Avalanche, The Newest Consensus Model
Avalanche is a PoS layer 1 blockchain that offers sub-second finality and incredibly low fees. Touted as the platform of platforms, Avalanche aims to help create the internet of finance by offering institutions and enterprise-level companies a solution to participate in blockchain with its custom subnet solution.
This solution and the underlying Avalanche consensus model were created by Cornell Professor Emin Gün Sirer who currently leads Ava Labs as they further build the Avalanche ecosystem.
Some of their most notable investors include Andreessen Horowitz, former Coinbase CTO Balaji Srinivasan, Naval Ravikant, Polychain, and Ramtin Naimi of Abstract Ventures.
How Does Avalanche Consensus Work?
Avalanche consensus combines the best of the two consensus protocols that precede it; Classical Consensus and Nakamoto Consensus. Particularly, Avalanche consensus delivers scalability, decentralization, speed, energy efficiency, and security.
Simply put, the trilemma solved.
It achieves this is by sampling the audience repeatedly until the “winning” idea converges to a decision.
Because every node only talks to a small subset of nodes, consensus and thus finality is achieved at a lightning rate compared to other protocols.
To further illustrate this point, let’s say you worked at a 1,000 person company and wanted to figure out if people wanted pizza or tacos for lunch.
Every couple seconds a random person would ask a small subset of thieir coworkers for their opinion that would influence the askers preference.
Because this random sampling is iterated many times over the group, you’d get closer to the same answer thus finding consensus. Bingo!
This also means that when more validators come onto the network, consensus is scalability because there are even more nodes available to poll from.
Besides the revolutionary Avalanche consensus, one of the biggest value props for this protocol is the ability to create custom blockchains for a specific asset, security, or utility. More on this later.
The Avalanche Ethereum Bridge
Ava Labs continues to invest in grants and developers to help build DeFi projects through its accelerator program, Avalanche-X.
One of the most notable is the Avalanche Ethereum Bridge (AEB) developed by ChainSafe.
The AEB is a two-way bridge that allows anyone to bridge assets, particularly ERC-20 and ERC-721, between the Ethereum and Avalanche ecosystem.
It accomplishes this through the use of 5 block relayers, processing, minting, and burning equivalent assets.
But why would you want to move your assets from Ethereum to Avalanche?
As the use of DeFi increases especially on chains like Ethereum, so does the network congestion which usually ends up causing high network fees aka gas fees. And due to the network effect of Ethereum, naturally, the price of ETH will go up thus causing a massive barrier to entry for new players.
Many are left paying $50-$100 in gas fees, even when simply swapping between tokens or moving assets to their Metamask wallet.
Ethereum operates on PoW which is highly energy expensive and currently, their team is working on ETH2.0, a solution to move to PoS later this year. However, many low-fee and lightweight blockchains like Avalanche are already proving to be a working solution today.
Avalanche is fairly new as they’ve launched their main net in September of 2020 but it’s proven itself to be a scalable solution for today.
According to John Wu, President of Ava Labs, since the launch of the Avalanche mainnet, over $120M assets have come over from Etherum to Avalanche using the AEB bridge, 50+ projects have been deployed, and over $1M smart contract transactions have taken place. Not to mention, there are also about 1000 validators and over $9B in staked value. Very impressive numbers for a protocol that’s only 9 months old.
Avalanche’s Vision of the Future
Avalanche envisions that every asset could be digitized and fall under a specific coin family in the Avalanche ecosystem. Their slogan is to help build the internet of finance and I believe they are one of the better chains to do so.
It plans to go about this is by offering institutions and enterprise clients an easy way to build their own custom blockchain through the use of subnets on Avalanche. By offering a choice in scripting languages, virtual machines, and the ability to define the set of nodes, Avalanche is positioning itself to be a plug-and-play solution that makes it easy for traditional players to leverage the world of blockchain.
The truth of the matter is that DeFi is an early preview of what that world could look like one day. It’s still very nascent which is why the yields and incentives to participate are so damn high.
Avalanche aims to help enterprise companies digitize their assets that have historically been locked and unable to move, like real estate.
John Wu, President of Ava Labs, states that there’s about $360T of assets that sit on financial services firms and most of that can’t be moved because of changing regulations.
Likewise one of “The biggest concerns [at Securitize] were over being able to set simple requirements to assets, including things like timing (i.e. “You can’t trade this assets within some period of time”), ownership (“i.e. you can’t transfer this to specific entities”), and access policies (“only certain entities can view these transactions”). What we’ve been trying to enable is the ability to build your own VMs and subnets in Avalanche is precisely all of this.”
Kevin Sekniqi
By giving a solution that helps create permissioned blockchains that allow for flexibility and control, enterprise companies are more likely to adopt blockchain technology and leverage its benefits.
Easy user experience usually lends itself to mass adoption, like how Apple products took over the world.
And this is something that Ethereum currently can’t provide simply due to high cost, latency, and lack of customizability.
Speaking of latency, it’s important to note that Bitcoin has a transaction finality of 60 mins, Ethereum at about 10+ minutes, Polkadot at more than a minute, and Avalanche an astonishing 1 second.
Visa does around 1,700 TPS, will crypto even contend with that?
The inevitability of this answer becomes potentially even more promising when you hear that Avalanche is able to process 4,500+ TPS!
You can even see this take place in a real-world example with buying coffee using the AVAX token.
In Conclusion
It’s easy to think that crypto is the future and simultaneously that the future is already here once you’ve drunk the Kool-Aid.
With so many projects coming out with tons of hype and promise, it’s even more important to ground oneself in the reality of today and pay attention to how these protocols are positioning themselves for adoption.
As a whole, the crypto community is hopeful for mass adoption and institutional money to come in, not just tomorrow but today. And I think that’s where Avalanche and the team at Ava Labs have positioned itself to be ahead of other protocols.
Yes, Avalanche is yet another PoS blockchain that offers high throughput, low latency, and cheap fees. But beyond that, it has the capability to be a turnkey solution for institutions to finally participate in this technology revolution and easily digitize assets that have been locked in legacy financial services for too long.
Don’t call me out on my random sampling, but what are your thoughts on Avalanche (AVAX)?
Originally published at https://glenngabriel.com on May 28, 2021.
