"I think it's very fair to treat Avalanche and Bitcoin as having similar levels of legitimacy. Avalanche has genuinely interesting tech." Vitalik Buterin - Co-founder Ethereum
The Avalabs team with Emin Gün Sirer, Kevin Sekniqi, Maofan "Ted" Yin started the project in 2018 and launched the Mainnet on 21. Sept 2020. To avoid confusion with the Travala AVA Token, the team changed the name of their native Token from AVA to AVAX
The Avalanche network aims to improve Scalability without compromising on decentralization.
Three blockchains are making up its mainnet: the X-Chain, C-Chain, and P-Chain. Each of the Chains is responsible for different things, which we will explore in greater detail later on. There are multiple consensus mechanisms used, the Avalanche and Snowman Consensus Mechanism. Avalance claimed to be the fastest Chain regarding the finalization time, which is under a second. Issued Crypto Assets are configurable on the Avalanche Chain. The Chain creator decides about features, if the Chain needs permission or is permissionless, and the smart contract functionality.
Avalanche claims to be more scalable, more decentralized, ready for enterprise adoption with VISA-like throughput and all this with sub-second finality times.
Sound too good to be true?
Let's have a look at the things Avalanche is trying to solve.
Here is the full video review.
Avalanche: Problems and Solutions
Avalanche tries to solve three main problems:
- Transaction Fees
Scalability versus decentralization
Traditional Blockchains often struggle to find a balance between Scalability and decentralization. With an increasing number of users and activities, it's getting harder to find consensus. Bitcoin is struggling a lot with that. On the other hand, fewer people validate and secure the network, which is much faster but leads to centralization.
Avalanche has a unique approach to solving this problem with its combination of unique consensus mechanisms.
Ethereum and other large blockchains are suffering from high fees. High fees are for sure a problem for mass adoption and slow down the deployment of real-world applications.
The gas fees on the C-Chain are 225 nAVAX (previously 470 nAVAX) and on the X-Chain and P-Chain 0.001 AVAX, which compares to around $0,03 at the moment.
Different types of transactions require the payment of a transaction fee. The C-Chain gas prices vary depending on creating your blockchain, creating a subnet, or making a simple send. More Details you can be found here.
💡 nAVAX is short for nanoAVAX: 1 nAVAX = .000000001 AVAX
In existing solutions, it is challenging to get customizability and cooperation between multiple different blockchains.
Subnets and custom blockchains are the Avalanche solution addressing that problem. They share the network's security, speed, and compatibility. Different projects and businesses have their very own needs when it comes to blockchains. That's why with Avalanche, it is possible to configure your Chain for your own needs.
The Technology behind Avalance
Avalanche is using a combination of methods that make it somehow look unique. Avalanche is built on three different, interoperable blockchains, each one with another cause. Each Chain is responsible for other roles, which improves speed and Scalability.
Let's have a look at them.
- Exchange Chain (X-Chain)Transaction Fees: AVAXConsensus Protocol: Avalanche The primary use of this Chain is to create and exchange AVAX and other digital assets and is an instance of the Avalanche Virtual Machine (AVM). Those assets have an adaptable set of rules. The Ethereum Token standards are very similar to that. The creation and minting of tokens require a fee in AVAX to be paid. Those Fees are burned.
- Contract Chain (C-Chain)Consensus Protocol: Snowman This Chain can create smart contracts for DApps. The Contract Chain implements the Ethereum Virtual Machine (EVM), making it possible for developers to develop EVM-compatible Apps. Gas Fees are paid in AVAX and burned.
- Platform Chain (P-Chain)Consensus Protocol: Snowman. The Platform Chain allows the creation of subnets, tracking them, and coordinating the network validators. Subnets provide consensus for custom blockchains. Those subnets are a set of validators. A blockchain is validated by only one subnet. Each subnet can validate multiple blockchains.
The two Consensus mechanisms of Avalanche explained.
The protocols are called Avalanche and Snowman. Both consensus protocols have a lot of similarities. However, each one is tailored towards its specific blockchain(s) needs. This dual system is a crucial reason for the network's improved Scalability and transaction processing speed.The two mechanisms of Avalanche are pretty similar, but some differences are based on the different needs of specific blockchains.
The Snow family of protocols that have been developed for Avalanche combines the best properties of Nakamoto consensus (robust and highly decentralized) with the best of the classical consensus protocols (low latency, high throughput, lightweight).
Snow protocols are high-speed; they achieve irreversible finality in under 2 seconds and support thousands of transactions per second (TPS). Emin Gün Sirer is claiming AVAX is faster than VISA.Let's have a look at the protocols.
The Avalanche Consensus Protocol
The Avalanche consensus protocol uses a parallel checking mechanism to probabilistically determine if a validator's transaction confirmation is true or not. All this happens randomly. This mechanism dramatically increases the transactions per second and provides a sub-second finality time. Snowman has a similar approach but is linearly processing with blocks.
To create custom, interoperable blockchains on Avalanche you need to pay a fee. The currency used is the AVAX Token.
Avalanche is leaderless, which means unlike in Proof of Work (PoW), Proof of Stake (PoS), or Delegated Proof of Stake (DPoS), the validator's work does not have to be validated by others. This factor increases the decentralization of the Avalanche network without sacrificing Scalability
Avalanche implements a directed acyclic graph (DAG) similar to Fantom (see here in my review), which allows processing transactions in parallel. Every node is processing and validating transactions. This happens through random polling other validators to determine whether a new transaction is valid. After a certain number of confirmations of this random approach, a transaction is statistically proven to be true. It is almost impossible for a transaction to be false and this makes it possible to finalize transactions immediately without further confirmation. There are no blocks in the Avalanche Consensus Mechanism. Also, the requirements for running a validator node are low, which helps with performance and decentralization.
The Snowman Consensus Protocol
Snowman is a linear Avalanche and great for smart contracts. The P-Chain and the C-Chain are implementing the Snowman consensus protocol. Snowman is not using directed acrylic graphs (DAG) like the X-Chain, which gives you absolute order. This is needed for smart contracts and network orchestration.
Customizable Avalanche blockchains
Avalanche is offering the same base functionality as Ethereum.
As a developer, you can create:
- new tokens
- and smart contracts
As a user, you can:
- stake tokens
- be a validator
- use decentralized Applications (DApps)
You can also do with Avalanche, but not with Ethereum, to create your own interoperable, customized blockchain.
For traditional financial markets and financial institutions, being compliant is crucial. In Avalanche subnets, you can configure complex rulesets to enforce this compliance. Examples are requirements to be located in a specific country or passing the Know your customer (KYC) checks, and so on.
Every organization has its own specific needs, and with Avalanche, you get a highly scalable platform that can be adjusted to those needs. In a created blockchain, you can have a custom native token. The native token is used to pay transaction fees. For the creation of blockchains and subnets, you need to pay a small fee in AVAX.Avalanche has its own Avalanche Virtual Machine (AVM), fully compatible with the Ethereum Virtual Machine (EVM). This makes it possible to port your Solidity-based project from Ethereum to Avalanche easily.To validate custom subnets, a subnet maintainer has to be a validator in the primary network.
Now it's time to have a look at the $AVAX Token.
The $AVAX Token
Avalanche was built with financial market use cases in mind. A Digital asset can be easily created and traded.
The asset could represent
- financial instruments like equities
- bonds - loans from an investor to a borrower for an interest rate
- fractionalized real estate - receive partial equity in a property
- Initial Litigation Offerings (ILO)
- and many more
How can the AVAX Token be used?
6.500 transactions per second (TPS) make the Avalanche throughput higher than that one of Visa. In combination with the sub-second finalization, this is very powerful.
Creation of subnets and blockchains
Avalanche is a platform of platforms. It will ultimately consist of thousands of subnets to form a heterogeneous interoperable network of many blockchains.
Anyone can create their own customized application-specific blockchain. Those subnets support multiple virtual machines. Each subnet has its own (native) Token and also a configurable Fee structure.
Everything started with mining. In the early days, it was possible to mine Bitcoin with a moderate hardware setup. Today you need expensive hardware, and if you are not in a country with cheap electricity and part of a mining pool, mining does not make much sense. Currently, there are five mining operations controlling the majority of the Bitcoin hashing power. Do you consider that as decentral?As we hear, Avalanche uses proof-of-stake for network security. You can run your validator node with a hardware requirement of 2 CPU cores, 4 GB Memory, and a 40 GB SSD hard disk. The Avalanche consensus mechanisms make it possible to scale to millions of validators.Depending on your staking duration, the rewards are going from around 9,5 % (for two weeks) up to 11,5 % (for a year). There is no slashing, and at the moment, you only need 60 % uptime to receive rewards. Currently, you need a minimum of 2000 AVAX to stake to become a validator. You also can delegate your stake.
$AVAX Token Metrics - 14. Sept 2021
Price: $ 51.45
Circulating Supply: 220.286.577
Max Supply: 720.000.000
MarketCap: $ 11.326.705.253
Fully Diluted Valuation: $ 37.020.994.634
MarketCap Rank: 17
All time high: $ 64.51
All time low: $ 2.8
Trading Volume / MarketCap: 0.1067
Total Supply: 720.000.000
Current Circulating Supply: 220.286.577
Raised Capital: $60.000.000 (Jan 2019 - Jul 2020)
Purchaser Distribution (15,96 % of total supply)
- Seed Sale (around $0.33 / token)
- Private Sale (around $0.5 / token)
- Public Sales (between $0.5 and $0.85)
Ecosystem Distribution (24,04 % of total supply)
- Strategic Partners
- Community & Developer Endowment
- Testnet Incentive Program
Team (10 % of total supply)
Token Unlocking Schedule
All kinds of Fees in the Avalanche Network are paid in $AVAX. All of those fees are burned to reduce the supply, which increases the scarcity for all AVAX token holders. If there is more AVAX burned than minted, then there is a deflationary pressure. The amount of 720 million AVAX Tokens can never be exceeded. In Ethereum, there are no limits to the total supply.
Team, Advisor, Investors
Avalanche was created by AVA Labs, which has its own Avalanche Foundation. The whole team has over 119 people working, most of them are based in the US, New York area.
Professor at Cornell University for 20 years
MBA - Harvard, BS Cornell University
Founder of Sureview Captial /Sego
Technology entrepreneurs making investing in private assets as easy as buying public equity.
Maofan “Ted” Yin - Chief Protocol Architect (Linkedin)
Student of Sirer
Lead author of the Libra Consensus
Doctor of Philosophy (Ph.D.), Computer Science - Cornell University
Strong Research Background
Stephen Buttolph - Senior System Architect
B.S in Computer Science at Cornell University (2018)
Tyler Smith - Developer
former BCH developer
There are impressive names in the early investors. The first $6 million round in 2019 included names like Andreessen Horowitz, while another $230 million round in September 2021 was led by Polychain Capital and Three Arrows Capital. The capital injection should boost the decentralized finance (DeFi) activity on the platform and support new enterprise tools. The investment round was happening through a token investment, which was described as a "private sale of tokens." The investment companies are holding the native AVAX Token instead of equity.
- an early investor in the project (6 million round)
- raised $ 2.2 billion for its Crypto fund (2021)
- invested in tons of projects e.g., Keep, Solana, Opensea, Ripple, Dfinity
- exited Airbnb, Asana, Box, DigitalOcean, Facebook, Lyft, Zynga, Coinbase, Slack, and many more.
launched 2016 with $5 million from 30 investors
- crypto/blockchain hedge fund
- early investor in the project (6 million round)
- invested in Tezos, 0x, Anchorage, Arbitrum, AVA Labs, Solana, and many more
based in Singapore
- invested in Aave, Avalanche, Bitcoin, Mina, Polkadot, Kusama, Ethereum, Solana, Lido, Balancer, SushiSwap, TraderJoe, KeeperDAO, KyberNetwork, and many more
The Avalanche roadmap is one of the most detailed that we have seen till now. Here is what is planned for the rest of the year?
- P-Chain Governance
- P-Chain Pruning
- P-Chain Fast Sync
- C-Chain Fast Sync
- C-Chain Dynamic Fees Update
- X-Chain Epochs
- X-Chain account history indexing in AvalancheGo
New DeFi Lending Platforms
Initial Litigation Offering (ILO)
- First ILO launched
New Avalanche Bridge V1
- industry-first secure bridging architecture-
- 5x cheaper than Avalanche-Ethereum Bridge (AEB)-
- 2x faster than AEB
Avalanche Wallet V3: Redesign
- Consolidated wallet workflow
- Additional login options- Improved security
Avalanche Wallet V4: Mobile
Aalanche Wallet V5: Browser Extensio
New Avalanche Bridge V2
- Ethereum Virtual Machine (EVM) Multi-Chain Support
New Avalanche Bridge V3
- Additional Chain Support
NFT Marketplace V2: NFT SDK
- Additional Global Exchange Listings (Phase 3)
- Additional US Exchange Listings (Phase 2)
- X-Chain Dynamic Fees
- X-Chain Pruning
- X-Chain Fast Sync
- Cross-subnet transfers
- Permissionless subnets
- Subnet validation rewards
Avalanche Name Space
Avalanche Wallet V6
New Avalanche Bridge V4
Traction and Adoption
- 1,000+ validators on Denali Testnet
- 3,000+ members in our community development platform, Avalanche Hub
- 5,500+ tasks completed by individuals in the Avalanche Hub
- Hundreds of grant applications were submitted to build core infrastructure and innovative use cases on Avalanche
- GitHub activity rivaling competitive projects with multi-year leads over Avalanche
- Hackathon for university students had over 30 teams participate from leading computer science and engineering programs like Cornell, Carnegie Mellon, and Michigan
Avalanche's decentralized application platform offers sub-second transaction finality, VISA Level throughput, and high customizability without sacrificing decentralization or security. This is possible through a set of consensus protocols (Snow Protocols) delivered by the AVA Labs team.
These attributes make it ideal for building a DeFI platform and competing with the traditional financial markets. The scalable ecosystem of AVAX makes it an excellent platform for payments, potentially protected by millions (currently 1000) of validators. Those validators are responsible for the security of the network.
Avalanche is a network of blockchains; the number is unlimited. This is very similar to Polkadot. The Avalanche Network is modular on the application level that can be either private or public. Developers have complete control over smart contract behavior; this makes it possible to create complex digital assets. Each digital asset can have a custom ruleset.
AVAX has a fixed capped supply of 720 million AVAX Tokens. 360 Million avalanche tokens were minted at launch, many of them locked up investing periods up to 10 years. 360 million tokens are used for staking rewards. Compared to other Blockchains like Ethereum or Bitcoin Network Fees are not used as Mining or Staking rewards, all Avalanche Network Fees are burned as a deflationary mechanism, reducing the total supply. This creates scarcity, which is an essential characteristic of the store of value concept.
The team around Emir Gün Sirer and their Investors, including Andreessen Horowitz, Polychain Capital, and Three Arrows Capital, are impressive. At the moment around 50 % of the staff belongs to the Research and Development team .
Direct competitors who are claiming similar improvements are for sure Polkadot, Polygon, and Solana. Let's have a look at their numbers. Currently has a market cap of $13 Billion, Polkadot is standing at $27 Billion, Solana at around $45 Billion, and Ethereum at $325 Billion. A market cap increase of five to ten X should be possible in the following months and years.
All this looks very promising. We will closely look at how the AVAX Network was developing and adding it to our Crypto Portfolio.Let's have a look at some risks and potentials.
- reported that development is slowing down. AVAX is having a hard time finding enough developers. (like every other Blockchain Project)
- no self-funding mechanism (reward for stakers, validators) because network fees are burned
- Twitter Discussion of Emir Sirer and Vlad Zamfir
- Significant adoption through compatibility with EVM
- a very clear plan and detailed timeline compared to other projects
- Staking rewards between 9,69% and 11,54 % in combination with the rising price might be an excellent investment
- Capped max. supply of 720.000.000 AVAX Tokens
- Configurability of Subnets for custom needs
- Sub-second Finality, Throughput and Scalability possibilities
- A price of $300 to $600 (5 to 10 x) should be possible.
- Even more significant growth potential in the Avalanche Ecosystem
Audits & Exploits & Developers
The code is mathematically correct but still needs formal proofing.
There was a Bug Bounty program announced on 31. March 2021. The Avalanche Wallet was intensively Penetration tested for three weeks by Holborn and is now officially approved to be secure. Here you can find the report.
- Feb 2021
The Avalanche network has come to a near halt after “a bug in the cross-chain functionality," through load generated by Pangolin launch and huge loads of traffic they generated
31. March 2021
Messari reported (31-3-2021) even an offline time of 24 hours and said that the high traffic of Pangolin's launch triggered an error in Avalanche that led to an invalid mint and C-chain nodes panic.
- May 2021
Six hours outage without control over their coin.
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