This represents an additional friction for anyone looking to launch a L1. As of 2024, ~40%+ of Avalanche validators are hosted on Amazon and other data providers. If hardware requirements continue to get more complex and burdensome, that percentage will likely increase, leading to increased centralization/single-point-of-failure risk.
What Upgrades Are Included With Avalanche9000?
ACP-77
One of the largest aspects of Avalanche9000 is the coveted ACP-77, designed to alter the core relationship between L1s, their validators, and the creation of new L1s/tokens. To start, Avalanche subnets are now referred to as L1 blockchains. This change emphasizes their true nature: fully independent blockchains that control their consensus mechanics, transaction processing, and security without relying on other blockchains.
This independence is extended to L1 validators, as they will no longer be required to sync with Avalanche’s primary network or stake 2000 AVAX to be eligible. Instead, validators simply need to pay a continuous, nominal AVAX-denominated fee. Existing Avalanche L1s can switch from the 2000 AVAX staking model to a ValidatorManager smart contract through ACP-77. However, this conversion is optional if they prefer to continue the old model.
Why is this so important? It drastically reduces startup costs associated with launching a new L1 blockchain, massively reducing operating costs, and ensures that virtually any project can easily and readily launch a highly customized L1. Consider the cost and difficulty associated with launching full L2s on top of Ethereum or even other primary L1 blockchain networks like Cardano or Tron. This is the general idea of what Avalanche has been developing toward, allowing on and off-chain entities to have their own customizable L1s at a fraction of the cost of starting their own native chain. Additionally, with the new continuous payment model (pay-as-you-go) rather than the one-time 2000 AVAX upfront payment, more AVAX can be burned over time in the long run, assuming the proliferation of many, many L1s.
Customizable L1 Validation
Continuing with this idea, ACP-77 also makes it possible for new L1s to establish their own decentralized validator management system, moving it away from the Avalanche P-Chain to individual ValidatorManager smart contracts. This enables L1 creators to define and enforce their own personal network rules, which can be highly desirable for specialty projects. Depending on the permissions of the L1 (permissionless or permissioned), validators either earn staking rewards or are managed centrally by the L1 owner, with no staking rewards for controlled validators.
P-Chain Operational Logic Upgrades
Through ACP-77, the P-Chain can now authenticate the addition or removal of validators from an L1 using BLS multi-signatures, which is leveraged by Interchain Messaging. This enhancement allows L1s to enforce specific requirements for joining their validator sets. For instance, an L1 may require validators to lock up tokens on the C-Chain or the L1 itself, similar to staking in the Ethereum community. These requirements can extend beyond Avalanche to include token lock-ups on Ethereum (ERC-20) or Solana (SPL), providing substantial flexibility for L1 creators in controlling their validator sets.
The revised relationship between the P-Chain and L1s also facilitates a dynamic fee model. L1s can leverage the P-Chain as an arbiter to modify parameters and confirm incoming Avalanche Warp Messages.
ACP-125
ACP-125 proposes reducing the minimum base fee from 25 nAVAX to 1 nAVAX on the C-Chain. This would effectively lower the minimum gas price that users must pay to execute a transaction when network demand is low.
The nAVAX minimum base fee refers to the lowest possible gas price (of AVAX) that must be paid to execute transactions on the Avalanche C-Chain, the chain that handles smart contracts and DeFi activity using Ethereum-compatible tools. Each transaction on a blockchain incurs gas fees, which are burnt. The base fee is part of this fee structure, and it's adjusted dynamically to reflect network congestion—rising when demand is high and falling when it’s low.
Avalanche, like Ethereum, uses a dynamic fee model, where the base fee fluctuates based on network demand. Ideally, the gas fee should reflect the amount of computational resources used. The dynamic fee mechanism ensures that transaction costs rise during high-demand periods, helping regulate network usage and prevent congestion. When demand drops, the base fee should lowered accordingly to encourage more transactions.
A community member created a theoretical Dune dashboard that visualizes the change in fees should ACP-125 have been live. The example demonstrates that a target wallet spent $3,189 (115 AVAX) in gas fees for executed transactions, whereas if ACP-125 was live, the wallet would have only spent $579 (~20 AVAX) in gas fees. This is shown visually in the graphs below:
Motivations for Reducing the Minimum Base Fee
Even though the base fee is dynamic, it has been pinned at the 25 nAVAX minimum base fee level for an extended period, indicating that this minimum is higher than what the market demands. As a result, the current fee is arguably artificially high, discouraging transaction activity when the network is underutilized. This is important as significant on-chain activity is flocking to networks, notably Ethereum L2s, for their extremely low fees.
By lowering the base fee, the Avalanche network would become cheaper to use during periods of low demand, likely increasing transaction volume, dApp usage, and overall network utility. It will also help ensure that Avalanche remains highly competitive versus high-performance Ethereum L2s like Base.
Now, one concern is the potential for state bloat, where cheaper transaction fees encourage users to over-utilize the network, leading to an increase in data stored on the blockchain. However, ACP-125 argues that past periods of high usage showed the dynamic fee algorithm functioning well, providing confidence that lowering the base fee wouldn’t pose a significant risk to network health.
ACP-103
Building off of the logic of ACP-125, ACP-103 aims to replicate the success of the C-Chain’s dynamic fee system by adjusting the transaction costs on the X-Chain and P-Chain based on demand. Under the current system, users pay a fixed fee regardless of the level of network activity. This can result in overuse or underpricing of network resources. By shifting to dynamic fees, the gas prices will adjust in response to network load, increasing during periods of high usage and decreasing when the network is less congested.
The current fixed fee system doesn’t reflect real-time network conditions. Dynamic fees would ensure that transaction costs correspond to the actual demand for network resources, helping to manage spikes in activity and mitigate issues like spam or denial-of-service attacks. Thus, ACP-103 seeks to align transaction fees with the market’s demand for computational resources. As demand rises, the cost of using the network increases, creating a more balanced system that can better allocate resources and handle heavy traffic periods.
This proposal aims to implement this through four dimensions:
- Bandwidth (B): Measures the network bandwidth used.
- Reads (R): Counts the number of state or database reads.
- Writes (W): Counts the number of state or database writes.
- Compute (C): Quantifies the total computational resources used to execute a transaction. These dimensions are combined to calculate the total gas consumed, and fees will adjust based on overall network gas usage
In the future, ACP-103 may lead to the introduction of a multidimensional fee model where each resource (e.g., bandwidth, reads, writes) is priced independently, providing even more fine-grained control over how fees are allocated based on a transaction's specific demands.
Overall, the implementation of ACP-103 could significantly enhance the performance, security, and user experience on the X-Chain and P-Chain. It ensures that Avalanche continues to be scalable (one of the core value propositions of Avalanche9000), even as transaction volumes grow, by dynamically adjusting fees to meet changing conditions. This is particularly important as Avalanche seeks to attract more institutional and enterprise use cases, which require robust, scalable infrastructure.
ACP-113
ACP-113 proposes a mechanism to generate verifiable, non-cryptographic random number seeds on the Avalanche platform. This is important because current deterministic block execution limits the use of traditional random number generators within smart contracts on the Avalanche blockchain, which is critical for certain applications (i.e., gaming, lotteries, or other dApps that require randomness).
Many blockchain applications need access to randomness for things like random draws, lotteries, or cryptographic tasks. However, traditional blockchains struggle to generate truly random numbers due to their deterministic nature (meaning they always produce the same result given the same input). This can make it hard to create fair randomness within smart contracts without external sources like oracles.
Currently, Avalanche L1s and its EVM-compatible smart contracts cannot generate secure or verifiable random numbers due to the deterministic execution of smart contracts. This limits their versatility, especially for applications requiring randomness. So, ACP-113 aims to solve this for Avalanche by introducing a method to generate verifiable random number seeds that can be used in smart contracts, enabling applications to use randomness while ensuring that the generated random numbers can be verified by any participant.
How Randomness Works
Randomness would be generated through a combination of BLS (Boneh–Lynn–Shacham) signatures and VRF (Verifiable Random Functions). These tools allow for randomness that is deterministically verifiable but difficult to predict or manipulate.
It works as follows:
- BLS-based VRF: The block proposer uses their BLS key to generate a random value by signing the previous block's information. This forms a random seed that is used to generate randomness in the next block. Because this process is cryptographically secure and verifiable, the random seed is considered unbiased and reliable.
- Recursive Signing: The system uses recursive signing, where the signature of the previous block is used in the next block. This chaining mechanism helps generate verifiable randomness while preserving the integrity of the random values
- Bootstrapping: The protocol can bootstrap randomness using a predefined seed when the current proposer does not have a BLS key (or other missing information). This ensures that randomness generation continues even in edge cases.
The following graphic is provided within ACP-113 for visualization of VRFs. On the left side, there is Block n, and on the right, Block n+1, illustrating the progression from one block to the next. Each block contains a value labeled VRF-Sig, representing the VRF signature generated for that block. The output of the randomness process is represented by VRF-Out(n), calculated by hashing the VRF-Sig of Block n.
This diagram shows how randomness is propagated and verified across blocks in a blockchain. Each block's proposer uses their cryptographic keys to generate a verifiable random number, which can be checked by any participant. This provides secure randomness for decentralized applications while ensuring that the randomness cannot be tampered with.
ACP-20
ACP-20 is a proposal that introduces support for Ed25519 TLS certificates to improve Avalanche's peer-to-peer (P2P) communications. This upgrade aims to enhance security, reduce complexity, and increase efficiency by replacing the reliance on the larger RSA or ECDSA keys with the smaller, more efficient Ed25519 cryptographic keys.
Ed25519 public keys are only 32 bytes, and signatures are 64 bytes, compared to RSA or ECDSA's significantly larger key sizes. The reduced size decreases the bandwidth requirements for NodeID generation and p2p communications. It also simplifies maintenance for node operators by allowing TLS certificates to be generated in memory rather than storing them persistently.
Why This Is Important
Currently, AvalancheGo generates a 4096-bit RSA private key, which is then hashed to generate a NodeID. With the proposed switch to Ed25519, operators only need to manage a single, small key, reducing the overhead of node maintenance.
Ed25519 has become widely adopted in cryptographic applications, including its use in many blockchain and distributed systems. It’s faster, more secure, and more lightweight than alternatives like RSA. The adoption of Ed25519 public keys opens up new possibilities, like using these keys for VRFs, which are being introduced through ACP-113.
ACP-118
The last major proposal included within Avalanche9000 is ACP-118, which introduces a major enhancement for how the Avalanche network handles signatures in the context of Warp messages, which are cross-L1 (or cross-chain) communications. The proposal aims to standardize the way signatures are requested and aggregated across different Virtual Machines (VMs) on Avalanche, allowing them to interact seamlessly while simplifying signature aggregation for services like Warp message relayers.
Warp messages are used to enable cross-chain communication between different Avalanche L1s. These messages require signatures from validators, and their signatures are aggregated using BLS signatures to ensure message authenticity. Currently, each VM (like L1 EVM and Coreth) implements its own mechanisms for handling signature requests, which causes friction when building applications intended to operate across multiple VMs.
ACP-118 intertwines with ACP-77 in that it provides the standardized tooling for requesting and aggregating signatures across L1 blockchains, ensuring that even with different validator sets or governance mechanisms, the cross-chain messaging and communication remain smooth and secure.
Key Advantages of ACP-118
One of ACP-118's main advantages is that it significantly reduces the complexity of building cross-L1 or cross-chain applications. Instead of needing to account for each VM's unique codec or signature aggregation mechanism, developers can rely on a standardized format that works across the board.
This standard makes it much easier to aggregate signatures and validate cross-chain messages for developers building applications that span multiple VMs (like DeFi platforms, bridges, or other multi-chain services). This also improves security and consistency, reducing the risk of bugs or misconfigurations in handling signatures. Not to mention, as Avalanche L1 blockchains continue to grow, cross-chain communication will become even more essential for scaling the ecosystem. The Warp Signature Interface Standard ensures that scaling across L1s does not introduce additional friction for developers or increase the complexity of signature verification.
The standard can be used for verifying block hashes, ensuring that on-chain events occurred, or confirming that an event didn’t happen. By defining how signature requests should be handled, the standard supports flexible use cases, whether attesting to a block's validity or managing validator expiration across L1s. VMs are still responsible for ensuring that only valid payloads are signed, and they should be cautious to prevent potential Denial of Service (DoS) attacks by validating the payload and justification of each signature request.
ACP-131
ACP-131 proposes enabling specific Ethereum EIPs (Ethereum Improvement Proposals) on Avalanche's C-Chain and L1-EVM chains. These changes align Avalanche with Ethereum’s Cancun upgrade to maintain compatibility with Ethereum-based developer tools and infrastructure. However, the upgrade excludes blob transactions from EIP-4844 to avoid certain complexities.
This upgrade ensures Avalanche remains compatible with Ethereum’s EVM, allowing seamless use of developer tools and Solidity versions. It improves performance, functionality, and the developer experience. L1s can opt-out, but adoption will require a network upgrade for the C-Chain and participating L1s. Overall, this proposal keeps Avalanche aligned with Ethereum while ensuring stability and future scalability.
Blockchain Summit LATAM and Retro9000
Avalanche9000 is slated to officially kick off at the global Avalanche Blockchain Summit LATAM scheduled for October 2024 in Argentina. The Avalanche Blockchain Summit is an annual event that brings together developers, entrepreneurs, investors, and blockchain enthusiasts to discuss innovations, developments, and future plans for the Avalanche ecosystem. It offers a platform for networking, knowledge sharing, and showcasing new projects and technologies within the Avalanche network.
The summit typically features workshops on DeFi, NFTs, Web3, and infrastructure scaling. Panels with industry experts provide insights into emerging trends and Avalanche’s roadmap. Technical sessions focus on updates to Avalanche’s platform, with deep dives into features like Avalanche's Avalanche9000 upgrade.
The main kickoff event for Avalanche9000 is aimed at builders and developers who want to become early adopters of Avalanche’s customizable L1 blockchains. It includes launch party incentive programs. An incentivized testnet, called Retro9000, will most likely begin in October and incorporate an interactive leaderboard system that users can vote on in terms of what projects they think are most innovative.
Bounty9000 is an opportunity for developers to take advantage of building an Avalanche L1 by using USDC as the gas token. Additionally, Avalanche has stated that rewards will be offered to testnet developers for building foundational applications and chains as part of the Avalanche9000 launch. This includes a first-place $9,000 prize and a second-place $900 prize, paid out in AVAX.
Recent Institutional Adoption
Avalanche’s infrastructure designs and coming upgrades have attracted the attention of numerous financial giants, institutional investors, and other adopters in recent months. Two of their most impressive partnerships to date have come since August, including both Grayscale and Franklin Templeton.
Grayscale Trust
Grayscale Investments is one of the largest digital asset managers globally, offering investment products that allow investors to gain exposure to cryptocurrencies without needing to directly buy, store, or manage the underlying digital assets. Founded in 2013, Grayscale is a subsidiary of Digital Currency Group (DCG), a major player in the blockchain and cryptocurrency space. As of 2024, Grayscale Investments manages approximately $25.7 billion in assets under management (AUM) across its various cryptocurrency investment products.
The Grayscale Avalanche Trust is a specialized investment product launched in August 2024, aimed at giving accredited investors exposure to the native token of the Avalanche blockchain, AVAX. This trust functions similarly to Grayscale’s other single-asset investment products, allowing investors to gain indirect exposure to AVAX without having to buy or manage the token directly.
The Avalanche Trust is designed to provide investors with access to AVAX, the token powering the Avalanche platform, which is known for its scalability, security, and decentralized architecture. Avalanche has also gained attention for its role in the tokenization of real-world assets (RWA), which converts physical assets like real estate and art into digital tokens on the blockchain.
It is open for daily subscription to eligible accredited investors and charges a management fee of 2.5%. As of launch, Grayscale aims to eventually list the Trust shares on secondary markets, though regulatory approval for such listings is not guaranteed. Currently, the trust has just over $600k in AUM so far.
Franklin Templeton Money Market
Franklin Templeton is a leading global investment management firm with a history dating back to 1947. The firm provides a wide range of investment solutions, including mutual funds, ETFs, and institutional asset management services. Franklin Templeton is known for its expertise across asset classes such as equities, fixed income, multi-asset solutions, alternatives, and more. As of 2024, Franklin Templeton manages over $1.6 trillion in AUM, making it one of the largest asset managers in the world.
Franklin Templeton has expanded its OnChain U.S. Government Money Fund (FOBXX) to the Avalanche blockchain as part of its broader initiative to integrate traditional finance with blockchain technology. This tokenized money market fund, which was originally launched on the Stellar blockchain and later expanded to Polygon and Arbitrum, allows institutional investors to access U.S. Treasury yields in a fully digital and blockchain-enabled environment.
The fund uses a unique tokenized structure, with shares represented by BENJI tokens, which investors can purchase using stablecoins like USDC. These tokenized shares can also be transferred peer-to-peer on-chain, enhancing liquidity and accessibility for investors. The fund itself has gained substantial traction, with over $427 million in AUM as of 2024.
Conclusion
The Avalanche9000 upgrade represents a pivotal evolution in the Avalanche network, addressing the most significant limitations the platform has faced since its mainnet launch in 2020, with its focus on reducing barriers to building customizable L1 blockchains, improving interoperability through Interchain Messaging (ICM), and reducing staking costs with the ACP-77 upgrade, Avalanche9000 positions the network as a highly scalable, flexible, and developer-friendly platform.
As Avalanche9000 rolls out, its economic incentives, like the Bounty9000 program, will drive early adoption of new L1 chains, encouraging developers to build on Avalanche's infrastructure. Combined with growing institutional interest, as evidenced by Grayscale's Avalanche Trust and Franklin Templeton's tokenized money market fund, Avalanche is establishing itself as a leader in the next generation of blockchain technology aimed at unlocking real-world asset tokenization and seamless dApps.
Avalanche9000 ultimately provides the framework necessary for long-term scalability, unlocking new possibilities for developers, institutional players, and DeFi applications while maintaining low fees and high performance in an increasingly competitive blockchain environment.
Disclaimer: This report was commissioned by Ava Labs. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.
Avalanche9000 has been referred to as the single most important network upgrade to the Avalanche blockchain in the project’s history, going back to its mainnet launch in September 2020. The upgrade represents Avalanche’s attempt to tackle the challenges of building ultra-scalable and interoperable blockchains ready to accommodate mass adoption. Interestingly, it also shows how Avalanche has adopted a fundamentally different philosophy in its approach to network infrastructure design than many of its primary competitors.
Through Avalanche9000, Avalanche has fully embraced an integrated network architecture rather than a layered network architecture design found on Ethereum. For Avalanche, this design establishes solutions for builders attempting to scale applications, projects, and tools without significant congestion or constraints. Additionally, it ensures that the whole ecosystem built atop Avalanche is readily connected rather than siloed within different layers of the system.
Overall, Avalanche9000 introduces several critical updates that focus on making its L1 blockchain deployment by builders, projects, and businesses more economically feasible, customizable, and scalable.
To that end, Avalanche9000 includes:
- Customization: The upgrade allows developers to create custom L1 blockchains (previously referred to as subnets) with greater flexibility in terms of staking, tokenomics, and validator sets. This flexibility lowers the cost and complexity of launching L1s, reducing barriers for businesses and developers alike.
- Interchain Messaging (ICM): A standout feature of Avalanche9000 is the introduction of Interchain Messaging, which facilitates seamless communication and shared liquidity between different L1s. This improves interoperability across the network, allowing L1s to operate independently but still benefit from the collective strength of the ecosystem.
- Core Integration: Avalanche9000 incorporates the Core wallet system, enabling users to interact with the growing number of L1s via a browser extension and web app. This system also improves bridging between L1s, making interactions faster and more efficient.
- Etna Upgrade: Part of Avalanche9000, the Etna upgrade includes several community-driven proposals (ACPs) to improve the network's scalability and functionality. A major change here is the reduction of validator staking requirements, making it easier for developers to maintain L1s.
Existing L1 Design
Avalanche is unique in its innovative approach to blockchain architecture and scalability thanks to the concept of L1—dynamic sets of validators that reach consensus on specific blockchains. Each blockchain is validated exclusively by one L1 within the Avalanche ecosystem, although a single L1 can validate multiple blockchains. The Primary Network, consisting of the P, X, and C-chains, is responsible for everything within the Avalanche ecosystem, including L1s. The P-Chain specifically is a blockchain that is used for L1 coordination/administration and staking, it is also now used to register BLS signatures for Avalanche Warp Messaging.
L1s give developers more flexibility and customization options compared to the C-chain to support their needs and use cases. Unlike other networks that have a single virtual machine (VM), such as EVM in Ethereum, L1s in Avalanche can have multiple VMs, including Ava-VM, EVM, WASM, and more.
They can also support multiple programming languages, fee structures, KYC requirements, gas tokens, and more. L1s provide all this optionality while leveraging Avalanche’s fast finality, network effects, and liquidity, allowing for seamless communication between L1s. Avalanche’s long-term scalability strategy is to have hundreds to thousands of L1s. This distributes the network load and prevents any L1 from reaching capacity.
Problems with the Current Design
Under the current L1 creation protocol, an individual or entity wishing to establish a L1 on the Avalanche network must first become a primary network validator. This role requires a substantial staking requirement of 2,000 AVAX, which is a significant financial barrier for most startups. While some workarounds do exist, like GoGoPool or Benqi’s Ignite program that help to lower the requirement, they are not engrained at the protocol level.
Additionally, this process involves complex interactions between multiple chains within the Avalanche ecosystem: the X-chain, C-chain, and P-chain. Each serves distinct functions, from asset creation and exchange to smart contract execution and platform management. The necessity for token transfers across these chains to meet staking requirements adds layers of complexity and potential points of failure that can deter innovation.
The success of the C-Chain might hurt L1s’ ability to flourish. L1 validators need to validate the C-Chain, and as the C-Chain and its transaction history grow, those validators will need more and more powerful hardware to keep up. This represents an additional friction for anyone looking to launch a L1. As of 2024, ~40%+ of Avalanche validators are hosted on Amazon and other data providers. If hardware requirements continue to get more complex and burdensome, that percentage will likely increase, leading to increased centralization/single-point-of-failure risk.
What Upgrades Are Included With Avalanche9000?
ACP-77
One of the largest aspects of Avalanche9000 is the coveted ACP-77, designed to alter the core relationship between L1s, their validators, and the creation of new L1s/tokens. To start, Avalanche subnets are now referred to as L1 blockchains. This change emphasizes their true nature: fully independent blockchains that control their consensus mechanics, transaction processing, and security without relying on other blockchains.
This independence is extended to L1 validators, as they will no longer be required to sync with Avalanche’s primary network or stake 2000 AVAX to be eligible. Instead, validators simply need to pay a continuous, nominal AVAX-denominated fee. Existing Avalanche L1s can switch from the 2000 AVAX staking model to a ValidatorManager smart contract through ACP-77. However, this conversion is optional if they prefer to continue the old model.
Why is this so important? It drastically reduces startup costs associated with launching a new L1 blockchain, massively reducing operating costs, and ensures that virtually any project can easily and readily launch a highly customized L1. Consider the cost and difficulty associated with launching full L2s on top of Ethereum or even other primary L1 blockchain networks like Cardano or Tron. This is the general idea of what Avalanche has been developing toward, allowing on and off-chain entities to have their own customizable L1s at a fraction of the cost of starting their own native chain. Additionally, with the new continuous payment model (pay-as-you-go) rather than the one-time 2000 AVAX upfront payment, more AVAX can be burned over time in the long run, assuming the proliferation of many, many L1s.
Customizable L1 Validation
Continuing with this idea, ACP-77 also makes it possible for new L1s to establish their own decentralized validator management system, moving it away from the Avalanche P-Chain to individual ValidatorManager smart contracts. This enables L1 creators to define and enforce their own personal network rules, which can be highly desirable for specialty projects. Depending on the permissions of the L1 (permissionless or permissioned), validators either earn staking rewards or are managed centrally by the L1 owner, with no staking rewards for controlled validators.
P-Chain Operational Logic Upgrades
Through ACP-77, the P-Chain can now authenticate the addition or removal of validators from an L1 using BLS multi-signatures, which is leveraged by Interchain Messaging. This enhancement allows L1s to enforce specific requirements for joining their validator sets. For instance, an L1 may require validators to lock up tokens on the C-Chain or the L1 itself, similar to staking in the Ethereum community. These requirements can extend beyond Avalanche to include token lock-ups on Ethereum (ERC-20) or Solana (SPL), providing substantial flexibility for L1 creators in controlling their validator sets.
The revised relationship between the P-Chain and L1s also facilitates a dynamic fee model. L1s can leverage the P-Chain as an arbiter to modify parameters and confirm incoming Avalanche Warp Messages.
ACP-125
ACP-125 proposes reducing the minimum base fee from 25 nAVAX to 1 nAVAX on the C-Chain. This would effectively lower the minimum gas price that users must pay to execute a transaction when network demand is low.
The nAVAX minimum base fee refers to the lowest possible gas price (of AVAX) that must be paid to execute transactions on the Avalanche C-Chain, the chain that handles smart contracts and DeFi activity using Ethereum-compatible tools. Each transaction on a blockchain incurs gas fees, which are burnt. The base fee is part of this fee structure, and it's adjusted dynamically to reflect network congestion—rising when demand is high and falling when it’s low.
Avalanche, like Ethereum, uses a dynamic fee model, where the base fee fluctuates based on network demand. Ideally, the gas fee should reflect the amount of computational resources used. The dynamic fee mechanism ensures that transaction costs rise during high-demand periods, helping regulate network usage and prevent congestion. When demand drops, the base fee should lowered accordingly to encourage more transactions.
A community member created a theoretical Dune dashboard that visualizes the change in fees should ACP-125 have been live. The example demonstrates that a target wallet spent $3,189 (115 AVAX) in gas fees for executed transactions, whereas if ACP-125 was live, the wallet would have only spent $579 (~20 AVAX) in gas fees. This is shown visually in the graphs below:
Motivations for Reducing the Minimum Base Fee
Even though the base fee is dynamic, it has been pinned at the 25 nAVAX minimum base fee level for an extended period, indicating that this minimum is higher than what the market demands. As a result, the current fee is arguably artificially high, discouraging transaction activity when the network is underutilized. This is important as significant on-chain activity is flocking to networks, notably Ethereum L2s, for their extremely low fees.
By lowering the base fee, the Avalanche network would become cheaper to use during periods of low demand, likely increasing transaction volume, dApp usage, and overall network utility. It will also help ensure that Avalanche remains highly competitive versus high-performance Ethereum L2s like Base.
Now, one concern is the potential for state bloat, where cheaper transaction fees encourage users to over-utilize the network, leading to an increase in data stored on the blockchain. However, ACP-125 argues that past periods of high usage showed the dynamic fee algorithm functioning well, providing confidence that lowering the base fee wouldn’t pose a significant risk to network health.
ACP-103
Building off of the logic of ACP-125, ACP-103 aims to replicate the success of the C-Chain’s dynamic fee system by adjusting the transaction costs on the X-Chain and P-Chain based on demand. Under the current system, users pay a fixed fee regardless of the level of network activity. This can result in overuse or underpricing of network resources. By shifting to dynamic fees, the gas prices will adjust in response to network load, increasing during periods of high usage and decreasing when the network is less congested.
The current fixed fee system doesn’t reflect real-time network conditions. Dynamic fees would ensure that transaction costs correspond to the actual demand for network resources, helping to manage spikes in activity and mitigate issues like spam or denial-of-service attacks. Thus, ACP-103 seeks to align transaction fees with the market’s demand for computational resources. As demand rises, the cost of using the network increases, creating a more balanced system that can better allocate resources and handle heavy traffic periods.
This proposal aims to implement this through four dimensions:
- Bandwidth (B): Measures the network bandwidth used.
- Reads (R): Counts the number of state or database reads.
- Writes (W): Counts the number of state or database writes.
- Compute (C): Quantifies the total computational resources used to execute a transaction. These dimensions are combined to calculate the total gas consumed, and fees will adjust based on overall network gas usage
In the future, ACP-103 may lead to the introduction of a multidimensional fee model where each resource (e.g., bandwidth, reads, writes) is priced independently, providing even more fine-grained control over how fees are allocated based on a transaction's specific demands.
Overall, the implementation of ACP-103 could significantly enhance the performance, security, and user experience on the X-Chain and P-Chain. It ensures that Avalanche continues to be scalable (one of the core value propositions of Avalanche9000), even as transaction volumes grow, by dynamically adjusting fees to meet changing conditions. This is particularly important as Avalanche seeks to attract more institutional and enterprise use cases, which require robust, scalable infrastructure.
ACP-113
ACP-113 proposes a mechanism to generate verifiable, non-cryptographic random number seeds on the Avalanche platform. This is important because current deterministic block execution limits the use of traditional random number generators within smart contracts on the Avalanche blockchain, which is critical for certain applications (i.e., gaming, lotteries, or other dApps that require randomness).
Many blockchain applications need access to randomness for things like random draws, lotteries, or cryptographic tasks. However, traditional blockchains struggle to generate truly random numbers due to their deterministic nature (meaning they always produce the same result given the same input). This can make it hard to create fair randomness within smart contracts without external sources like oracles.
Currently, Avalanche L1s and its EVM-compatible smart contracts cannot generate secure or verifiable random numbers due to the deterministic execution of smart contracts. This limits their versatility, especially for applications requiring randomness. So, ACP-113 aims to solve this for Avalanche by introducing a method to generate verifiable random number seeds that can be used in smart contracts, enabling applications to use randomness while ensuring that the generated random numbers can be verified by any participant.
How Randomness Works
Randomness would be generated through a combination of BLS (Boneh–Lynn–Shacham) signatures and VRF (Verifiable Random Functions). These tools allow for randomness that is deterministically verifiable but difficult to predict or manipulate.
It works as follows:
- BLS-based VRF: The block proposer uses their BLS key to generate a random value by signing the previous block's information. This forms a random seed that is used to generate randomness in the next block. Because this process is cryptographically secure and verifiable, the random seed is considered unbiased and reliable.
- Recursive Signing: The system uses recursive signing, where the signature of the previous block is used in the next block. This chaining mechanism helps generate verifiable randomness while preserving the integrity of the random values
- Bootstrapping: The protocol can bootstrap randomness using a predefined seed when the current proposer does not have a BLS key (or other missing information). This ensures that randomness generation continues even in edge cases.
The following graphic is provided within ACP-113 for visualization of VRFs. On the left side, there is Block n, and on the right, Block n+1, illustrating the progression from one block to the next. Each block contains a value labeled VRF-Sig, representing the VRF signature generated for that block. The output of the randomness process is represented by VRF-Out(n), calculated by hashing the VRF-Sig of Block n.
This diagram shows how randomness is propagated and verified across blocks in a blockchain. Each block's proposer uses their cryptographic keys to generate a verifiable random number, which can be checked by any participant. This provides secure randomness for decentralized applications while ensuring that the randomness cannot be tampered with.
ACP-20
ACP-20 is a proposal that introduces support for Ed25519 TLS certificates to improve Avalanche's peer-to-peer (P2P) communications. This upgrade aims to enhance security, reduce complexity, and increase efficiency by replacing the reliance on the larger RSA or ECDSA keys with the smaller, more efficient Ed25519 cryptographic keys.
Ed25519 public keys are only 32 bytes, and signatures are 64 bytes, compared to RSA or ECDSA's significantly larger key sizes. The reduced size decreases the bandwidth requirements for NodeID generation and p2p communications. It also simplifies maintenance for node operators by allowing TLS certificates to be generated in memory rather than storing them persistently.
Why This Is Important
Currently, AvalancheGo generates a 4096-bit RSA private key, which is then hashed to generate a NodeID. With the proposed switch to Ed25519, operators only need to manage a single, small key, reducing the overhead of node maintenance.
Ed25519 has become widely adopted in cryptographic applications, including its use in many blockchain and distributed systems. It’s faster, more secure, and more lightweight than alternatives like RSA. The adoption of Ed25519 public keys opens up new possibilities, like using these keys for VRFs, which are being introduced through ACP-113.
ACP-118
The last major proposal included within Avalanche9000 is ACP-118, which introduces a major enhancement for how the Avalanche network handles signatures in the context of Warp messages, which are cross-L1 (or cross-chain) communications. The proposal aims to standardize the way signatures are requested and aggregated across different Virtual Machines (VMs) on Avalanche, allowing them to interact seamlessly while simplifying signature aggregation for services like Warp message relayers.
Warp messages are used to enable cross-chain communication between different Avalanche L1s. These messages require signatures from validators, and their signatures are aggregated using BLS signatures to ensure message authenticity. Currently, each VM (like L1 EVM and Coreth) implements its own mechanisms for handling signature requests, which causes friction when building applications intended to operate across multiple VMs.
ACP-118 intertwines with ACP-77 in that it provides the standardized tooling for requesting and aggregating signatures across L1 blockchains, ensuring that even with different validator sets or governance mechanisms, the cross-chain messaging and communication remain smooth and secure.
Key Advantages of ACP-118
One of ACP-118's main advantages is that it significantly reduces the complexity of building cross-L1 or cross-chain applications. Instead of needing to account for each VM's unique codec or signature aggregation mechanism, developers can rely on a standardized format that works across the board.
This standard makes it much easier to aggregate signatures and validate cross-chain messages for developers building applications that span multiple VMs (like DeFi platforms, bridges, or other multi-chain services). This also improves security and consistency, reducing the risk of bugs or misconfigurations in handling signatures. Not to mention, as Avalanche L1 blockchains continue to grow, cross-chain communication will become even more essential for scaling the ecosystem. The Warp Signature Interface Standard ensures that scaling across L1s does not introduce additional friction for developers or increase the complexity of signature verification.
The standard can be used for verifying block hashes, ensuring that on-chain events occurred, or confirming that an event didn’t happen. By defining how signature requests should be handled, the standard supports flexible use cases, whether attesting to a block's validity or managing validator expiration across L1s. VMs are still responsible for ensuring that only valid payloads are signed, and they should be cautious to prevent potential Denial of Service (DoS) attacks by validating the payload and justification of each signature request.
ACP-131
ACP-131 proposes enabling specific Ethereum EIPs (Ethereum Improvement Proposals) on Avalanche's C-Chain and L1-EVM chains. These changes align Avalanche with Ethereum’s Cancun upgrade to maintain compatibility with Ethereum-based developer tools and infrastructure. However, the upgrade excludes blob transactions from EIP-4844 to avoid certain complexities.
This upgrade ensures Avalanche remains compatible with Ethereum’s EVM, allowing seamless use of developer tools and Solidity versions. It improves performance, functionality, and the developer experience. L1s can opt-out, but adoption will require a network upgrade for the C-Chain and participating L1s. Overall, this proposal keeps Avalanche aligned with Ethereum while ensuring stability and future scalability.
Blockchain Summit LATAM and Retro9000
Avalanche9000 is slated to officially kick off at the global Avalanche Blockchain Summit LATAM scheduled for October 2024 in Argentina. The Avalanche Blockchain Summit is an annual event that brings together developers, entrepreneurs, investors, and blockchain enthusiasts to discuss innovations, developments, and future plans for the Avalanche ecosystem. It offers a platform for networking, knowledge sharing, and showcasing new projects and technologies within the Avalanche network.
The summit typically features workshops on DeFi, NFTs, Web3, and infrastructure scaling. Panels with industry experts provide insights into emerging trends and Avalanche’s roadmap. Technical sessions focus on updates to Avalanche’s platform, with deep dives into features like Avalanche's Avalanche9000 upgrade.
The main kickoff event for Avalanche9000 is aimed at builders and developers who want to become early adopters of Avalanche’s customizable L1 blockchains. It includes launch party incentive programs. An incentivized testnet, called Retro9000, will most likely begin in October and incorporate an interactive leaderboard system that users can vote on in terms of what projects they think are most innovative.
Bounty9000 is an opportunity for developers to take advantage of building an Avalanche L1 by using USDC as the gas token. Additionally, Avalanche has stated that rewards will be offered to testnet developers for building foundational applications and chains as part of the Avalanche9000 launch. This includes a first-place $9,000 prize and a second-place $900 prize, paid out in AVAX.
Recent Institutional Adoption
Avalanche’s infrastructure designs and coming upgrades have attracted the attention of numerous financial giants, institutional investors, and other adopters in recent months. Two of their most impressive partnerships to date have come since August, including both Grayscale and Franklin Templeton.
Grayscale Trust
Grayscale Investments is one of the largest digital asset managers globally, offering investment products that allow investors to gain exposure to cryptocurrencies without needing to directly buy, store, or manage the underlying digital assets. Founded in 2013, Grayscale is a subsidiary of Digital Currency Group (DCG), a major player in the blockchain and cryptocurrency space. As of 2024, Grayscale Investments manages approximately $25.7 billion in assets under management (AUM) across its various cryptocurrency investment products.
The Grayscale Avalanche Trust is a specialized investment product launched in August 2024, aimed at giving accredited investors exposure to the native token of the Avalanche blockchain, AVAX. This trust functions similarly to Grayscale’s other single-asset investment products, allowing investors to gain indirect exposure to AVAX without having to buy or manage the token directly.
The Avalanche Trust is designed to provide investors with access to AVAX, the token powering the Avalanche platform, which is known for its scalability, security, and decentralized architecture. Avalanche has also gained attention for its role in the tokenization of real-world assets (RWA), which converts physical assets like real estate and art into digital tokens on the blockchain.
It is open for daily subscription to eligible accredited investors and charges a management fee of 2.5%. As of launch, Grayscale aims to eventually list the Trust shares on secondary markets, though regulatory approval for such listings is not guaranteed. Currently, the trust has just over $600k in AUM so far.
Franklin Templeton Money Market
Franklin Templeton is a leading global investment management firm with a history dating back to 1947. The firm provides a wide range of investment solutions, including mutual funds, ETFs, and institutional asset management services. Franklin Templeton is known for its expertise across asset classes such as equities, fixed income, multi-asset solutions, alternatives, and more. As of 2024, Franklin Templeton manages over $1.6 trillion in AUM, making it one of the largest asset managers in the world.
Franklin Templeton has expanded its OnChain U.S. Government Money Fund (FOBXX) to the Avalanche blockchain as part of its broader initiative to integrate traditional finance with blockchain technology. This tokenized money market fund, which was originally launched on the Stellar blockchain and later expanded to Polygon and Arbitrum, allows institutional investors to access U.S. Treasury yields in a fully digital and blockchain-enabled environment.
The fund uses a unique tokenized structure, with shares represented by BENJI tokens, which investors can purchase using stablecoins like USDC. These tokenized shares can also be transferred peer-to-peer on-chain, enhancing liquidity and accessibility for investors. The fund itself has gained substantial traction, with over $427 million in AUM as of 2024.
Conclusion
The Avalanche9000 upgrade represents a pivotal evolution in the Avalanche network, addressing the most significant limitations the platform has faced since its mainnet launch in 2020, with its focus on reducing barriers to building customizable L1 blockchains, improving interoperability through Interchain Messaging (ICM), and reducing staking costs with the ACP-77 upgrade, Avalanche9000 positions the network as a highly scalable, flexible, and developer-friendly platform.
As Avalanche9000 rolls out, its economic incentives, like the Bounty9000 program, will drive early adoption of new L1 chains, encouraging developers to build on Avalanche's infrastructure. Combined with growing institutional interest, as evidenced by Grayscale's Avalanche Trust and Franklin Templeton's tokenized money market fund, Avalanche is establishing itself as a leader in the next generation of blockchain technology aimed at unlocking real-world asset tokenization and seamless dApps.
Avalanche9000 ultimately provides the framework necessary for long-term scalability, unlocking new possibilities for developers, institutional players, and DeFi applications while maintaining low fees and high performance in an increasingly competitive blockchain environment.
Disclaimer: This report was commissioned by Ava Labs. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.
Avalanche9000 has been referred to as the single most important network upgrade to the Avalanche blockchain in the project’s history, going back to its mainnet launch in September 2020. The upgrade represents Avalanche’s attempt to tackle the challenges of building ultra-scalable and interoperable blockchains ready to accommodate mass adoption. Interestingly, it also shows how Avalanche has adopted a fundamentally different philosophy in its approach to network infrastructure design than many of its primary competitors.
Through Avalanche9000, Avalanche has fully embraced an integrated network architecture rather than a layered network architecture design found on Ethereum. For Avalanche, this design establishes solutions for builders attempting to scale applications, projects, and tools without significant congestion or constraints. Additionally, it ensures that the whole ecosystem built atop Avalanche is readily connected rather than siloed within different layers of the system.
Overall, Avalanche9000 introduces several critical updates that focus on making its L1 blockchain deployment by builders, projects, and businesses more economically feasible, customizable, and scalable.
To that end, Avalanche9000 includes:
- Customization: The upgrade allows developers to create custom L1 blockchains (previously referred to as subnets) with greater flexibility in terms of staking, tokenomics, and validator sets. This flexibility lowers the cost and complexity of launching L1s, reducing barriers for businesses and developers alike.
- Interchain Messaging (ICM): A standout feature of Avalanche9000 is the introduction of Interchain Messaging, which facilitates seamless communication and shared liquidity between different L1s. This improves interoperability across the network, allowing L1s to operate independently but still benefit from the collective strength of the ecosystem.
- Core Integration: Avalanche9000 incorporates the Core wallet system, enabling users to interact with the growing number of L1s via a browser extension and web app. This system also improves bridging between L1s, making interactions faster and more efficient.
- Etna Upgrade: Part of Avalanche9000, the Etna upgrade includes several community-driven proposals (ACPs) to improve the network's scalability and functionality. A major change here is the reduction of validator staking requirements, making it easier for developers to maintain L1s.
Existing L1 Design
Avalanche is unique in its innovative approach to blockchain architecture and scalability thanks to the concept of L1—dynamic sets of validators that reach consensus on specific blockchains. Each blockchain is validated exclusively by one L1 within the Avalanche ecosystem, although a single L1 can validate multiple blockchains. The Primary Network, consisting of the P, X, and C-chains, is responsible for everything within the Avalanche ecosystem, including L1s. The P-Chain specifically is a blockchain that is used for L1 coordination/administration and staking, it is also now used to register BLS signatures for Avalanche Warp Messaging.
L1s give developers more flexibility and customization options compared to the C-chain to support their needs and use cases. Unlike other networks that have a single virtual machine (VM), such as EVM in Ethereum, L1s in Avalanche can have multiple VMs, including Ava-VM, EVM, WASM, and more.
They can also support multiple programming languages, fee structures, KYC requirements, gas tokens, and more. L1s provide all this optionality while leveraging Avalanche’s fast finality, network effects, and liquidity, allowing for seamless communication between L1s. Avalanche’s long-term scalability strategy is to have hundreds to thousands of L1s. This distributes the network load and prevents any L1 from reaching capacity.
Problems with the Current Design
Under the current L1 creation protocol, an individual or entity wishing to establish a L1 on the Avalanche network must first become a primary network validator. This role requires a substantial staking requirement of 2,000 AVAX, which is a significant financial barrier for most startups. While some workarounds do exist, like GoGoPool or Benqi’s Ignite program that help to lower the requirement, they are not engrained at the protocol level.
Additionally, this process involves complex interactions between multiple chains within the Avalanche ecosystem: the X-chain, C-chain, and P-chain. Each serves distinct functions, from asset creation and exchange to smart contract execution and platform management. The necessity for token transfers across these chains to meet staking requirements adds layers of complexity and potential points of failure that can deter innovation.
The success of the C-Chain might hurt L1s’ ability to flourish. L1 validators need to validate the C-Chain, and as the C-Chain and its transaction history grow, those validators will need more and more powerful hardware to keep up. This represents an additional friction for anyone looking to launch a L1. As of 2024, ~40%+ of Avalanche validators are hosted on Amazon and other data providers. If hardware requirements continue to get more complex and burdensome, that percentage will likely increase, leading to increased centralization/single-point-of-failure risk.
What Upgrades Are Included With Avalanche9000?
ACP-77
One of the largest aspects of Avalanche9000 is the coveted ACP-77, designed to alter the core relationship between L1s, their validators, and the creation of new L1s/tokens. To start, Avalanche subnets are now referred to as L1 blockchains. This change emphasizes their true nature: fully independent blockchains that control their consensus mechanics, transaction processing, and security without relying on other blockchains.
This independence is extended to L1 validators, as they will no longer be required to sync with Avalanche’s primary network or stake 2000 AVAX to be eligible. Instead, validators simply need to pay a continuous, nominal AVAX-denominated fee. Existing Avalanche L1s can switch from the 2000 AVAX staking model to a ValidatorManager smart contract through ACP-77. However, this conversion is optional if they prefer to continue the old model.
Why is this so important? It drastically reduces startup costs associated with launching a new L1 blockchain, massively reducing operating costs, and ensures that virtually any project can easily and readily launch a highly customized L1. Consider the cost and difficulty associated with launching full L2s on top of Ethereum or even other primary L1 blockchain networks like Cardano or Tron. This is the general idea of what Avalanche has been developing toward, allowing on and off-chain entities to have their own customizable L1s at a fraction of the cost of starting their own native chain. Additionally, with the new continuous payment model (pay-as-you-go) rather than the one-time 2000 AVAX upfront payment, more AVAX can be burned over time in the long run, assuming the proliferation of many, many L1s.
Customizable L1 Validation
Continuing with this idea, ACP-77 also makes it possible for new L1s to establish their own decentralized validator management system, moving it away from the Avalanche P-Chain to individual ValidatorManager smart contracts. This enables L1 creators to define and enforce their own personal network rules, which can be highly desirable for specialty projects. Depending on the permissions of the L1 (permissionless or permissioned), validators either earn staking rewards or are managed centrally by the L1 owner, with no staking rewards for controlled validators.
P-Chain Operational Logic Upgrades
Through ACP-77, the P-Chain can now authenticate the addition or removal of validators from an L1 using BLS multi-signatures, which is leveraged by Interchain Messaging. This enhancement allows L1s to enforce specific requirements for joining their validator sets. For instance, an L1 may require validators to lock up tokens on the C-Chain or the L1 itself, similar to staking in the Ethereum community. These requirements can extend beyond Avalanche to include token lock-ups on Ethereum (ERC-20) or Solana (SPL), providing substantial flexibility for L1 creators in controlling their validator sets.
The revised relationship between the P-Chain and L1s also facilitates a dynamic fee model. L1s can leverage the P-Chain as an arbiter to modify parameters and confirm incoming Avalanche Warp Messages.
ACP-125
ACP-125 proposes reducing the minimum base fee from 25 nAVAX to 1 nAVAX on the C-Chain. This would effectively lower the minimum gas price that users must pay to execute a transaction when network demand is low.
The nAVAX minimum base fee refers to the lowest possible gas price (of AVAX) that must be paid to execute transactions on the Avalanche C-Chain, the chain that handles smart contracts and DeFi activity using Ethereum-compatible tools. Each transaction on a blockchain incurs gas fees, which are burnt. The base fee is part of this fee structure, and it's adjusted dynamically to reflect network congestion—rising when demand is high and falling when it’s low.
Avalanche, like Ethereum, uses a dynamic fee model, where the base fee fluctuates based on network demand. Ideally, the gas fee should reflect the amount of computational resources used. The dynamic fee mechanism ensures that transaction costs rise during high-demand periods, helping regulate network usage and prevent congestion. When demand drops, the base fee should lowered accordingly to encourage more transactions.
A community member created a theoretical Dune dashboard that visualizes the change in fees should ACP-125 have been live. The example demonstrates that a target wallet spent $3,189 (115 AVAX) in gas fees for executed transactions, whereas if ACP-125 was live, the wallet would have only spent $579 (~20 AVAX) in gas fees. This is shown visually in the graphs below:
Motivations for Reducing the Minimum Base Fee
Even though the base fee is dynamic, it has been pinned at the 25 nAVAX minimum base fee level for an extended period, indicating that this minimum is higher than what the market demands. As a result, the current fee is arguably artificially high, discouraging transaction activity when the network is underutilized. This is important as significant on-chain activity is flocking to networks, notably Ethereum L2s, for their extremely low fees.
By lowering the base fee, the Avalanche network would become cheaper to use during periods of low demand, likely increasing transaction volume, dApp usage, and overall network utility. It will also help ensure that Avalanche remains highly competitive versus high-performance Ethereum L2s like Base.
Now, one concern is the potential for state bloat, where cheaper transaction fees encourage users to over-utilize the network, leading to an increase in data stored on the blockchain. However, ACP-125 argues that past periods of high usage showed the dynamic fee algorithm functioning well, providing confidence that lowering the base fee wouldn’t pose a significant risk to network health.
ACP-103
Building off of the logic of ACP-125, ACP-103 aims to replicate the success of the C-Chain’s dynamic fee system by adjusting the transaction costs on the X-Chain and P-Chain based on demand. Under the current system, users pay a fixed fee regardless of the level of network activity. This can result in overuse or underpricing of network resources. By shifting to dynamic fees, the gas prices will adjust in response to network load, increasing during periods of high usage and decreasing when the network is less congested.
The current fixed fee system doesn’t reflect real-time network conditions. Dynamic fees would ensure that transaction costs correspond to the actual demand for network resources, helping to manage spikes in activity and mitigate issues like spam or denial-of-service attacks. Thus, ACP-103 seeks to align transaction fees with the market’s demand for computational resources. As demand rises, the cost of using the network increases, creating a more balanced system that can better allocate resources and handle heavy traffic periods.
This proposal aims to implement this through four dimensions:
- Bandwidth (B): Measures the network bandwidth used.
- Reads (R): Counts the number of state or database reads.
- Writes (W): Counts the number of state or database writes.
- Compute (C): Quantifies the total computational resources used to execute a transaction. These dimensions are combined to calculate the total gas consumed, and fees will adjust based on overall network gas usage
In the future, ACP-103 may lead to the introduction of a multidimensional fee model where each resource (e.g., bandwidth, reads, writes) is priced independently, providing even more fine-grained control over how fees are allocated based on a transaction's specific demands.
Overall, the implementation of ACP-103 could significantly enhance the performance, security, and user experience on the X-Chain and P-Chain. It ensures that Avalanche continues to be scalable (one of the core value propositions of Avalanche9000), even as transaction volumes grow, by dynamically adjusting fees to meet changing conditions. This is particularly important as Avalanche seeks to attract more institutional and enterprise use cases, which require robust, scalable infrastructure.
ACP-113
ACP-113 proposes a mechanism to generate verifiable, non-cryptographic random number seeds on the Avalanche platform. This is important because current deterministic block execution limits the use of traditional random number generators within smart contracts on the Avalanche blockchain, which is critical for certain applications (i.e., gaming, lotteries, or other dApps that require randomness).
Many blockchain applications need access to randomness for things like random draws, lotteries, or cryptographic tasks. However, traditional blockchains struggle to generate truly random numbers due to their deterministic nature (meaning they always produce the same result given the same input). This can make it hard to create fair randomness within smart contracts without external sources like oracles.
Currently, Avalanche L1s and its EVM-compatible smart contracts cannot generate secure or verifiable random numbers due to the deterministic execution of smart contracts. This limits their versatility, especially for applications requiring randomness. So, ACP-113 aims to solve this for Avalanche by introducing a method to generate verifiable random number seeds that can be used in smart contracts, enabling applications to use randomness while ensuring that the generated random numbers can be verified by any participant.
How Randomness Works
Randomness would be generated through a combination of BLS (Boneh–Lynn–Shacham) signatures and VRF (Verifiable Random Functions). These tools allow for randomness that is deterministically verifiable but difficult to predict or manipulate.
It works as follows:
- BLS-based VRF: The block proposer uses their BLS key to generate a random value by signing the previous block's information. This forms a random seed that is used to generate randomness in the next block. Because this process is cryptographically secure and verifiable, the random seed is considered unbiased and reliable.
- Recursive Signing: The system uses recursive signing, where the signature of the previous block is used in the next block. This chaining mechanism helps generate verifiable randomness while preserving the integrity of the random values
- Bootstrapping: The protocol can bootstrap randomness using a predefined seed when the current proposer does not have a BLS key (or other missing information). This ensures that randomness generation continues even in edge cases.
The following graphic is provided within ACP-113 for visualization of VRFs. On the left side, there is Block n, and on the right, Block n+1, illustrating the progression from one block to the next. Each block contains a value labeled VRF-Sig, representing the VRF signature generated for that block. The output of the randomness process is represented by VRF-Out(n), calculated by hashing the VRF-Sig of Block n.
This diagram shows how randomness is propagated and verified across blocks in a blockchain. Each block's proposer uses their cryptographic keys to generate a verifiable random number, which can be checked by any participant. This provides secure randomness for decentralized applications while ensuring that the randomness cannot be tampered with.
ACP-20
ACP-20 is a proposal that introduces support for Ed25519 TLS certificates to improve Avalanche's peer-to-peer (P2P) communications. This upgrade aims to enhance security, reduce complexity, and increase efficiency by replacing the reliance on the larger RSA or ECDSA keys with the smaller, more efficient Ed25519 cryptographic keys.
Ed25519 public keys are only 32 bytes, and signatures are 64 bytes, compared to RSA or ECDSA's significantly larger key sizes. The reduced size decreases the bandwidth requirements for NodeID generation and p2p communications. It also simplifies maintenance for node operators by allowing TLS certificates to be generated in memory rather than storing them persistently.
Why This Is Important
Currently, AvalancheGo generates a 4096-bit RSA private key, which is then hashed to generate a NodeID. With the proposed switch to Ed25519, operators only need to manage a single, small key, reducing the overhead of node maintenance.
Ed25519 has become widely adopted in cryptographic applications, including its use in many blockchain and distributed systems. It’s faster, more secure, and more lightweight than alternatives like RSA. The adoption of Ed25519 public keys opens up new possibilities, like using these keys for VRFs, which are being introduced through ACP-113.
ACP-118
The last major proposal included within Avalanche9000 is ACP-118, which introduces a major enhancement for how the Avalanche network handles signatures in the context of Warp messages, which are cross-L1 (or cross-chain) communications. The proposal aims to standardize the way signatures are requested and aggregated across different Virtual Machines (VMs) on Avalanche, allowing them to interact seamlessly while simplifying signature aggregation for services like Warp message relayers.
Warp messages are used to enable cross-chain communication between different Avalanche L1s. These messages require signatures from validators, and their signatures are aggregated using BLS signatures to ensure message authenticity. Currently, each VM (like L1 EVM and Coreth) implements its own mechanisms for handling signature requests, which causes friction when building applications intended to operate across multiple VMs.
ACP-118 intertwines with ACP-77 in that it provides the standardized tooling for requesting and aggregating signatures across L1 blockchains, ensuring that even with different validator sets or governance mechanisms, the cross-chain messaging and communication remain smooth and secure.
Key Advantages of ACP-118
One of ACP-118's main advantages is that it significantly reduces the complexity of building cross-L1 or cross-chain applications. Instead of needing to account for each VM's unique codec or signature aggregation mechanism, developers can rely on a standardized format that works across the board.
This standard makes it much easier to aggregate signatures and validate cross-chain messages for developers building applications that span multiple VMs (like DeFi platforms, bridges, or other multi-chain services). This also improves security and consistency, reducing the risk of bugs or misconfigurations in handling signatures. Not to mention, as Avalanche L1 blockchains continue to grow, cross-chain communication will become even more essential for scaling the ecosystem. The Warp Signature Interface Standard ensures that scaling across L1s does not introduce additional friction for developers or increase the complexity of signature verification.
The standard can be used for verifying block hashes, ensuring that on-chain events occurred, or confirming that an event didn’t happen. By defining how signature requests should be handled, the standard supports flexible use cases, whether attesting to a block's validity or managing validator expiration across L1s. VMs are still responsible for ensuring that only valid payloads are signed, and they should be cautious to prevent potential Denial of Service (DoS) attacks by validating the payload and justification of each signature request.
ACP-131
ACP-131 proposes enabling specific Ethereum EIPs (Ethereum Improvement Proposals) on Avalanche's C-Chain and L1-EVM chains. These changes align Avalanche with Ethereum’s Cancun upgrade to maintain compatibility with Ethereum-based developer tools and infrastructure. However, the upgrade excludes blob transactions from EIP-4844 to avoid certain complexities.
This upgrade ensures Avalanche remains compatible with Ethereum’s EVM, allowing seamless use of developer tools and Solidity versions. It improves performance, functionality, and the developer experience. L1s can opt-out, but adoption will require a network upgrade for the C-Chain and participating L1s. Overall, this proposal keeps Avalanche aligned with Ethereum while ensuring stability and future scalability.
Blockchain Summit LATAM and Retro9000
Avalanche9000 is slated to officially kick off at the global Avalanche Blockchain Summit LATAM scheduled for October 2024 in Argentina. The Avalanche Blockchain Summit is an annual event that brings together developers, entrepreneurs, investors, and blockchain enthusiasts to discuss innovations, developments, and future plans for the Avalanche ecosystem. It offers a platform for networking, knowledge sharing, and showcasing new projects and technologies within the Avalanche network.
The summit typically features workshops on DeFi, NFTs, Web3, and infrastructure scaling. Panels with industry experts provide insights into emerging trends and Avalanche’s roadmap. Technical sessions focus on updates to Avalanche’s platform, with deep dives into features like Avalanche's Avalanche9000 upgrade.
The main kickoff event for Avalanche9000 is aimed at builders and developers who want to become early adopters of Avalanche’s customizable L1 blockchains. It includes launch party incentive programs. An incentivized testnet, called Retro9000, will most likely begin in October and incorporate an interactive leaderboard system that users can vote on in terms of what projects they think are most innovative.
Bounty9000 is an opportunity for developers to take advantage of building an Avalanche L1 by using USDC as the gas token. Additionally, Avalanche has stated that rewards will be offered to testnet developers for building foundational applications and chains as part of the Avalanche9000 launch. This includes a first-place $9,000 prize and a second-place $900 prize, paid out in AVAX.
Recent Institutional Adoption
Avalanche’s infrastructure designs and coming upgrades have attracted the attention of numerous financial giants, institutional investors, and other adopters in recent months. Two of their most impressive partnerships to date have come since August, including both Grayscale and Franklin Templeton.
Grayscale Trust
Grayscale Investments is one of the largest digital asset managers globally, offering investment products that allow investors to gain exposure to cryptocurrencies without needing to directly buy, store, or manage the underlying digital assets. Founded in 2013, Grayscale is a subsidiary of Digital Currency Group (DCG), a major player in the blockchain and cryptocurrency space. As of 2024, Grayscale Investments manages approximately $25.7 billion in assets under management (AUM) across its various cryptocurrency investment products.
The Grayscale Avalanche Trust is a specialized investment product launched in August 2024, aimed at giving accredited investors exposure to the native token of the Avalanche blockchain, AVAX. This trust functions similarly to Grayscale’s other single-asset investment products, allowing investors to gain indirect exposure to AVAX without having to buy or manage the token directly.
The Avalanche Trust is designed to provide investors with access to AVAX, the token powering the Avalanche platform, which is known for its scalability, security, and decentralized architecture. Avalanche has also gained attention for its role in the tokenization of real-world assets (RWA), which converts physical assets like real estate and art into digital tokens on the blockchain.
It is open for daily subscription to eligible accredited investors and charges a management fee of 2.5%. As of launch, Grayscale aims to eventually list the Trust shares on secondary markets, though regulatory approval for such listings is not guaranteed. Currently, the trust has just over $600k in AUM so far.
Franklin Templeton Money Market
Franklin Templeton is a leading global investment management firm with a history dating back to 1947. The firm provides a wide range of investment solutions, including mutual funds, ETFs, and institutional asset management services. Franklin Templeton is known for its expertise across asset classes such as equities, fixed income, multi-asset solutions, alternatives, and more. As of 2024, Franklin Templeton manages over $1.6 trillion in AUM, making it one of the largest asset managers in the world.
Franklin Templeton has expanded its OnChain U.S. Government Money Fund (FOBXX) to the Avalanche blockchain as part of its broader initiative to integrate traditional finance with blockchain technology. This tokenized money market fund, which was originally launched on the Stellar blockchain and later expanded to Polygon and Arbitrum, allows institutional investors to access U.S. Treasury yields in a fully digital and blockchain-enabled environment.
The fund uses a unique tokenized structure, with shares represented by BENJI tokens, which investors can purchase using stablecoins like USDC. These tokenized shares can also be transferred peer-to-peer on-chain, enhancing liquidity and accessibility for investors. The fund itself has gained substantial traction, with over $427 million in AUM as of 2024.
Conclusion
The Avalanche9000 upgrade represents a pivotal evolution in the Avalanche network, addressing the most significant limitations the platform has faced since its mainnet launch in 2020, with its focus on reducing barriers to building customizable L1 blockchains, improving interoperability through Interchain Messaging (ICM), and reducing staking costs with the ACP-77 upgrade, Avalanche9000 positions the network as a highly scalable, flexible, and developer-friendly platform.
As Avalanche9000 rolls out, its economic incentives, like the Bounty9000 program, will drive early adoption of new L1 chains, encouraging developers to build on Avalanche's infrastructure. Combined with growing institutional interest, as evidenced by Grayscale's Avalanche Trust and Franklin Templeton's tokenized money market fund, Avalanche is establishing itself as a leader in the next generation of blockchain technology aimed at unlocking real-world asset tokenization and seamless dApps.
Avalanche9000 ultimately provides the framework necessary for long-term scalability, unlocking new possibilities for developers, institutional players, and DeFi applications while maintaining low fees and high performance in an increasingly competitive blockchain environment.
Disclaimer: This report was commissioned by Ava Labs. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.
