Author: Eden Au, The Block

Translator: Felix, PANews

Key Points:

• ACP-77 is a community proposal that will change the dynamics of validators on Avalanche L1 (previously known as subnets).
• Avalanche L1 validators will no longer need to validate the main network and stake at least 2,000 AVAX. Instead, they will follow the requirements set by the sovereign Avalanche L1.
• Avalanche L1 validators will pay ongoing dynamic fees to register information on the P-Chain.
• The proposal benefits both institutional and retail Avalanche L1 validators, as it enables regulatory compliance and lowers the entry barrier for validators.

Avalanche has long been a proponent of horizontal scaling using "subnets," which are now rebranded as Avalanche Layer 1 (L1). Avalanche L1 is a sovereign, often application-specific blockchain that can be customized to meet the specific needs of different use cases.

This infrastructure has attracted many native crypto and institutional clients to host their Web3 platforms on Avalanche L1, including the NFT platform of Japanese gaming giant Konami and Intain's secure tokenization platform.

Over the years, Avalanche L1 has undergone multiple upgrades to enhance its functionality. For example, the Banff upgrade enabled cross-subnet communication through Avalanche Warp Messaging (AWM). Meanwhile, Evergreen introduced a framework for privacy protection and compliant permissioned Avalanche L1 for enterprises.

However, the existing validation requirements for Avalanche L1 still have a high entry barrier. Current Avalanche L1 validators need to validate the main network of Avalanche, including the contract chain (C-Chain), platform chain (P-Chain), and exchange chain (X-Chain).

For reference, main network validators must allocate at least 8 AWS vCPUs, 16 GB RAM, and 1 TB of storage space for network validation. They also need to stake a minimum of 2,000 AVAX.

At the inception of the network, this staking requirement was not high. However, due to the appreciation of tokens over the years, it has reached over $250,000 at the peak of the previous market, equivalent to $41,000 today. This high overall operational cost hinders the decentralization of Avalanche L1 validators and may hinder the reliability and adoption of the Avalanche ecosystem in the long run.

Cost of staking AVAX (in USD)

ACP-77

ACP-77 is a community proposal that will fundamentally reform the creation and management design of Avalanche L1s, bringing more flexibility and autonomy to Avalanche L1 validators.

Sovereignty

According to the proposal, Avalanche L1 validators will no longer need to validate the main network simultaneously. They only need to synchronize with the P-Chain, which tracks changes in their own set of Avalanche L1 validators and handles cross-L1 communication through AWM. This change significantly reduces the operational and staking costs for participating in Avalanche L1 validation.

This separation will also allow regulated entities to validate only their permitted Avalanche L1s, as they can now choose not to validate the unpermitted main network, which may contain transactions perceived as potentially high-risk or non-compliant from their perspective.

Furthermore, Avalanche L1 can formulate and implement its own validation rules and staking requirements, and the P-Chain will no longer support staking reward distribution for Avalanche L1. In other words, the sovereignty of Avalanche L1 returns from the P-Chain to L1 itself, marking a milestone in achieving horizontal scaling for multiple sovereign blockchains to run simultaneously.

Dynamic Fees

On the other hand, the proposal will transform the fee mechanism of the P-Chain from a fixed per-transaction fee to a more user-centric dynamic fee. This change aims to ensure the long-term economic sustainability of the network after the removal of the 2,000 AVAX staking requirement.

The new dynamic fee mechanism involves Avalanche L1 validators making continuous payments based on several factors (such as the total number of registered Avalanche L1 validators on the P-Chain). The fees will be adjusted based on network utilization. When the total number of Avalanche L1 validators exceeds the target utilization rate, the fees will increase, and vice versa.

The basic principle is that each additional Avalanche L1 validator adds load to the P-Chain. The P-Chain is responsible for storing essential metadata of Avalanche L1 validators for communication purposes, such as IP addresses, BLS keys, etc.

In practice, the balance of Avalanche L1 validators on the P-Chain will continuously deplete and need regular replenishment to maintain uninterrupted operation. This approach reduces the entry barrier by lowering upfront staking and hardware costs while ensuring continuous contributions to the network's economic sustainability.

Summary

In summary, ACP-77 aims to redesign the relationship between Avalanche L1s and the main network. Specifically, Avalanche L1s will gain greater flexibility and sovereignty, as Avalanche L1 validators no longer need to adhere to strict requirements imposed on main network validators, such as the minimum staking requirement of 2,000 AVAX, significantly reducing the operational costs for Avalanche L1 validators.

Avalanche L1 validators will pay dynamic fees to the P-Chain to continuously store essential metadata for communication purposes. This ensures fair compensation for the main network for its crucial work in providing for each Avalanche L1 validator, Avalanche L1, and cross-L1 communication.

The proposal will make it easier for institutional L1s to achieve regulatory compliance, while retail-focused L1s can benefit from a more decentralized set of validators. These advantages will promote a larger, more diverse Avalanche ecosystem and expand the scale of the blockchain ecosystem.

Related Reading: Inventory of 9 unreleased projects in the Avalanche ecosystem

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