Create fast, private and customised blockchain networks
The Avalanche blockchain is an open-source platform for launching decentralized finance (DeFi) applications and enterprise solutions in one interoperable, highly scalable ecosystem. The mainnet went live in late September 2020.
It is the first smart contracts platform that confirms transactions in under one second, supports the Ethereum development toolkit, and enables independent validators to participate as full block producers.
How is Avalanche different from other blockchains?
A key difference between Avalanche and other decentralized networks is the consensus protocol. To date, there have only been 3 approaches to the consensus problem: Classical, Nakamoto, and Avalanche.
In the aftermath of Nakamoto presenting the world with Bitcoin, the world still wanted a protocol with all of the benefits of the Nakamoto consensus such as robustness and true decentralization plus all the benefits of Classical consensus such as speed, scale, quick finality, all at the same time as achieving energy efficiency.
Avalanche takes features from both solutions such as robustness and true decentralization from the Nakamoto model. In addition it taps into benefits of Classical consensus, such as speed, scale, quick finality, and energy efficiency. Avalanche combines these two into a new protocol.
It is yet to be proven whether it’s possible to have the best of both Classical and Nakamoto without the downsides that come with either class of protocol, but Avalanche has certainly taken huge leaps forward.
How does Avalanche work?
Avalanche employs a multi-chain framework with three blockchains that divide critical functions–and even employ different data structures–to give developers maximum flexibility and control over their applications.
First, there is the Exchange Chain (X-Chain). The X-Chain facilitates the creation and exchange of assets between individuals peer-to-peer, including Avalanche’s native token, AVAX.
Second, there is the Contract Chain (C-Chain). The C-Chain is Avalanche’s default smart contract blockchain and a super-fast implementation of the Ethereum Virtual Machine. It is fully compatible with Solidity smart contracts and Ethereum tooling so Ethereum developers are able to easily port applications into the Avalanche ecosystem.
Finally, there is the Platform Chain (P-Chain). The P-Chain is responsible for staking, coordinating validators across networks, and creating custom subnets. Every Avalanche validator participates in staking on the P-Chain to help secure the core network, but these validators can then form dynamic or private sets of validators to operate subnets. On these subnets, the validators have complete control over the data, economic model, virtual machine, and more.
In summary, the division of the network into 3 separate processing powers or entities enables Avalanche to deliver the first smart contract platform that confirms transactions in under one second.
The Avalanche (AVAX) token is the native token of the Avalanche platform and is used to secure the network through staking, transacting peer-to-peer, paying for fees, and providing a basic unit of account between the multiple subnetworks created on the Avalanche platform.
Staking on Avalanche
Staking is a natural mechanism in order to participate in an open network and staking nodes are financially motivated to act virtuously and avoid conduct that might hurt the value of their stake.
A node wishing to enter the network can freely do so by first putting up and locking a stake that cannot be moved for a defined period of time determined by the token holder. Once accepted, a stake cannot be reverted or unlocked to ensure that nodes share the same, stable view of the network. And better yet, for both the token holder and the network, is that the stake does not incur any additional costs.
Unlike other systems that also propose a proof-of-stake (PoS) mechanism, AVAX does not use slashing, and therefore, the total stake is returned when the staking period expires.
How is Avalanche different from Ethereum?
The Avalanche blockchain clearly states that they do not want to be labeled as another ‘Ethereum killer’ as many of the founding members of the team were involved with Ethereum in the early days. When it comes to comparing Avalanche to Ethereum, Avalanche’s similarities are much more evident at a surface level.
Avalanche supports the Ethereum Virtual Machine (EVM) and its tooling–but under the hood, they approach distributed challenges in very different ways. For now, Ethereum uses a proof-of-work mining system like Bitcoin and intends to migrate to proof-of-stake when it launches Ethereum 2.0.
While proof-of-work is an excellent foundation for strong protocols, it achieves this stability by deliberately slowing down network actions and confirmations which is a perfectly acceptable trade-off when considering Bitcoin’s digital gold argument. A much harder sell for the booming world of DeFi builders and users.
As long as Ethereum uses proof-of-work, it will struggle to scale participation without incurring massive fees and network congestion. Ethereum 2.0’s proof-of-stake approach will help, but it also introduces significant complexity and execution risk with its approach to scaling, “sharding”, which aims to process transactions simultaneously, rather than consecutively.
Protocols in the Avalanche family are capable of achieving sub-second finality, supporting 4,500+ transactions per second, and scaling up to millions of full, block-producing validator nodes participating in consensus.
Apps on Avalanche can run in their own independent blockchains known as subnets. These subnets are still connected to the broader ecosystem of chains on Avalanche, but now their relationships are purely value-adding rather than competitive. Not only does this enable the creation of private subnets, but it also allows developers to define the rules, economics, participants, and security of their particular implementation.
Avalanche Blockchain In-summary
The Avalanche protocol is attempting to cherry-pick the best aspects of current distributed ledger technology and place it within a tidy frame. By implementing the innovations of Ethereum and the EVM, and respecting age-old systems while changing the core mechanics to achieve faster, lighter, and cheaper running costs.
The key feature of the Avalanche blockchain solution is to give the developer community a way to create their own blockchain ecosystems. The benefits for builders are clear whilst the advantages of speed and efficiency should be well received by the community. Only time will tell if Avalanche can mount a serious challenge in the crowded blockchain space.