Résumé
Avalanche attempts to improve scalability without compromising speed or decentralization. There are 3 blockchains on the Avalanche network: the Exchange Chain (X-Chain), the Contract Chain (C-Chain), and the Platform Chain (P-Chain). X-Chain is used to create and trade assets. C-Chain is intended for the creation of smart contracts. The P-Chain is intended to coordinate validators and subnets.
One of the protocol's most important breakthroughs is Avalanche Consensus, a method using repeated votes subsampled by validators to make consensus fast and cost-effective. Avalanche also uses subnetworks as a new method of horizontal scalability, enabling the creation of customizable and interoperable blockchains. There is no limit to the number of possible subnets.
Introduction
As blockchain technology develops, it provides new solutions to old problems of scalability, interoperability and usability. Avalanche has taken a unique approach by using three distinct blockchains in its platform. With its native AVAX token and multiple consensus mechanisms, Avalanche claims to be “the fastest smart contracts platform in the blockchain industry, as measured by validation time.” In this article, we will examine the factors that led to this assertion and the solutions it provides.
When was Avalanche launched?
Avalanche was launched in September 2020 by Ava Labs, a team based in New York. Ava Labs has raised nearly $300 million in funding, and the Avalanche Foundation has completed private and public token sales totaling $48 million. The three-person team behind Avax Labs consists of Kevin Sekniqi, Maofan “Ted” Yin, and Emin Gün Sirer.
What problems does Avalanche solve?
There are three main problems that Avalanche is trying to solve. They are related to scalability, transaction fees and interoperability.
Scalability versus decentralization.
Blockchains have always struggled to balance scalability and decentralization. A network with increasing activity can quickly become congested. Bitcoin (BTC) is a good example of this problem, as transactions sometimes took hours or even days to process during times of network congestion.
One way to combat this is to make the network more centralized, giving fewer people more authority to validate network activity, providing greater speed. However, decentralization is essential to blockchain security. New blockchains are trying to solve this problem through technological advancements, and Avalanche has created a unique approach, which we'll cover later.
High fees
Another common problem with large blockchains like Ethereum is their gas fees, which can become high with heavy traffic. This ends up discouraging users of these blockchains, but the competition offers less established ecosystems. For example, the popularity of Ethereum and a historical lack of alternatives have led to high traffic and fees. At times, simple transfers cost more than $10, and complex interactions with a smart contract were even more expensive.
Interoperability
Different projects and companies have their own blockchain needs. Previously, projects had to work either with Ethereum, another individual blockchain not suited to their needs, or a private blockchain. However, finding the balance between customization and cooperation across multiple blockchains has proven difficult. Avalanche offers its solution to the problem with subnets and custom blockchains that share network security, speed, and compatibility.
How does Avalanche work?
Avalanche uses a combination of methods that make it unique and is actually made up of three interoperable blockchains: the X-Chain, the C-Chain and the P-Chain.
1. The Exchange Chain (or X-Chain) is used to create and trade AVAX tokens and other digital assets. Transaction fees are paid in AVAX, and the blockchain uses the Avalanche consensus protocol.
2. The contract chain (or C-Chain) is where developers can create smart contracts for DApps. This chain implements an instance of the Ethereum Virtual Machine (EVM), allowing coders to fork EVM-compatible DApps. It uses a modified version of the Avalanche consensus protocol called Snowman.
3. The Platform Chain (or P-Chain) coordinates network validators, tracks active subnets, and enables the creation of new subnets. P-Chain also uses Snowman.
With each blockchain taking on different roles, Avalanche improves speed and scalability compared to running all processes on a single chain. Avalanche developers have adapted the consensus mechanisms to the needs of each blockchain. Users need AVAX to stake and pay network fees, giving the ecosystem a common asset.
How do Avalanche consensus mechanisms work?
There are a lot of similarities between Avalanche's two consensus protocols. This dual system is one of the main reasons for the network's improved scalability and transaction processing speed.
Avalanche
The Avalanche consensus protocol does not need a leader to achieve consensus as with proof of work (PoW), proof of stake (PoS), or delegated proof of stake (DPoS). This factor increases the decentralization of the Avalanche network without sacrificing scalability. In contrast, PoW, PoS, and DPoS end up having a single-actor validation process, whose work is then validated by others.
Avalanche implements a consensus protocol optimized for directed acyclic graphs (DAG). A DAG allows the network to process transactions in parallel. Validators sample data from other validators to determine whether a new transaction is valid. After a certain amount of this repeated random subsampling, it is statistically proven that it would be almost impossible for a transaction to be fake.
All transactions are finalized immediately, with no further confirmation required. Running a validator node and validating transactions has low and accessible hardware requirements, which contributes to performance, decentralization and low climate impact.
Snowman
The Snowman consensus protocol builds on the Avalanche consensus protocol, but orders transactions linearly. This property is beneficial for smart contracts. Unlike the Avalanche consensus protocol, Snowman creates blocks.
Token AVAX
AVAX is the native token of Avalanche with a limited supply of 720 million. All fees paid on the network are destroyed as a deflation mechanism, benefiting the entire Avalanche community. AVAX has three main use cases:
1. You can stake your AVAX to become a validator or delegate it to a validator. Validators can earn up to 10% Annual Percentage Yield (APY) and set a custom percentage of the reward that they pass on to the delegators who support them.
2. AVAX serves as a common unit of account for all subnetworks, improving interoperability.
3. Transaction fees and subnet subscriptions are due in AVAX.
How to stake AVAX?
AVAX holders can earn rewards by becoming a validator or staking tokens with a validator. To become a validator, you must stake 2,000 AVAX.
The hardware requirements are low enough that most standard laptop or desktop computers are suitable for beginning validation. You can also stake tokens behind a validator and receive rewards when the validator confirms transactions.
Customizable Avalanche Blockchains
Avalanche offers similar functionality to Ethereum and other top-tier blockchains. Developers can create tokens, NFTs and DApps. Users can stake, validate transactions and use over 400 DApps. Avalanche's advantages, according to its proponents, arise from improvements to its capabilities. In addition, Avalanche also allows the creation of interoperable and personalized blockchains.
A custom blockchain using a highly scalable subnet is well suited to the needs of large enterprises, and many are already developing subnets. It is convenient for large companies and small independent operators of these personalized blockchains to interact with others in a rich ecosystem and leverage the security of Avalanche's mainnet.
Avalanche has its own Avalanche Virtual Machine (AVM), which is also compatible with EVM. Developers familiar with Ethereum's Solidity coding language can easily use Avalanche and also port existing projects to it.
How is Avalanche different from other scalable blockchains?
The problems and solutions we found are not unique to Avalanche. Avalanche competes with other scalable platforms and interoperable blockchains like Polkadot, Polygon and Solana. So what makes Avalanche different from the rest?
Consensus mechanism
Probably the most significant difference is the avalanche consensus. However, Avalanche is not the only blockchain with a new consensus mechanism. Solana has a proven track record that claims to be able to handle up to 50,000 TPS (transactions per second), surpassing Avalanche's 6,500 TPS. However, the TPS number is only a metric for evaluating network speed and one that does not take into account the purpose of the blocks.
Transaction speed and completion
Another notable difference is the less than 1 second time for an Avalanche transaction to complete. What does that mean ? TPS is only one indicator of speed measurement. We must also take into account the time required to ensure that a transaction is finalized and cannot be canceled or modified. It is possible to process 100,000 transactions in a second, but if there is a delay in finalization, the network will always be slower for users. Avalanche claims to have the fastest completion time in the industry.
Decentralization
One of Avalanche's biggest claims is its commitment to decentralization. Relative to its size and age, it has a large number of validators (over 1300 as of April 2022) due to its reasonably low requirements. However, as the price of AVAX has increased, it has become more expensive to become a validator.
Interoperable blockchains
Avalanche's interoperable blockchains are also unlimited in number. It is a direct competition with Polkadot, one of the most famous projects offering personalized and interoperable blockchains. Polkadot has limited space auctioned in the Parachain Slots auction, while Avalanche operates with a simple subscription.
To conclude
With decentralized finance (DeFi) platforms looking for alternatives to Ethereum, blockchains like Avalanche are attractive due to their EVM compatibility and low fees. However, DeFi platforms already have a long list of alternative platforms when it comes to scalability and speed.
Avalanche has grown in popularity since its release and has already caught up with Ethereum in total transactions per day, but it remains to be seen whether it will be able to compete with other blockchains like Solana or Polygon.
