In 2020 and 2021, one of the most watched public chain coins in the blockchain world is none other than Avalanche and its public chain token AVAX. Especially in 2021, AVAX's increase once doubled. So why does Avalanche and its token AVAX have such growth potential? This article will provide investors with a detailed introduction to Avalanche’s blockchain technology, features, tokens, and future development.
1. What is the Avalanche avalanche chain?
The Avalanche (Avalanche Chain) protocol was officially launched in 2020 and launched by Ava Labs in September 2020. Ava Labs raised nearly $300 million in funding, followed by the Avalanche Foundation’s private and public token sales totaling $48 million.
Avalanche is different from most existing public chains. It is composed of three parallel public chains. These three chains each perform their own duties and jointly create a platform that is fast and convenient for DeFi to carry smart contracts. Compared with Ethereum, Binance Smart Chain and even Polygon, which started developing earlier, Avalanche Chain can be said to be a rising star in the public chain, attracting many star projects, including Aave, Curve, DefiKingdom, etc. .
2. What is avalanche consensus?
The approach of the Avalanche consensus mechanism is to obtain multiple verification results through rapid and multiple sampling methods among hundreds or even more nodes. As long as a certain result reaches more than half of the verification nodes multiple times, the correctness of its transaction or information can be confirmed.
This verification method is faster than Satoshi Nakamoto’s Proof of Work (PoW) relying on brute force, more secure than Byzantine Consensus Mechanism (BFTs), and more secure than Proof of Stake (PoS). The entire mechanism is like an "avalanche". After startup, more and more verification nodes accumulate like a snowball, so it is called the "avalanche mechanism". Since it is not limited to a single linear chain, the scalability of the Avalanche blockchain is greatly improved. Very high.
3. Characteristics of Avalanche avalanche chain
The main features of Avalanche are the Avalanche consensus and the transaction mechanism in which three public chains collaborate. The birth of Avalanche chain is to try to solve the three main problems of the blockchain: scalability (Scalability), high transaction fees, and interoperability ( Interoperability).
Three chains collaborate together: Avalanche is divided into three chains, namely the Exchange Chain (X-Chain) for creating and exchanging assets, the Contract Chain (C-Chain) for developing and creating smart contracts, which is also the most commonly used by everyone, and the Contract Chain (C-Chain) for pledge-related Platform Chain (P-Chain). Since the three chains assume different roles, Avalanche Chain also improves speed and scalability.
Transaction Chain (X Chain): Allows assets (such as AVAX) to be created and traded in the ecosystem.
Platform Chain (P Chain): Supports the creation of subnets and rules for managing them.
Contract chain (C chain): Allows the creation and running of smart contracts on Avalanche (which is also where current users are mainly active).
4. How fast does Avalanche process?
Since Avalanche's mechanism is composed of three parallel public chains, it can leapfrog the authentication speed of cryptocurrency, and can reach a maximum of 4,500 transactions per second. The PoW workload verification mechanism of Bitcoin is only 7 transactions per second, so it is conceivable that the Avalanche avalanche mechanism can greatly improve the transaction throughput on the public chain.
Comparing the transaction processing speed data of mainstream blockchains such as Bitcoin and Ethereum as follows, it can be seen that the Avalanche Protocol does have its strong advantages in scalability.
| Blockchain | Consensus mechanism | Transactions per second (tps) | | :---: | :---: | :---: | | Bitcoin | Proof of work PoW | 7 transactions | | Ether Square | Proof of Stake | 14 transactions | | Avalanche | Avalanche Consensus | More than 4,500 transactions |
5. Avalanche’s future development has three major growth potentials
1. Has many DeFi projects and a diverse ecosystem
There are currently a total of 170 DeFi projects under development on Avalanche, including trading, staking, wallets, lending, NFT trading platforms and other projects, with a diverse ecosystem.
2. A strong competitor of Ethereum: Avalanche’s cross-chain bridge, Avalanche Bridge (AB), provides secure and high-performance cross-chain asset transfer services. The current cross-chain confirmation time of Ethereum is about 5 minutes, while Avalanche is within 10 seconds. Moreover, Avalanche’s gas fee is one-tenth that of Ethereum, and the transaction verification speed is much faster than that of Ethereum. Become one of the main competitors of Ethereum, the largest blockchain currently.
3. Already a Deloitte partner, this could be the start of government use cases Avalanche’s development team, Ava Labs, has formed a partnership with Deloitte, a Big Four accounting firm. Deloitte announced on November 17, 2021, that it has developed a new Close As You Go (CAYG) disaster recovery platform with the help of Avalanche Blockchain’s Avalanche Protocol to help U.S. state and local governments efficiently with simple and easy-to-use pages. Apply for relief funds to avoid complicated procedures.
The CAYG platform is actually a Custom Chain parallel to the C chain. This shows that the Avalanche public chain allows the use of Avalanche's consensus mechanism and verification nodes to develop a customized chain suitable for different businesses. This may be the Avalanche blockchain becoming The beginning of government use cases.
6. Avalanche’s two major shortcomings: Disadvantage 1: There have been systemic problems that caused the network to stop, which may cause trust issues.
Avalanche had a systemic problem on February 12, 2022, which brought the Avalanche network to a standstill. At that time, the Avalanche team issued a statement stating that this was caused by an error code in the communication between the Ethereum Virtual Machine and Avalanche, emphasizing that Errors are caused by high demand and usage.
However, the above situation still caused a drop in the price of AVAX tokens at that time. AVAX encountered such systemic problems in the early stages of its development. If it happens again, it may lead to a crisis of trust.
Disadvantage 2: NFT market share is relatively weak: Compared with Solana, Avalanche obviously does not have a strong market share in the NFT market. Although Avalanche has worked hard to develop related primary and secondary sales platforms and mechanisms, its popularity is obviously weaker than Solana. Whether Avalanche can make a breakthrough in this regard in the future is still unknown.
In summary： Avalanche and its token AVAX have significant advantages in blockchain technology, transaction speed and scalability, and have a diverse DeFi ecosystem and strong competitiveness. However, systemic problems and the weakness of the NFT market are still challenges that need to be faced in its future development. For investors, understanding these pros and cons will help make more informed investment decisions.