Avalanche Whitepaper Explained!
What is Avalanche (AVAX)?
Avalanche is a blockchain platform that has smart contract capabilities. AVAX is the native cryptocurrency token of Avalanche, which powers this blockchain along with other consensus methods.
The main aim of Avalanche is to host a scalable blockchain solution maintaining decentralisation and security with low cost, quick transaction speeds, and environmental friendliness. Avalanche has become quite popular with a Total Value Locked(TVL) of approximately $8.41 billion and the popularity has risen across Avalanche Decentralised Applications(DApps).
Avalanche provides its users with the option to establish their own customised and compatible blockchains, with a minor subscription fee. We would be looking at how a blockchain that was founded in 2020, has gained so much traction in such a short period while solving most of the problems that were faced by users of previous blockchains.
EMERGENCE OF AVALANCHE (AVAX)
Avalanche was launched by Ava Labs in September 2020. The founding team consists of Kevin Sekniqi, Maofan “Ted” Yin, and Emin Gün Sirer, and is based in New York. At first, Avalanche was conceptualised as InterPlanetary File System(IPFS) in May 2018 by a group of enthusiasts who called themselves “Team Rocket”.
It was later led and developed by a team from Cornell University and they were called the founders of this project. It started as an open-source platform for launching decentralised finance applications and introducing blockchain deployments in one interoperable, scalable ecosystem.
It further expanded by targeting three broad use cases – to build application-specific blockchains with permission and permission-less deployments and to build and launch highly scalable DApps. AVAX uses the Proof of Stake mechanism. Avalanche’s $42 million Initial Coin Offering ended on July 15, 2020, which was followed by the launch of the mainnet in September and the introduction of the native token AVAX. A year later, they raised $230 million through a token sale.
Avalanche Whitepaper Summary: The blockchain consists of multiple blockchain networks and it makes use of the “Avalanche consensus” which combines the robustness, scalability, and decentralization of the “Nakamoto consensus” and speed, quick finality, and energy efficiency of the “Classical consensus”.
Each chain of the Avalanche network represents a separate virtual machine and it supports multiple custom machines like Ethereum virtual machine (EVM) and WASM, thereby allowing these chains to imbibe case-specific functionality.
The key components of the Avalanche network are:
- Subnets: It is a dynamic set of validators who work together to achieve consensus on the state of the chain. Each blockchain is validated by one subnet. A subnet can, however, validate more than one blockchain, also, a node can be a member of more than one subnet.
- Chains: The Avalanche network has 3 blockchains. The P chain, X chain, and the C chain. Each chain is a part of a subnet.
○ The X chain: Also known as the Exchange Chain, functions as a decentralised network and is specifically used for the creation, management, and transaction of tokens. One of the assets that can be traded on this chain is the AVAX, the network’s native token.
○ The C chain: Also known as the Contract chain and is specifically used for smart contracts. It is an instance of the Ethereum Virtual Machine powered by the Avalanche. So, with this, we can copy and paste and start using Ethereum dApps on the Avalanche network almost instantly. This allows developers to move their projects to Avalanche easily.
○ The P chain: Also known as the Platform chain and it is for the management of the subnets, coordination of all the validators, and also the staking mechanism. This chain implements the Snowman consensus protocol which has high throughput.
ADVANTAGES OF AVALANCHE (AVAX)
- The Avalanche network is highly interoperable. Interoperability is the ability of a network to trade and interact with other platforms. The creation of different subnets in Avalanche makes it highly interoperable and therefore allows it to improve the DeFi environment.
- The Avalanche network is much more difficult to attack in comparison to Ethereum and Bitcoin. For Bitcoin, which works on PoW, one needs 51% of all the computational power in the network to attack it, for Ethereum 2.0, which works on PoS, one would need 51% of all the staked tokens to attack the network, but in Avalanche the attacker will have to control 80% of the network to attack it. This is because of the Avalanche consensus protocol that this network uses.
- The Avalanche network allows 4500 transactions per second per subnet and has a finality clock of fewer than 3 seconds. While for Bitcoin, the speed is 7 transactions per second and has an hour-long finality clock and for Ethereum, the speed is 15 transactions a second with 10 min finality clock.
- The faster rates of transaction and higher throughput of the Avalanche blockchain network reduce the slippage of price considerably and this helps and ensures instant trades and gives a user trading on decentralised exchanges a similar experience as centralised ones. Also, because of the low level of transaction fees, the platform is financially viable for small trades thus, it gives small players a chance to experience the DeFi ecosystem.
Additional Read: LUNA vs AVAX
AVALANCHE’S (AVAX) TOKENOMICS
The supply of AVAX is limited to 720 million. Therefore, AVAX is a deflationary asset as its availability is limited. AVAX coins can also be used for governance on the platform because by holding and staking coins one gets voting rights which one can use to vote on important decisions on the future of the network.
Fees in Avalanche are also burned quite similar to that in the Ethereum network, and this progressively deflates the token supply. The validators stake these AVAX coins to secure the network and in return they earn rewards. Of the 720 million tokens, 360 million are contained in the genesis block and the rest would be minted over time.
At the time of writing, AVAX Price is trading for $24.00 which is around 80% down from its all-time high. AVAX reached its all-time high in November 2021 after an announcement by the company that it was going to partner with Deloitte to build efficient disaster relief platforms using the Avalanche blockchain. Currently, it ranks 15 according to the market cap. Its market capitalisation is $6.90 billion currently.
AVAX Price PERFORMANCE OVER THE YEARS
AVALANCHE FACES STIFF COMPETITION IN THE CRYPTO SPACE
There are various competitors of Avalanche in the crypto industry. These include Ethereum, Solana, Polkadot, Terra, and many more.
- Ethereum: Ethereum still occupies the hearts of Web 3 veterans among smart contract blockchains. It poses a strong possibility for widespread adoption. As the demand for new DeFi protocols and Dapps increases, everyone will be looking for the right infrastructure to use to build the future of Web 3.
- Solana: Solana blockchain operates at lightning speeds, and its fees equate to a fraction of a cent per transaction. It has experienced strong adoption. Since its adoption in 2020, it has settled more than 50 billion transactions.
- Polkadot: Polkadot is popularly known for one of its features called “interoperability.” Its infrastructure connects various blockchains into one network. It enables them to exchange data without compromising their security. Interoperability is essential for the future of Web 3, in which products, currency, and services will move throughout what many hope will be a decentralised digital ecosystem.
Although there is fierce competition, Avalanche whitepaper outlines its unique features that can make crypto investors a fan of this blockchain.
AVAX Whitepaper Summary(ROADMAP & VISION)
AVAX Whitepaper defines a very well-planned roadmap defining key areas of engineering, ecosystem development, and constant iteration that plans to make the platform better than ever. It plans to upgrade the user experience, platform features and performance, liquidity, and ecosystem growth.
Wallet Experience: Avalanche Wallet plans to undergo a facelift to make AVAX more accessible to new crypto users, enhance security features, and fix other user interface stuff like balance checks and imports. There is also going to be an app for Avalanche wallet.
Novel Bridge Technology: Users find it difficult to transfer their assets to Avalanche because of the fees involving Avalanche-Ethereum Bridge(AEB). The developers plan to introduce an industry-first secure bridging architecture that is going to be 2X faster and 5X cheaper than AEB, with plans to extend it to other chains as well.
Apricot Performance Upgrades: Developers plan to complete the next phases of Apricot upgrades, which enable dynamic fees for smart contract transactions on the C-chain, add governance on the P-chain, and optimize the network to scale it to match the increasing user demand.
Blueberry Upgrade: Blueberry upgrade would enable the subnets as the next growth engine for Avalanche and the cryptosystem. It would help in creating independent blockchains with custom virtual machines and rules. This is a huge step towards taking whole control over development and data and creating greater value across the ecosystem while maintaining seamless transfer of value.
C-Chain Support: Developers are trying to push to support C-chain, to make their users go directly from their accounts into DeFi apps on Avalanche without cross-chain transfers. It would also help introduce new functionalities like Chainlink on the main net, liquidity protocols including BenQi, launchpads like Avalaunch, and NFT marketplaces. There are also plans of launching a first-of-its-kind asset class, Initial Litigation Offerings(ILOs).
Avalanche allows its developers to build multi-platform applications that are highly decentralised as well as novel financial primitives and blockchains that are interoperable. Avalanche also aims to decentralise the financial market by building a single, interoperable ecosystem that would connect all the blockchain platforms.
Avalanche is working on a revolutionary idea with a revolutionary chain and it is on the right track to transforming the DeFi space. It addresses the need for financial applications and solves the scalability problem that users face with Dapp’s development on Ethereum.
The network also provides a lot of flexibility and personalised services when developing new dApps, it has all the dev tools of the Ethereum network, is compatible with the Ethereum Virtual Machine, and provides scalability, flexibility, and decentralised governance for all of its users.
The Avalanche Bridge contract was adopted so quickly that just the next day of its launch, more than 30 million USD worth of Ethereum-based assets were locked up giving evidence of its strong adoption. Avalanche can become one of the most popular and appreciated blockchain-based projects in the DeFi world.
HOW TO INVEST IN AVALANCHE (AVAX)
Use this three-step process to buy your first AVAX token using the CoinDCX, crypto investing app.
- Sign Up for the CoinDCX account: Enter a valid email address and a user name on the sign-up page. Once the Email Id has been verified, set a strong password to secure your account.
- Verify the account: You need to complete your KYC, to buy a AVAX token on the CoinDCX platform. All you need to do is upload the documents and your account will be set up in 15 minutes.
- Buy AVAX INR: After the account has been verified, you can deposit any amount of fiat currency you are comfortable with and start your crypto journey!
Additional Read: Ethereum Whitepaper Summary
Disclaimer: User Generated Content – Original Content created by a member of BITS Pilani, under the consultation of Dr. Amit Dua, Assistant Professor, Computer Science Department, BITS Pilani, Pilani Campus in association with CoinDCX. The views and opinions expressed within this post belong solely to the author.
Author: Saatvik Mittal, Aditya Choraria