Avalanche explained.
Avalanche is an energy efficient network of blockchain infrastructure, or more simply put a distributed network of computers working together. It is used by people to interact with applications which are deployed on the network and to transfer digital assets. To date projects building on the network are diverse including browser based games, decentralised finance applications and parametric weather insurance .
At its core it is a fast and scalable L1 (base layer) that provides almost instant execution of transactions through its Avalanche Consensus Protocol. It can currently process up to 4,500 transactions per second. To put that into perspective for you, Ethereum can at the time of writing process about 20 transactions per second. Speed isn’t all about tps, while other chains may take up to 60 minutes to finalise a transaction Avalanche typically achieves this in less than a second.
From the outset Avalanche was built with the scalability trilemma in mind. This trilemma is that blockchains typically have to choose 2 out of the 3 of the following options. Scalability, decentralization and security. The developers of this network have overcome this issue with both a consensus mechanism and incorporation of a functional system of subnets.
More importantly this is achieved using a fraction of the energy of the chains that have garnered most media attention in relation to this topic. A report published last year confirmed that Avalanche makes use of less than 1% ( just 0.0005%) of the energy of a blockchain such as Bitcoin. With Btc being an asset that can be bridged into the Avalanche ecosystem it can also help to reduce the footprint of the Btc network and allows for its use as an asset in DeFi.
Please visit CCRI to view the full report.
How does Avalanche work?
The system is a collection of validators working together to maintain the record and secure operation of the computer network. Avalanche is currently secured by over a thousand validators. The projects building on Avalanche use smart contracts to create DApps (decentralised applications) which are deployed on the network. These smart contracts once deployed are immutable (they cannot be altered). The language used for the creation of the smart contracts is Solidity which is used in other networks, owing to this interoperability of networks is possible.
Avalanche is a fairly complex platform. However, there are three key features to its design which differentiate it from other blockchains:
- Consensus mechanism
- Multiple built-in blockchains
- Incorporation of subnetworks
Consensus mechanism
Consensus is both as simple as it sounds on the surface and one of the most difficult areas of computer science beneath. It’s all about coming to an agreement. While consensus is fairly easy to achieve in centralised networks where one governing authority is trusted to validate transactions and safeguard records, it is far less straightforward in the case of decentralised systems.
It took a long time to develop a system that a) could be distributed among unknown participants and b) was secure in its assessment of data to the extent that it could be used to transfer value.
A consensus mechanism is a fault tolerant mechanism used in blockchain systems to achieve agreement on a single data value or a single state of the distributed network. In almost half a century of distributed systems there have been 3 successful approaches to the consensus problem: Classical, Nakamoto and Avalanche.
Classical consensus is implemented through a system of voting. It has some problems which make it unsuitable as an open and permissionless network suitable for global needs. While fast these protocols do not scale well, performance suffers once the number of validators increases beyond certain thresholds. These networks are vulnerable to double spend attacks as an attacker need only gain control of 33% of the network to implement an attack. For this reason and others for successful operation the validators must be aware of each other’s identities and be unified in order to avoid violations of network safety.
Nakamoto Consensus came as a breakthrough showing the world that it was possible to create a secure decentralised consensus protocol on a global scale. Its namesake being Satoshi Nakamoto, the nom de plume of the author of the Bitcoin paper. Making the change from classical certainty based protocols to employing a probabilistic approach allowed for scalability.
With no limit to the amount of participants involved in the validation of the network came some additional hurdles. These types of networks are slow and take a lot of time to finalise transactions. Operating using proof of work to secure and organize a network requires constant dedication of computational resources even if no activity is occurring on the network. The proof of work mechanism requires validators to commit these resources as a security measure. Owing to this they are not optimal for peer to peer transactions or decentralised finance.
Avalanche Consensus combines the best parts of both Classical protocols and Nakamoto protocols. With Avalanche you get the benefits of classical consensus such as energy efficiency, speed and rapid finality. In addition the network has the benefits of Nakamoto consensus such as security and scalability implemented as a network open to validator participation. Avalanche has an 80% parameterized safety threshold that is comparably higher than other blockchains.
Operating using Proof of Stake mechanisms, Avalanche requires validators to stake assets rather than solve cryptographic puzzles to participate in maintaining and securing the network record. Validator nodes only work when there is work to be done. Nodes listen to the network for transactions to be broadcast. When a broadcast occurs the network votes to confirm the validity of the transaction. No transactions equals a dormant network.
Multiple built-in blockchains
Avalanche is built primarily using three different blockchains. Each blockchain has a specific function within the broader Avalanche ecosystem instead of all the work being done on one chain. Digital assets can be moved around the three chains in order to complete different functions.
- The C-chain — Also known as the Contract Chain because it allows for the creation and use of smart contracts. This is where builders deploy protocols and users conduct the majority of their transactions. Avalanche’s smart contracts benefit from cross-chain interoperability due to it being an instance of the Ethereum Virtual Machine.
- The X-chain — Also known as the Exchange Chain as this is the blockchain upon which digital smart assets are exchanged and created. AVAX, Avalanche’s native token, is included on this chain. The X-chain is an instance of the AVM (Avalanche Virtual Machine) and implements the Avalanche consensus protocol.
- The P-chain — Also known as the Platform chain. This custom chain is used for governance and communication of metadata. It is here that validators are coordinated, active subnets are monitored and new subnets are created. The P-chain implements the Snowman consensus protocol.
Incorporation of Subnetworks
Avalanche participants also have the ability to open specialised chains, known as subnetworks, which operate under their own rule set. Once a subnetwork reaches its temporary scaling limits, another subnetwork can be launched to meet network traffic demands. To put it simply, subnetwork creation is unlimited. Other blockchains are working towards achieving a similar mechanism of operation. Ethereum 2.0’s shards and Polkadot’s parachains are similar systems which are striving to offer scaling solutions. Avalanche, however, is ahead of the pack in this regard and operates at a much larger scale with an increased throughput and transaction speed.
Subnetworks are basically groups of nodes that contribute to validating a specific set of blockchains. Consensus is reached through the validation process on these chains. All subnet validators must also participate on Avalanche’s Primary Network through the P-Chain.
How to participate in the Avalanche ecosystem ?
AVAX is Avalanche’s native token, which is used to pay transaction fees (aka “gas”) which prevent network spam (unwanted or intrusive actions). Transaction fees on the Avalanche network are burned (destroyed forever). AVAX is the basic unit of account among Avalanche network blockchains. To participate in applications or send digital assets to addresses on the Avalanche network you will first need to buy AVAX through a smart wallet such as Core or a crypto exchange. Once you have some fuel in your tank you’re ready to start participating in the ever growing world of Web 3. Using a browser based or ‘hot wallet’ you can interact with protocols which allow you to earn interest on stable and other assets through over collateralized lending. You may choose to mint an nft or participate in a game that incorporates tech such as nfts and smart contract as part of its dynamics.
Conclusion
In May of 2018, a paper was distributed by a group calling themselves Team Rocket that proposed a third class of consensus protocol they dubbed “Avalanche.” Since that time Avalanche has been ahead of the game becoming an open-source project allowing developers to deploy applications in a fast, efficient and interoperable ecosystem. Having overcome the scalability trilemma the network provides security, decentralization and scalability with a minimal ecological impact. For these reason we found it to be the best tech on which to deploy applications developed by Mycelium Network.
