Avalanche Rush — Understanding the Avalanche Blockchain
Overview
Avalanche is a Laye 1 competitor that facilitates the creation of custom blockchains and decentralized applications (dApps). Avalanche is a unique Proof of Stake (PoS) network that features 3 built-in blockchains, all of which are secured and validated by the main network. These blockchains include the Exchange Chain (X-chain), Platform Chain (P-chain), and Contract Chain (C-chain).
Network Architecture
The core of Avalanche’s architecture is a subnetwork (subnet) called the “Primary Network” which secures the 3 blockchains on the network, being the X, P, and C chains (Chart 1). The subnet hosts a group of transaction validator nodes that utilize PoS to reach a consensus on the state of the blockchains. The purpose of each separate chain is as follows:
X-Chain: is a platform for creating and trading crypto assets
P-Chain: coordinates transaction validators, tracks active subnets and enables the creation of new subnets and custom blockchains including private blockchains
C-Chain: facilitates the creation of smart contracts (EVM compatible)
Each of these blockchains is validated by a single subnet (The Primary Network). What’s unique about the Avalanche network is that each blockchain has the ability to design subnets that maintain particular properties, such as requiring validators to meet certain requirements for regulatory purposes as an example. Subnets can not only limit their validators based on certain criteria, but validators can also choose to be a part of as many or as few subnets as they wish (assuming they meet the specified criteria of a particular subnet). As a result, both Avalanches subnets and their validators are able to create ecosystems that are specifically in line with and focused on their respective priorities.
The Avalanche network infrastructure is built to enable modular blockchains that are scalable and interoperable with other entities on the Avalanche blockchain. While the Avalanche network is EVM compatible, its subnets can use other virtual machines aside from EVM to make themselves compatible with a broad range of various blockchains. Existing blockchains can port their state over to Avalanche and use its consensus mechanism for faster performance, finality, and increased security. Blockchains like Bitcoin Cash and Ethereum Classic could each have their own subnet and utilize PoS, using their own token as stake (Chart 2).
Each subnet can validate multiple VMs (blockchains) and also have its own token/fee structure. Anyone can create their own subnet by paying a subscription-style fee in AVAX or they can look to use an existing subnet.
Consensus Mechanism
Avalanche utilizes a consensus algorithm called Snowball, which is a Proof of Stake (PoS) mechanism designed by Ava Labs. Snowball requires users of the network who wish to become transaction validators to stake at least 2000 AVAX tokens to participate in consensus.
Within the Snowball consensus mechanism, validator nodes in a subnet repeatedly query each other to determine the validity of the network's transactions until they reach a common decision, aka consensus. In a given round, each validator randomly selects K nodes from the entire validator list (probability of selection is weighted by staked amount) to query for their preferred decision. Each queried validator responds with their preferred decisions, and if the majority of responses returned in a round differ from the node performing the query, then it will update its own preferred decision to reflect that and respond to other nodes with that answer. All nodes in the network perform this process simultaneously, in a leaderless way, to reach network consensus. As the network scales, the load on individual nodes stays constant as they continue to query the same number of random nodes.
All validator nodes must be a part of the primary network but participation in the other subnets is optional. A major difference between Avalanche and other PoS blockchains is that Avalanche doesn’t incorporate deterrents for malicious behavior of validator nodes, ie: slashing their stakes, instead, validators just don’t receive the rewards for that block. The large number of validators in the network ensures immutability and censorship resistance that proof of work protocols, backed by a small number of mining pools cannot achieve. Since its inception, the Avalanche ecosystem has seen the number of validators securing its network skyrocket, propelling it to become one of the largest networks of validators among popular blockchains (Chart 3).
Blockchain Comparisons
Avalanche claims that its consensus mechanism combines the benefits of “Nakamoto consensus” (robustness, scale, and decentralization) and “classical consensus” (Speed, quick finality, and energy efficiency) to form a revolutionary consensus engine. A quick comparison against other popular blockchains demonstrates Avalanche's claims are true as it’s a high performant, low-cost alternative to the most popular platforms (Chart 4 + 5).
Avalanche Vision: Platform of Platforms
Avalanche was created under the notion that a one size fits all approach for a blockchain is too rigid and limited. Instead, Avalanche is designed from the ground up as a platform to host many custom networking (Subnets) and application (VM) layers addressing different needs. In the Avalanche model, each chain is a separate representation of a virtual machine hosted on one of these subnets. Each chain/subnet is able to cross communicate to form one interoperable, composable network (Chart 6).
The unique thing about this cohesive cluster is that while anyone can create a modular, fully customizable subnet that operates under its own ruleset, is that it also requires all validators of any subnet to also be validators within the primary network, staking a minimum of 2000 AVAX tokens. In addition, subnet creation requires subscription fees and blockchain creation fees to be paid in AVAX, which are burned. This creates a strong deflationary force for the network's utility token as the ecosystem scales.
AvaRush
Avalanche has recently become the talk of the town as the ecosystem begins to pick up some serious traction. This has been largely due in part to the Avalanche Foundation’s announcement of a $180m Defi Incentive Program, titled Avalanche Rush. The move was launched with the intention of introducing more applications to its Defi ecosystem and catalyze its growth, with major blue chips such as Aave and Curve being the first to bridge over. Avalanche Rush follows the launch of the Avalanche Bridge (AB), a next-generation cross-chain bridging technology that transfers assets between blockchains. The combination of Avalanche Rush and the new bridge provides strong liquidity incentives and a seamless user experience for established and emerging DeFi applications to join the Avalanche ecosystem. The deployment of Avalanche Rush has ignited some serious growth in the ecosystem as highlighted by some of the metrics below.
Conclusion
Avalanche is a unique and innovative take towards a Layer 1 solution. The Avalanche Rush incentive program cements the Avalanche Foundation’s commitment to scale DeFi and create a more accessible, decentralized, and cost-effective ecosystem. What’s important to note is that while the network has attracted rapid and exponential growth in its TVL, with numerous new applications launching and users bridging over to take part in the incentive program, the program itself has only just begun. Could this be the start of an Avalanche bull run?
Sources
https://www.gemini.com/cryptopedia/avax-coin-avalanche-crypto-ava-labs
https://insights.glassnode.com/avalanche-the-new-defi-blockchain-explained/
https://decrypt.co/resources/what-is-avalanche-network-avax-ava-labs
https://coinmarketcap.com/currencies/avalanche/
https://docs.avax.network/learn/platform-overview/avalanche-consensus
https://medium.com/xord-one/the-avalanche-chain-a-deep-dive-45f2f0d23fc9
https://www.avax-projects.com/#infographics
