The goal of the Avalanche cryptocurrency is to increase scalability without compromising decentralization. It is based on three blockchains: X-Chain, C-Chain and P-Chain.
X-Chain operates on the basis of the Avalanche consensus protocol and is used for asset management. C-Chain is for creating smart contracts, while P-Chain is for coordinating validators. These two blockchains use the Snowman consensus protocol.
In the Avalanche consensus protocol, all nodes work in parallel to randomly check the transaction confirmations of other validators. After a sufficient number of repeated random checks, the transaction is indicated as true. This increases the TPS to 6500 TPS and the processing speed takes less than one second. Snowman works with blocks in a similar way, but in a linear process.
Avalanche can also create custom interoperable blockchains. There are no restrictions on the number of blockchains, but you will need to pay a commission to work with the AVAX token.
What is the Avalanche blockchain?
As blockchain technology evolves, new solutions emerge for scalability, interoperability, and usability. The Avalanche network takes a unique approach with three separate blockchains on its platform.
Using its own AVAX token and multiple consensus mechanisms, the Avalanche network is positioning itself as “the fastest time-to-completion smart contract platform in the blockchain industry.” In this article, we will take a closer look at the Avalanche solutions that allowed this network to claim this title.
The Avalanche blockchain was launched in September 2020 by the US Ava Labs team. Ava Labs raised $ 6 million in a funding round, followed by a $ 48,000,000 token sale, private and public. The Avax Labs team included Kevin Sekniki, Maofan “Ted” Yin, and Emin Gyun Sirera.
What problems does Avalanche solve?
There are three main problems that the Avalanche network is designed to address. They are related to scalability, transaction fees and compatibility.
Scalability and decentralization
Blockchains have always tried to balance between scalability and decentralization. A network with a growing number of users and high activity may not be able to cope with the rapid achievement of consensus on the confirmation of transactions. Bitcoin (BTC) is a prominent example, as during periods of high network congestion, transaction processing took hours or even days.
One way to combat this is to strengthen the centralization of the network by giving fewer people the authority to check network activity. If fewer people verify transactions, the confirmation rate may increase. However, decentralization is an important aspect of blockchain technology. New blockchains are still trying to solve this problem with advanced technology solutions, and the Avalanche network was able to create a unique approach, which we will discuss next.
Another common problem with large blockchains like Ethereum is high gas charges, which are exacerbated by high traffic and network activity. All this hinders the attraction of new users to the use of blockchain data, but the current competition is even less established ecosystems. For example, popularity
Ethereum and the lack of any alternatives have resulted in consistently high traffic and high fees. Commissions for simple transfers could be over $ 10, and complex interactions with smart contracts were even more expensive.
When working with blockchains, different projects and companies have their own needs. Previously, projects were forced to work with Ethereum or other blockchains that were not adapted to their needs, or else use a private blockchain.
Finding a balance between customizability and interoperability across multiple blockchains, however, is not easy. Avalanche offers its subnetting and custom blockchain solution based on security, speed and interoperability.
How does Avalanche work?
Avalanche uses a unique combination of techniques to address these issues. First of all, Avalanche consists of three interoperable blockchains: X-Chain, C-Chain, and P-Chain.
- Exchange network (X-Chain). This network is used to create and exchange AVAX tokens as well as other digital assets. These assets are governed by changeable rules such as the Ethereum token standards. Transaction fees are paid in AVAX and the blockchain uses the Avalanche consensus protocol.
- Contract network (C-Chain). With C-Chain, developers can create smart contracts for DApps. This network partially implements the Ethereum Virtual Machine (EVM), allowing coders to work with EVM-compatible DApps. This network uses a modified version of the Avalanche consensus protocol called Snowman.
- Platform network (P-Chain). This network coordinates network validators, keeps track of active subnets, and allows new ones to be created. Subnets are sets of validators that provide consensus for custom blockchains. Each subnet can verify multiple blockchains, but each blockchain can only be verified by one subnet. P-Chain also uses the Snowman consensus protocol.
Since separate functions are performed by different blockchains, this allows for increased speed and improved scalability. The developers have combined this solution with two consensus mechanisms tailored to the needs of each blockchain. All of these blockchains are combined with their own utility token Avalanche AVAX. This token is used for staking and paying commissions, and also acts as a shared asset across different Avalanche subnets.
How do Avalanche consensus mechanisms work?
The two Avalanche consensus protocols have a lot in common, but each is tailored to its own blockchain. Such a system guarantees improved network scalability and high transaction processing speed.
Unlike Proof of Work (PoW), Proof of Stake (PoS), or Delegated Proof of Stake (DPoS), the Avalanche protocol does not need a leader to reach consensus. This factor helps to increase the decentralization of the Avalanche network without sacrificing scalability. PoW, PoS and DPoS handle transaction processing by a single entity, whose work is also verified by a third party.
Avalanche uses all nodes to process and validate transactions through a consensus protocol optimized for a directed acyclic graph (DAG). DAG allows the network to process transactions in parallel. Validators randomly check other validators to determine the validity of new transactions. Statistics show that after a certain number of repeated random checks, the transaction cannot be false.
All transactions are completed immediately, without additional confirmation. This means that not traditional blocks are used here, but parent transactions called “tops”. The hardware requirements for running a validator node and verifying a transaction are low and affordable, which contributes to improved performance and decentralization.
The Snowman Consensus Protocol is based on the Avalanche protocol, but orders transactions in a linear fashion, which is extremely useful when working with smart contracts. Unlike the Avalanche consensus protocol, Snowman creates blocks.
AVAX is Avalanche’s own token with a maximum turnover of 720 million. All commissions on the network are burned by the deflation mechanism.
This token is used mainly in three cases:
- Using AVAX, you can become a validator and stake, or you can do it through another validator. Validators can earn up to 11% APY (Annual Percentage Yield) and charge an individual percentage for the fees they receive from delegates.
- AVAX serves as a common unit of account for all subnets, enhancing interoperability.
- Transaction fees and subnet subscriptions are payable in AVAX.
How to add AVAX to staking?
AVAX holders can be rewarded by adding tokens to network staking. You can add tokens to staking by becoming a validator yourself or through another validator. To become a validator, you need to add 2000 AVAX to staking.
The hardware requirements are low, so most standard laptops or desktops will work to become a validator. You can also add tokens to staking through another validator and receive rewards after successful confirmation of the transaction.
Avalanche custom blockchains
At a basic level, Avalanche offers the same features as Ethereum. Developers can create new tokens, NFTs, smart contracts and DApps, and users can stake, verify transactions, and use DApps. Among the benefits of Avalanche are the improvements associated with these actions. In addition, Avalanche allows you to create interoperable custom blockchains.
A highly scalable, custom blockchain is well suited for large enterprises. It becomes even more convenient for custom blockchains to interact with other ecosystem participants and improve overall security. Avalanche uses its own Avalanche Virtual Machine (AVM), which is also compatible with (EVM). Using the Ethereum Solidity coding language, developers can easily interact with Avalanche and port existing projects to this platform.
Each blockchain can have its own tokens that will pay commissions. AVAX also charges subnet and blockchain creation and maintenance fees. Secondary subnets must also be validated on the primary subnet.
How is Avalanche different from other scalable blockchains?
The issues and solutions mentioned are not unique to Avalanche. This network competes with other scalable platforms and interoperable blockchains such as Polkadot, Polygon and Solana. So what makes Avalanche different?
One of its main differences is the DAG-optimized consensus mechanism. However, Avalanche is not the only blockchain with a new consensus mechanism. Solana has a Proof of History protocol with processing speeds of up to 50,000 TPS (transactions per second), which is well ahead of Avalanche’s 6500 TPS. Nevertheless, the validity of these indicators remains in question.
Transaction speed and completion
Another important difference: the completion time in Avalanche is less than 1 second. What does it mean? TPS is just one measure of speed. It is also necessary to consider the time it takes to complete the transaction completely, which ensures that it cannot be changed or canceled. TPS can go up to 100,000, but with a delay in termination for users, the network will still be slow.
One of the main benefits claimed by Avalanche is decentralization. Although the network is quite young, it already has a large number of validators due to its minimal hardware requirements. However, as the price of AVAX rises, becoming a validator also becomes more expensive.
The number of compatible Avalanche blockchains is also unlimited. In this aspect, it competes directly with Polkadot, one of the most famous projects offering customizable interoperable blockchains. Polkadot has limited selling space on Parachain Slots auctions, while Avalanche uses simple fees.
Where can you buy Avalanche cryptocurrency (AVAX)? TOP-5 exchanges
For the safe and convenient purchase of cryptocurrencies with a minimum commission, we have prepared a rating of the most reliable and popular cryptocurrency exchanges that support the deposit and withdrawal of funds in rubles, hryvnia, dollars and euros .
The reliability of the site is primarily determined by the trading volume and the number of users. By all key metrics, Binance is the largest cryptocurrency exchange in the world. Binance is also the most popular cryptocurrency exchange in Russia and the CIS, since it has the highest turnover of funds and supports transfers in rubles from Visa / MasterCard bank cards and payment systems QIWI, Advcash, Payeer .
Rating of cryptocurrency exchanges:
The criteria by which the rating is set in our rating of crypto-exchanges:
- Reliability of work – stability of access to all functions of the platform, including uninterrupted trading, deposit and withdrawal of funds, as well as the period of work on the market and daily trading volume.
- Commissions – the size of the commission for trading operations within the site and the withdrawal of assets.
- Additional features and services – futures, options, staking, NFT marketplace.
- Feedback and support – we analyze user reviews and the quality of technical support.
- Convenience of the interface – we evaluate the functionality and intuitiveness of the interface, possible errors and failures when working with the exchange.
- Final grade – the average number of points for all indicators, determines the place in the rating.
As an alternative to Ethereum for dealing with decentralized finance (DeFi) platforms, blockchains like Avalanche are proving to be very attractive due to their EVM compatibility and low fees. However, in terms of scalability and speed, DeFi already has a long list of alternative platforms.
Avalanche has grown in popularity since its release, but it is not yet known if it can compete with blockchains such as Solana or Polygon.