The Spruce Subnet provides financial institutions with the means to explore and engage with blockchain infrastructure with minimal risk or barriers. Financial Institutions can develop DeFi applications to further business needs and facilitate customer satisfaction.
Spruce is powered by Evergreen Subnets, a system created by the Avalanche team to facilitate the specific needs of financial institutions. Evergreen Subnets are Ethereum Virtual Machine (EVM)-based chains with a permissioned validator set and a custom gas token to power transactions across the blockchain. These Subnets maintain the benefits of building on DeFi networks while enabling chain-level features only possible within enterprise blockchains. Spruce and Evergreen Subnets address many of the issues permissioned DeFi faces, opening the door to broader institutional adoption within public blockchains.
The Spruce testnet provides traditional buy- and sell-side institutions the ability to engage with public blockchain infrastructure safely. Using valueless tokens allows institutional participants to experience the full functionality of Avalanche’s Subnet architecture without putting capital at risk.
Upon partner onboarding, institutions’ wallets are issued non-transferable tokens (NTTs) indicating they’ve passed Know Your Customer (KYC)/ Know Your Business (KYB) checks. In addition, their wallet addresses are embedded in an allowlist, which monitors access at the chain level. Smart contract deployers who have integrated key infrastructure and applications also undergo the onboarding process for their activity on Spruce.
In a recent research report by Uniswap, executives from Uniswap Labs and Circle Internet Financial cited a 2022 BIS Triennial Survey saying “around one-third of deliverable FX turnover, around $2.2 trillion, is at risk on any given day, up from $1.9 trillion in 2019.” Potential benefits of on-chain FX and cross-border payments include payment vs payment transactions, atomic settlement, and reduced counterparty risk.
Institutional partners have used DeFi applications on Spruce to execute foreign exchange (FX) and interest rate swaps, with other areas in active research and development. Future phases of Spruce will welcome additional third-party applications, assets, and processes, including the exploration of tokenized equity and credit issuance, trading, and fund management.
Subnets have been incredibly successful in providing institutions with the users they need. Active addresses across all Subnets have peaked at over 1 million in a day, and at nearly 4 million transactions in a day.