Avalanche (AVAX) Cheatsheet

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DefyingDefi

8 min readFeb 25, 2022

Easy AVAX Update Guide

Not gonna lie but I think what really caught my eye was how good-looking Emin Gün Sirer (creator of Avalanche) was… hello Crypto Hugh Grant!

Jokes aside, Avalanche was one of the projects that took 2021 by storm with its speed and low cost: 4,500 transactions per second, and a 2 second time to finality (how long it takes for a transaction to complete). Some say it is the fastest blockchain around.

In contrast, Ethereum does 15 transactions per second and takes about 6 minutes to finalize transactions. On top of that, on a “good” day, gas fees can even be up to $200 per transaction!

Yes, I was very upset by how much gas fees I had to pay to play Axie Infinity.

Will Avalanche be The Ethereum Killer?

What is Avalanche?

I’ll spend a little bit more time appreciating the technology created by Avalanche — as 1/ I want to sound more clever 2/ it has been said that Avalanche epitomizes the perfect blockchain: decentralized, scalable, secure.

Overview

Layer-1 proof of stake blockchain network where developers can build applications and deploy smart contracts
Built by Ava Labs, headquartered in New York
Compatible with Ethereum, which means Ethereum applications can easily deploy on Avalanche
Mainnet went live 2020
Led by Emin Gün Sirer — Former Cornell Computer science professor or Crypto Hugh Grant
Raised over US$60m in token sales in 2019 and 2020
Its initial investors comprised of Andreessen Horowitz, Polychain Capital, Initialized Capital, and angel investors such as Balaji Srinvasan and Naval Ravikant of AngelList

Consensus Model

Their proprietary Snowball Consensus model uses subsampled voting and network gossip
This means random subsets of validators (out of a larger group of volunteers) are asked to make decisions until more and more validators have the same decision.
How this works: let’s say I volunteered (sounds like me alright) to be at a bar with 100 other people (yes, very covid unfriendly) and we take a random subset of people (say 20 people) to choose between Tequila and Vodka. If more than half of them say Vodka, everyone in that group of 20 now has a preference of Vodka. Then I go on to choose another random group of 20 people to do the same thing. This process gets repeated until the whole bar has 1 preference (hopefully, no tequila please!!)
Also, it does not matter how many nodes or validators there are, consensus will be reached in a certain time frame. In fact, Avalance has thousands of nodes
The more AVAX you stake on the network, the higher your probability is to get chosen as a validator
It’s also harder to attack —it needs 80% of all computers to attack the network in comparison to Bitcoin and Ethereums’ 51%

Network Infrastructure

Avalanche’s genius stems from the fact that it has a primary network and 3 blockchains (or sub-nets) instead of one.
Each has its own purpose, and different tasks are run on different subnets. This makes it faster, instead of 1 blockchain doing it all. This is akin to a company having different departments instead of a 1-man show.
These are 1/X Chain — for transactions and where tokens are issued. 2/P Chain- where validators stake AVAX(native coin) to secure the network and more subnets are created. 3/C Chain — where smart contracts are deployed (Ethereum Virtual Machine compatible).
And it gets even more brilliant: each new subnet can have its own blockchains and consensus model, just like the primary network. And they can be public or private. This means it’s infinitely scalable and on-demand.
For example, if I wanted to create a blockchain, and since I don’t have a computer science degree — I can simply plug and play using Avalanche’s network. Ok, I’m exaggerating — but that’s the intention.

AVAX Coin

Its native coin AVAX has a max cap of 720 million — making it deflationary. Although the caveat is that they have a pretty aggressive vesting schedule and its next vesting cliff is on the 3rd of March!
Transaction fees are in AVAX (native coin) and are burned, which also helps it be deflationary

Fundamentals

Avalanche has pretty strong fundamentals in my opinion — looking at a few key metrics…

1/Market Cap/TVL seems pretty healthy (barometer of current market valuation)

2/ Unique wallet addresses — more than 2 million users

Source: https://snowtrace.io/chart/address

3/ Daily transactions have been on the rise — hitting more than 1 million per day

4/ Growth in TVL

It’s also seen an explosive growth in TVL — it’s come down a fair bit (No thanks to Putin) but still pretty impressive. They were pretty smart about it too, with the US$180M Avalanche Rush program that essentially is free money for people to use their network. And they onboarded Ethereum’s 2 largest Defi protocols for starters Aave and Curve with US$27m allocated to them.

Recent Developments

Avalanche had so many developments I was beginning to wonder if their team is made up of cyborgs who don’t sleep…

Funding/Grants

Firstly, Avalanche has so much $$$ to support and grow its ecosystem. That’s more than half a billion bucks there

Listings

And it started to launch on the world’s biggest exchanges + started supporting the biggest stablecoins, ensuring they always had access to liquidity from the real world and in the crypto world.

AVAX started to launch on the largest centralized exchanges: Coinbase, FTX , welcoming a surge of liquidity from the “real world”
Tether (USDT) and USDC launched on AVAX, more liquidity from stablecoins
Celsius Network, one of the biggest centralised borrowing and lending platforms (c.US$19b in assets under management) started supporting AVAX this year
UST has most recently been brought to the network via the Avalanche Rush programme bringing its Decentralised Exchange Pangolin on board

Institutional Adoption

On top of that, it formed game-changing partnerships — that is probably first of its kind in crypto.

It formed a strategic partnership with Deloitte to enable a new disaster recovery platform to help state and local governments easily demonstrate their eligibility for federal emergency funding this is pretty ground-breaking as it is testament to its technology being on-demand and completely adaptable to the user’s needs
Topps (trading card company) launched a Major League Baseball (MLB) collection and marketplace on Avalanche
Ava labs was also one of the start-ups chosen for Mastercard’s crypto accelerator I think this will foreshadow a future partnership
Fireblocks, a leading provider of custody and settlement solutions for digital assets to more than 650 banks, hedge funds, and financial institutions, launched support for Avalanche

Key Takeaways

1/ Impressive Tech: The reason why I spent so much time talking about its tech — is that it's truly brilliant! Its consensus model is revolutionary as everyone can reach an agreement without everyone hearing from everybody. (Quoting Emin himself here)

2/ Impressive Founder/Team: Yes I’m impressed by his good looks — but he’s known to be a super legit guy that developed a cryptocurrency in 2003 based on proof-of-work 6 years ahead of Bitcoin… and the team at Ava labs are of a different pedigree (look at where they come from!)

3/Impressive Growth: So what if you have a great team and great tech — you must gain adoption from users and developers. So far, they’ve done pretty well in this aspect — thanks to their Avalanche Rush incentive programs and funding rounds that support growth. I’d expect the ecosystem to grow further as the funds are increasingly deployed and more developers come to the network to deploy dApps, which will in turn attract more users

4/Roadmap: A lot of impressive developments, but what’s gonna happen next? What could potentially be communicated better is perhaps their priorities for the upcoming year. Its “roadmap” link on its website leads me nowhere… Moreover, I believe they have yet to hit a couple of milestones in their 2021 roadmap. For example, it has yet to release a browser extension + mobile app wallet which will enable us to transact more seamlessly — instead of a 3 step process to start using the coin in the ecosystem → (1/ transfer AVAX to the web Avalanche Wallet 2) Swap tokens from the X-Chain to the C-Chain 3/Transfer C-Chain tokens to Metamask). Other catalysts include introducing new bridges (bridging coins from 1 network to another) and integrations with other blockchains besides Ethereum (Emin mentioned Cosmos in one of his interviews). I guess this is 1 area we have to keep an eye on to ensure there is a clear path forward…

Conclusion

A little off-topic here, but I find that thinking in a structured manner informs my research process. Therefore, sticking to my decision-making framework in evaluating a coin:

Will the coin maintain value? This boils down to a supply and demand question — in the short term, there are a few headwinds like 1/ the current war and macro environment (less demand) 2/ the very imminent vesting cliff (more supply). But I still think its use cases outstrip the headwinds — which is why AVAX has been performing pretty well relatively. Great segue to the next point…
Are there use cases with the coin? AVAX is the native coin of the ecosystem, and yes transaction fees, Defi protocols, buying NFTs are all use cases as long as there are developers building and users using. So far this seems to be the case, but I’m keeping an eye out what their 2022 roadmap is.
Is there long-term growth potential? Its tech is nothing short of genius and has already obtained some institutional adoption. And the great benefit of AVAX is that its value is strongly tied to the technology and growth of the ecosystem. And it's just the beginning….

Needless to say, I feel pretty positive about Avalanche — excited to see what the coming year has in store for them. And hopefully, we get to see more of Crypto Hugh Grant.

I am a holder of AVAX, not financial advice.