Under the hood — An overview of the technology that powers the Verso network
Verso is a decentralised marketplace for the regulated financial service industry. Banks, e-wallets, and other participants can connect to Verso and dynamically retrieve financial products personalized to their users.
The system under the hood, the humming engine that makes this system work is the Avalanche blockchain. As you may know, there are several types of blockchains such as the well-known Bitcoin and Ethereum as well as other ‘challengers’ including Cardano, Polkadot, and the Binance Smart Chain to name a few. Each of them strikes a different balance between transaction speed (throughput), security, and decentralisation.
To make microfinance and DeFi products available for mass adoption via blockchain technology, Verso needed to find a solution for two substantial problems that most blockchains face today:
Problem 1: High fees
To take out a blockchain microloan of $5 — $100 could easily cost $20 — $40 network fees at the moment, which make such use cases practically impossible.
Problem 2: Low transaction speed
Most blockchains can only handle somewhere between 10–20 transactions per second, which is another big factor for the slow adoption in mass markets.
Verso solves these problems by using Avalanche, a new and revolutionary blockchain technology created by one of the blockchain’s earliest experts. This expertise is brought in by Emin Gün Sirer, an Ivy League associate professor at Cornell University, who has studied and taught blockchain technology for 20 years. He also co-created one of the earliest blockchain projects in 2003, six years before the famous Bitcoin Whitepaper. His new blockchain solution, Avalanche, now allows us to create new and valuable applications:
- With Avalanche, Verso will be able to dramatically reduce the cost of network fees by a factor of several thousand. Taking a $5 — $100 microloan will not cost $20 — $40 network fees this way, but instead only a few cents, at most.
- The network can handle around 4,500 transactions per second. Compare this to the Visa network processing 150 Million transactions per day on average, or about 1740 per second, this means that users will be able to have a great user experience with fast transactions.
Avalanche did not get to these breakthroughs the way that many competitors did. Many projects continue to describe themselves as decentralised blockchains, though actually, they have opted for high degrees of centralisation, to bring down costs and increase speed.
Instead, Avalanche was able to create a new consensus mechanism, which solves these problems at their root. Using a particular form of Proof-of-Stake consensus, the main blockchain problems of today are avoided from the start: energy-intensiveness, high-prices, and slow networks. This is a fundamental contrast to blockchain networks that use the proof-of-work consensus, like Bitcoin. Each of these technologies has its advantages, and proof-of-stake features fast transactions at high volumes and affordable prices.
In comparison to well-known blockchain protocols, Avalanche:
- Is able to execute up to 650x more transactions per second compared to, say, Bitcoin
- Is ASIC optimal, means there is no need for high-energy-consuming chips solely installed for the purpose of executing a hash function
- Is able to provide up to 180x faster transaction finality, compared to, say, Ethereum
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