A brief intro to Avalanche

Avalanche is a blockchain platform that wants to deal with the blockchain trilemma of security, stability, and decentralization on account of its unique mechanism, proof of stake. 

Similar to Ethereum, Avalanche supports smart contracts to run dApp, decentralized applications, on its network. It aims to create better blockchain interoperability by combining a number of DeFi ecosystems, as well as long-standing projects like Curve and Aave. 

All of this gives it a variety of uses, including, blockchain gaming, building dApps, and NFTs (non-fungible tokens). Avalanche is a rival to Ethereum which focuses on scalability and transaction processing speed.

The native token of the Avalanche platform is AVAX, and it’s used to power transactions in its environment. It serves as the means to distribute system rewards, facilitate transactions on the network, and participate in governance. 

History of Avalanche

Back in May 2018, a group of software developers under the name of Team Rocket published an article that described the basis of the Avalanche protocol. 

Very soon, the team of researchers at Cornell University, led by Emin Gün Sirer accepted the idea. He founded AVA Labs with the main goal to create and develop the Avalanche blockchain.

Emin was a professor of computer science at Cornell and was a member of Initiate to Cryptocurrencies and Contracts. He also created Karma, back in 2003, a Proof of Work virtual currency for file-sharing systems that predated Bitcoin.

AVAX tokens were first sold in February 2019, through a seed sale. Then another private sale occurred in May 2020, and an ICO – initial coin offering in July 2020. 

On September 21st, 2021, AVA Labs launched Avalanche, and ever since then, they continue to draw big investments. 

How does Avalanche work?

Even though Avalanche’s platform is pretty complex, there are three main aspects of its design that make it stand out from other blockchain projects. Its consolidation of subnetworks, consensus mechanism, and its use of various built-in blockchains.

Subnetworks

Avalanche members can initiate specialized chains that can operate using their own rules. This system can be compared to other blockchain solutions, such as Ethereum 2.0’s shards and Polkadot’s parachains.

On these chains, the consensus is reached by subnetworks, or subnets, which are in fact a group of nodes that participate in validating an elected set of blockchains.  All validators of a subnet must also validate Avalanche’s primary network. 

Avalanche consensus

In order for a blockchain network to remain secure and validate networks, it must engage a protocol that allows its nodes to come to an agreement or consensus.

Thanks to cryptocurrencies, the communication has centered around Proof of Work vs Proof of Stake, as the main methods for reaching this consensus.

Avalanche uses a novel consensus mechanism, that builds on the Proof of Stake base. When a transaction is launched by a user, it’s received by a validator node that selects a random, small set of other validators, looking for agreement. 

The validators perform this selection process over and over, communicating with each other to finally reach a consensus.

In such a manner, one validator’s message is sent to others, which select more validators, which selects even more, and so on, until the whole system reaches an agreement on a result.

Poetically, as one snowflake turns into a snowball, one transaction can turn into an avalanche. 

Built-in blockchains

Avalanche is built using three different blockchains to address the limitations of the famous blockchain trilemma. Digital assets can be transferred across each of these chains in order to achieve different functions inside the ecosystem.

The Contract chain (C-Chain) – allows the creation and execution of smart contracts, and because it’s based on the Ethereum Virtual Machine, Avalanche’s smart contacts can make use of cross-chain interoperability. 

The Exchange chain (X-Chain) – is the default blockchain on which assets are exchanged and created, and this includes AVAX, Avalanches native token. 

The Platform Chain (P-Chain) – enables the creation and management of subnetworks, and coordinates validators. 

All transactions are validated using the consensus protocol and Proof of Stake system. Avalanche offers a loyal, high-security network that balances cost and the speed of transactions while staying decentralized and easy to use. 

Anyone who wishes to explore Avalanche’s offering can purchase ACAX tokes as it’s used to interact with smart contracts, pay transaction fees, and can take advantage of staking rewards. 

Others who are interested in the DeFi programs Avalanche has to offer, or see potential in building dApps on the network would like to hold their tokens in order to participate in mentioned projects.

On the other hand, unlike other blockchains like Ethereum and Bitcoin, Avalanche’s fees are not paid to validators on the network, instead, all fees are well, burned. 

What makes it so unique?

The Avalanche platform can handle somewhere around 4500 transactions per second. It’s able to achieve transaction finality in about 3 seconds, or under. This makes it better suited for major scaling decentralized applications, which would be blocked on many competing platforms.

Apart from being highly scalable, Avalanche is also built to challenge another great problem that blockchain-based systems are facing, and that is interoperability. 

It reaches this by enabling blockchains within a subnet and between subnets to communicate with each other and supporting cross-chain value transfers. Also, it is very inclusive. 

What can you do with it?

Avalanche lets firms and individuals easily install their own blockchains, whether these are for private use-cases or public ones.  

It’s special in the fact that it uses a combination of many custom-built blockchains, in addition to a powerful consensus mechanism, and proof of stake, to achieve an incredibly powerful and decentralized platform for developers to build on. 

How it’s compatible with Ethereum, developers can easily port their Ethereum dApps, for example, to Avalanche and launch a various array of dApps on the platform. 

These applications can run on their own Avalanche blockchain, allowing developers a great deal of control over their function, how secure they are, as well as who has access to them.

All of these capabilities have seen development progress on Avalanche skyrocket in its short history, and there is now a wide range of apps using its very own technology.

Partnership 

The company behind Avalanche, AVA Labs is working with some big companies across the crypto and finance industries. Here are highlights of the partnerships and deals AVA Labs has set up so far.

• Mastercard – chose AVA Labs for their Start Path Crypto program, which is designed to help blockchain and crypto start-ups scale their business. 
• BitGo  – this institutional digital asset keeper added AVAX support in late 2021. This lets their clients offer AVAX to their investors.
• Deloitte – they partnered with AVA Labs and are using Avalanche to upgrade their cloud-based platform called Close As You Go. This platform helps state and local governments with issuing disaster reimbursement payments.

There is some more good news for Avalanche, and it’s that it has quickly caught projects to its network, mostly in the popular DeFi environment. 

Risks

Even though Avalanche doesn’t have any strong flaws, it’s still a new project in a very competitive space. Many of the best smart contract blockchains began their development many years before Avalanche, therefore they had more time to get established. 

There is some speculation whether the Avalanche network is really decentralized. In all fairness, the majority of organizations behind the blockchain projects play a larger role in their operation, so Avalanche doesn’t stand alone. 

Avalanche can be considered secure thanks to the randomized nature of its consensus mechanism. However, AVAX is a cryptocurrency, which is considered a risky asset. 

With its growing ecosystem and design, Avalanche has a great potential for long-term growth. Nonetheless, even if it’s backed by the big organizations and for now low risk, you should remember that Avalanche it’s still very young. 

Advantages and disadvantages of Avalanche

Here we’ve created a short list of what to like and dislike about Avalanche. 

Pros

• Fast transaction processing times
• Capable of supporting many blockchain-based projects
• Reward structure boosts participation

Cons

• Some great competition from platforms such as Ethereum
• Malicious or careless validators are never punished by losing AVAX
• All validators must stake 2000 AVAX tokens

The future of Avalanche

As Avalanche grows at a remarkable pace, the platform has searched for ways to cater to expanding memberships while keeping its signature affordability and speediness. And an answer to all that could be the subnets. 

They allow individual projects built on the Avalanche platform to stay connected to its mainnet by individual chains, and all that without taking up space on the mainnet.

Bu reorganizing traffic in this way, subnets can allow Avalanche to avoid any issues regarding speed and gas, as it scales up in size. 

Subnets have already been adopted by numerous large-scale projects. In addition to subnets, Avalanche has something to show. Platform-specific wallet called Core will streamline transactions on Avalanche, and make the platform even more navigable for new and non-crypto users.

In theory, subnets could allow all crypto networks, like Bitcoin and Ethereum to exist on Avalanche, and still use their own cryptocurrencies.

The current president of AVA Labs has shown interest in trying to build out Core to absorb all great blockchains, Bitcoin and Ethereum.