The History of Avalanche Chain: The ‘Flexible’ Ethereum Competitor
In the race to produce the fastest, most feature-complete blockchain there is, a handful of major players have emerged in the last few years.
Among these, Avalanche — an open-source platform for new financial primitives and decentralized applications — has solidified as one of the front-runners.
Here, we take a look at what makes it stand out in an increasingly populated industry.
What is Avalanche?
Avalanche is a platform developed by Ava Labs that allows anybody to easily produce their own multi-functional blockchains and decentralized applications (dApps).
It is designed to address some of the limitations of older blockchain platforms, including slow transaction speeds, centralization, and scalability — and uses several innovations to do so. These include its unique Avalanche consensus protocol, which promises low latency, high throughput capabilities, and resistance to 51% attacks.
Avalanche launched its mainnet in September 2020, just two months after raising $42 million in a token sale — which sold out in less than five hours.
In June 2021, Polychain Capital and Three Arrows Capital led a $230 million funding round for Avalanche via a private token sale. In April 2022, Avalanche announced a funding round of $350 million, putting the company’s valuation at $5.2 billion.
Since 2020, Avalanche has grown to become the third-largest blockchain by total value locked (TVL), after Ethereum and the BNB Chain, according to DeFi Llama.
How does Avalanche work?
At its core Avalanche is built around a system of three interoperable blockchains: the Exchange Chain (X-Chain), Contract Chain (C-Chain), and Platform Chain (P-Chain).
Briefly, the X-Chain is used for the creation of new digital assets, whereas the C-Chain is Avalanche’s Ethereum Virtual Machine (EVM) implementation, and the P-Chain is used for coordinating validators and creating subnets.
Two of these blockchains (the P-Chain and C-Chain) are secured by the “Snowman” consensus, helping to enable high throughput secure smart contracts, whereas the X-Chain is secured by the DAG-optimized “Avalanche” consensus — a secure and scalable protocol that can achieve transaction finality in seconds.
Ava Labs says that by splitting its architecture across three separate blockchains, Avalanche can optimize for flexibility, speed, and security without any trade-offs. This makes it a powerful platform for both public and enterprise use cases since developers have a great deal of flexibility in the types of applications they can build.
The platform is centered around the AVAX, the native utility token for the Avalanche ecosystem, and is used for paying network fees, staking, and providing a “basic unit of account” between Avalanche subnets.
What separates Avalanche from the other chains?
According to Ava Labs, the platform can handle somewhere in the order of 4,500 transactions per second — compared to around 7 tx/sec for Bitcoin and 14 tx/sec for Ethereum. It’s also able to achieve transaction finality in under 3 seconds. This arguably makes it better suited for massively scaling decentralized applications — which would be bottlenecked on many competing platforms.
How Avalanche stacks up to competing platforms. (Image: Avalanche)
Besides being highly scalable, Avalanche is also built to tackle another major problem facing blockchain-based systems today: interoperability. It achieves this by enabling blockchains both within a subnet and between subnets to communicate with one another, allowing them to complement one another and support cross-chain value transfers.
It’s also remarkably inclusive. While many proof of stake (PoS) blockchains only allow a select number of validators to participate in achieving consensus, Avalanche allows anybody staking at least 2,000 AVAX to participate.
As of May 2022, Avalance’s biggest rival remains Ethereum — the blockchain platform that currently dominates the DeFi space. Although Avalanche supports the Ethereum Virtual Machine (EVM), it uses a different consensus mechanism to secure the network and also supports cross-chain value transfers without the need for bridges.
What Avalanche offers to its users?
Avalance allows individuals and firms to easily deploy their own purpose-built blockchains, whether these be for private use-cases (permissioned blockchains) or public ones (permissionless).
It is unique in the fact that it uses a combination of multiple custom-built blockchains, in addition to a powerful proof of stake consensus mechanism to achieve an incredibly decentralized and powerful platform for developers to build on.
Being compatible with the Ethereum toolkit, developers are able to easily port their Ethereum dApps to Avalanche and can easily launch a diverse array of decentralized applications (dApps) on the platform. These apps can run on their own independent Avalanche blockchain, giving developers a great deal of control over how they’re secured and function, as well as who can access them.
These capabilities have seen development activity on Avalanche skyrocket in its relatively short history, and there are now a wide range of applications using Avalanche’s technology — including those surrounding private securities (Securitize), prediction markets (Prosper), and stablecoins (Bilira — a Turkish Lira stablecoin).
The future of Avalanche
As Avalanche grows at a rapid pace, the platform has looked for ways to cater to a ballooning usership while maintaining its signature speediness and affordability. Subnets may be the answer.
Subnets allow individual projects built on Avalanche to remain connected to the Avalanche mainnet via individual chains, without taking up space on the mainnet. By redistributing traffic in such a way, subnets may allow Avalanche to avoid transaction speed and gas fee issues as it scales up in size (problems that have historically plagued Ethereum).
In March 2022, Avalanche announced a $290 million initiative dedicated to helping developers incorporate subnets into their Avalanche-backed projects. The initiative, the Avalanche Multiverse, will incentivize developers to create fully-customizable, application-specific networks on the Avalanche blockchain. Theoretically, subnets could allow entire crypto networks, like Bitcoin or Ethereum, to exist on Avalanche, while still using their own cryptocurrencies.
Subnets can also be customized to include Know Your Customer (KYC) features, which would permit traditional finance institutions to build on Avalanche.
In addition to subnets, Avalanche has announced a new platform-specific wallet called Core. The wallet will streamline transactions on Avalanche, and make the platform more easily navigable for non-crypto-native users.
John Wu, president of Ava Labs, has expressed interest in attempting to build out Core to incorporate all major blockchains, including Bitcoin and Ethereum, a complicated feat.