Market Cap: $13,755,651,445

Fully Diluted: $20,252,808,944

Volume (24h): $846,621,032

Circulating Supply: 268,973,980 AVAX

Total Supply: 395,891,290 AVAX

 

 

Introduction

What is Avalanche?

Avalanche, similar to many other smart-contract enabled blockchains today, is an open-source platform that can launch decentralized applications and enterprise blockchain deployments in an interoperable ecosystem. It claims to be the first decentralized smart contracts platform built to handle the scale of global finance, with near-instant transaction finality.

Where Avalanche differs from most other networks is its consensus protocol, which is what purportedly allows Avalanche to maintain uncompromising security and decentralization while promoting quick finality and high throughput.

Launched in September 2020, Avalanche is the fastest smart contracts blockchain as measured by time-to-finality. Since its launch, the platform has grown considerably, with over 450 individual projects developed within its ecosystem, $118M+ of $AVAX burned, over 1350 individual block-producing validators, and over 1.5M members worldwide. It is ranked fourth in terms of Total Value Locked (TVL) at a whopping $8.55B, following only Ethereum, Terra, and BSC (BNB), and it is currently ranked #13 in terms of market capitalization at $13,755,651,445.

Value Proposition

AVA Labs presents the Avalanche blockchain as a solution to the need for enterprise-level speed and security in the decentralized financial sector. As the #1 blockchain as measured by time-to-finality, Avalanche’s unique selling proposition (USP) is that it can process 4500 transactions per second, proven empirically over time, without sacrificing (a) security and (b) decentralization. 

Where Avalanche stands apart from many of its competitors like Cardano and Solana – often described as “Ethereum-killers” – is its capacity to preserve these three qualities simultaneously. They comprise that which is known as the blockchain trilemma, which states that blockchains, thus far, have failed to produce no more than two of the three qualities in their networks.

In practice, this makes Avalanche a particularly attractive option for decentralized finance projects, for which delays in transaction completion, costs associated with changes in the network, and risk of attack are all glaring issues. Its main decentralized exchange, known as Trader Joe, has $1.47B locked in liquidity. It also has the capacity to interoperate with protocols from Ethereum, such as the Aave lending protocol and SushiSwap, another decentralized exchange protocol. Speed and security allow for other novel blockchain applications as well, including blockchain-based games, NFT-related projects, and other industry-specific applications.

Goals and Principles

Avalanche has three broad use cases, which are designed to foster a unifying platform for the creation, transfer, and trade of digital assets.

1. Building application-specific blockchains, both permissioned / private and permissionless / public.

2. Building highly scalable and decentralized applications (dApps).

3. Building smart assets – arbitrarily complex digital assets with custom rules, covenants, and riders.

 

 

AVAX Technology

Avalanche Consensus Engine

Previous Iterations of Consensus

Consensus protocols are the most inextricable aspect of blockchain technology and all other large-scale industrial distributed systems since the advent of distributed computing and transactions. However, over the past fifty years, blockchain consensus models have only witnessed two distinct schools of thought: classical consensus and Nakamoto consensus. 

Classical consensus protocols, which rely on all-to-all communication, can have low latency and high throughput but cannot scale and are not robust in the presence of membership changes, resulting in deployments that are typically static and permissioned. In other words, classical consensus protocols have nodes (participants) that are fixed, meaning that the alteration of the population must be approved either by consensus or by a centralized figure, the latter being much easier to execute.

Nakamoto consensus presents a more robust method for achieving consensus among a fluid network of participants by using proof-of-work mining coupled with the longest-chain rule, which states that the iteration of the blockchain with the longest history or the greatest number of preceding blocks or the most “work” put into it is the valid iteration. This allows for the consensus of the state of the network to remain constant in the midst of participant inflows and outflows, but it also results in high confirmation latencies, low throughput, and absurd energy expenditure to maintain its secure state.

The consensus protocol utilized in the Avalanche network combines favorable properties of both classical and Nakamoto consensus models. Through repeated random sub-sampling, this protocol, comprised of three single-purpose protocols, achieves low latency and high throughput, without requiring agreement on the precise membership of the system. In other words, it does not require information regarding how many participants within the system agree or disagree with a single transaction (or change in the state of the network); all it needs is to perform an iterative voting process among randomly selected subsets of network participants to determine the valid network state.

 

The Avalanche Protocol

The consensus protocol used in the Avalanche blockchain is actually, more accurately, a combination of two nearly identical protocols, Avalanche and Snowman. The distinction will be later clarified, but for the sake of simplicity, the consensus engine in its entirety will be referred to as SoA. 

As mentioned just prior, the SoA protocol operates by repeated, random sampling of the network. When a validator node seeks to determine whether a change in the state of the network (i.e. a transaction) should be accepted or rejected, it polls a small, constant-sized, and randomly chosen set of neighboring validator nodes on its decision regarding that change: whether they accept, reject, or prefer a conflicting state change. If a sufficiently large portion (alpha α) of the queried validators wish to accept the change, then the validator prefers to accept it as well. The same goes for when a validator prefers to reject a transaction. This process is repeated until α of the validators queried reply the same way for beta β consecutive rounds and consensus is achieved. See below.

When transactions present no conflicts, finalization happens incredibly quickly. In the face of conflicts in polls regarding the network, honest validators quickly cluster around these conflicting transactions and indicate their preferred transaction. This creates a positive feedback loop in which the acceptance of one transaction necessitates the rejection of the other, resulting in a much quicker resolution of the conflict than any other blockchain to date.

Consensus System Dynamics

The core mechanism of SoA provides a variety of system dynamics that make AVAX a blockchain suitable for large-scale deployment.

Permissionless, Open to Churn, and Robust – Classical consensus protocols and Nakamoto consensus protocols require knowledge of the state of the entire network and its full membership to securely account for changes in the network. This task is manageable and effective in closed, permissioned systems but becomes cumbersome in open, permissionless systems with a high number of validators. SoA, on the other hand, is able to validate without full membership knowledge. This means that the state of the network can be in a constant state of flux and the network will still be able to reach consensus. Validators may enter and depart from the network, without others knowing it, and network consensus is still achievable with high safety guarantees and a negligible probability of corruption.

Scalable and Decentralized – SoA is able to scale to tens of thousands if not millions of nodes without delegation to subsets of validators. Here, the distinction between Snowman and Avalanche can be expounded upon.

Snowman is a linearized version of the Avalanche protocol that is used in two of Avalanche’s blockchains, the Platform chain (P-Chain) and the Contract chain (C-Chain) (See P-Chain and C-Chain). Avalanche, implemented in the Exchange Chain (X-Chain), makes use of a directed acyclic graph (DAG), which functions to group together transactions from the same node to form ancestry sets. 

Unlike other blockchains in which leaders forego safety to preserve liveness, or the relative “activity” of a network, by approving the addition of blocks onto the chain prior to achieving consensus, Avalanche overlaps validators across different groups to grant them all first-hand participation in consensus and maintains transitive voting properties with its DAG to ensure consensus across nodes can occur expeditiously via bunching, resulting in complete consensus (safety) prior to the approval of transactions posted onto the blockchain (liveness). The result is a network that achieves consensus with a constant and minimized amount of communication overhead (or messaging complexity) – the main culprit for bottlenecks in data processes in other blockchains and the primary limitation to validator scalability. This is well illustrated in a comparison between Avalanche and other heterogeneous blockchains.

Adaptive – SoA is able to achieve higher performance when the adversary is small and is yet highly resilient under large attacks. This is again a quality that results from sub-sampling.

Asynchronously Safe – SoA does not follow the longest-chain rule like many other consensus protocols, which dictate that the longest existing version of a blockchain is the “true” or “valid” blockchain. In these blockchains, validation leaders are able to add blocks to the chain without first reaching consensus, which results in an increasingly deteriorating security of the network, especially if a leader that is selected based on the stake they own in the network is malicious.

Low Latency – SoA protocols reach finally in less than 1 second, which is significantly faster than longest-chain protocols and sharded blockchains, which are blockchains whose networks are divided into smaller “shards” that are run independently and in parallel to one another. This makes Avalanche particularly well-suited to business applications like day trading and consumer retail, where transaction finality is essential.

High Throughput – Since SoA and the Avalanche protocol, in particular, makes use of a DAG to group transactions,  Avalanche is able to conduct an average of 4500 transactions per second (TPS) with near-instant time-to-finality while maintaining full decentralization. Unlike many other projects that report a high TPS derived from highly controlled environments, such as Solana which reports 65,000 TPS but realistically only achieves about 3000, AVAX’s TPS is calculated from an empirical implementation of the network running on 2000 nodes on AWS, geo-distributed across low-performing machines. With high-performance machines, TPS can exceed 10,000.

 

 

Avalanche Platform Architecture

The Avalanche platform consists of three distinct blockchains – the Exchange Chain (X-Chain), the Platform Chain (P-Chain), and the Contract Chain (C-Chain). These three chains each serve a specific purpose at the application level and are designed in such a way that is most conducive to the application-level activity that occurs on them. Before diving into the three blockchains individually, it is essential to understand the underlying components of all of them, as they are fundamental to the functionality of each.

Subnetwork Model

Avalanche runs on a series of subnetworks, or subnets, that are comprised of a dynamic set of validators working together to achieve consensus on the state of a set of blockchains. Every blockchain is validated by one subnet, and a subnet can validate arbitrarily many blockchains. 

The purpose of these subnets is to manage validation across multiple blockchains – each of which maintains its own purpose and functionalities – with efficiency and flexibility. As there can be virtually infinite subnets across the Avalanche blockchain space, validators are repurposed across the network according to a variety of properties. In short, a finite population of autonomous validators can be used to their full potential thanks to the organizational effects elicited by subnets.

There is a special subnet known as the Default Subnet or Primary Network. This subnet is the only one that is validated by all validators. In other words, in order to validate any subnet, a validator must also validate the Default Subnet. The Default Subnet, in turn, validates a set of pre-defined, built-in blockchains, which are the Exchange Chain, Platform Chain, and Contract Chain. In order to join the Default Subnet, or to create or join any subsequent subnet, one must stake a predetermined amount of $AVAX token.

Subnets provide three distinct advantages over typical validation formats present in other blockchain projects.

Separation of Concerns – If a validator has no interest in the blockchains included in a given subnet, the validator will simply not join and opt for a different subnet. This organically results in a reduction in network traffic and the computational resource requirements of validation for any given blockchain. Compared to other blockchains that require full participation from all validators for every transaction, this is a significantly greater allocation of resources.

Support for Private Blockchains – Subnets can also maintain restricted access since subnets decide who may and may not enter. This is especially useful for blockchains with sensitive information, resulting in network activity that is monitored and approved by a small set of trusted validators. 

Application-Specific and Compliance Requirements – Validators can even create a subnet where each validator must have certain properties to make regulatory compliance easy to manage or to handle application-specific performance requirements. Validators may be required to station in a specific country, pass Know-Your-Customer and Anti-Money Laundering (KYC/AML) checks, or hold specific licenses or certifications. Similarly, if an application requires significant RAM or CPU power to conduct rapid validation on the network, such as with 3D digital rendering in blockchain games, a subnet for that application’s blockchain could require validators to meet hardware requirements to prevent performance bottlenecks. The options here are virtually unlimited, thus providing subnets with the opportunity to tailor their validating constituents to the specific applications or requirements of their blockchains.

Virtual Machines

While VM architectures have been an essential component of blockchains since Bitcoin, they were originally incredibly limited by a pre-defined static set of functionality. Since then, many developments, such as the Ethereum Virtual Machine (EVM), permitted new ways to create decentralized applications, thanks to smart contracts. However, even EVM is limited in its potential scope, due to relatively low-performance tolerances and relatively lesser-known coding languages like Solidity. Avalanche VMs (AVMs), on the other hand, permit developers to write in Go, an open-source language used since 2009. In addition, they support the creation of new instances of both AVM and EVM or the creation of custom VMs. Coupled with the scalability and security of Avalanche consensus, the possibilities on the application level are greatly increased.

The result of Avalanche Virtual Machines is three distinct blockchains, each with a specific purpose.

 

Exchange Chain (X-Chain)

The X-Chain is the decentralized platform on Avalanche for creating and trading digital smart assets. This is functionally comparable to Bitcoin in that there is no other possible action to be taken on the X-Chain – only sending and receiving funds. The purpose – and the inherent advantage – of the X-Chain over its counterparts is that it exists not to encompass a variety of use cases; it only exists to transfer money inexpensively and expeditiously.

One digital asset that is traded on the X-Chain is the $AVAX token itself. Whenever a user issues a transaction on the X-Chain, he or she will pay a fee denominated in $AVAX. This is incredibly useful during times of high network activity, as the fee is fixed at 0.001 $AVAX, roughly $0.03 at the time of writing. Compared to the steep gas fees of other blockchains like Ethereum, this cost is minuscule and well-suited to quotidian exchange activity, which is rightly protected from cost fluctuations that result from unrelated network activity.

The X-Chain is the only blockchain in the Avalanche Network that makes use of the Avalanche Consensus Protocol, which implements a DAG to asynchronously sort and validate transactions according to their ancestry as opposed to their temporal origin.

Platform Chain (P-Chain)

The P-Chain is the metadata blockchain on Avalanche, where any and all activity regarding validation, staking, and subnets reside. The P-Chain is where users can stake with their validating node, delegate $AVAX to stake on another user’s node, transfer $AVAX from the X-Chain to the P-Chain, and receive staking rewards.

Since the P-Chain is built to house and organize subnets, it is also fundamentally the Avalanche blockchain’s development layer, where validators can form subnets and consequently build new renditions of the Avalanche blockchain that utilize the existing set of validators. In other words, the P-Chain is where users can create their own L1 or L2 blockchains, with their own unique purposes, permissions, functionalities, and populations. This is all made possible with the P-Chain API.

The P-Chain makes use of the Snowman Consensus Protocol, a linearized version of the Avalanche protocol that achieves consensus across ordered blocks.

Contract Chain (C-Chain)

The C-Chain is Avalanche’s instance of the Ethereum Virtual Machine, designed to support the creation of smart contracts using the C-Chain API. This blockchain is dedicated to the use cases that are often capitalized upon within the Ethereum blockchain, namely decentralized finance. Wallet addresses on the C-Chain begin with a “0x” denomination, which indicates its ability to be utilized by a variety of platforms like MetaMask.

Avalanche Bridge

The Avalanche Bridge is a final component of the AVAX ecosystem’s multichain structure, and it serves to enable users to transfer ERC20 tokens from Ethereum to the C-Chain. Most commonly utilized for $WETH, $USD, and $WBTC transfers, the bridge typically enacts transfers within 10 to 15 minutes in totality and low fees of $3. This relatively quick and affordable method of token transfer, coupled with a $180M incentive program launched in August 2021, resulted in a massive uptick in market volume overall, reaching more than $370M in volume on August 27th alone. Since then, a huge influx of DeFi projects have entered the ecosystem, both native to AVAX and other blockchain networks, that have garnered incredible, sustained activity on the network.

 

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AVAX Ecosystem

The greater Avalanche ecosystem is a fast-growing repository of nascent blockchain projects, some of which originate from Ethereum and the rest born with the intention to capitalize on Avalanche’s improved scalability and performance capabilities. With 195 projects listed that cover use cases in DeFi, Products, News, DAOs, DEXs, Yield Farms, Wallets, Tools, Bridges, CEXs, NFTs, NFT Marketplaces, and Launchpads, the ecosystem is growing both in depth and in breadth.

Decentralized Applications (dAPPs)

By no surprise, the top applications on Avalanche are DeFi and cross-chain messaging protocols, many of which are native to Ethereum. This is indicative of Avalanche Network’s initial and continued identity as a finance-first blockchain as well as the state of the greater smart application landscape in crypto today. 

 

It is worth noting that of these applications, only four are cross-chain compatible applications or originate from other native blockchains. This is a key indicator that consumers and investors within the Avalanche ecosystem are finding genuine value in AVAX-native applications that are built on X-Chain and P-Chain. Of the applications, it is clear as well that DeFi protocols are still among the most popular Dapp’s for most users, which comes as no surprise. In many ways, blockchains as young as Avalanche are certainly working to push the envelope with regard to scalability and UI/UX, but the industry as a whole still has yet to present user-friendly applications for other use cases that are on par with that of web2 applications.

In the DeFi space, in particular, Avalanche was expected to see substantial growth through the ongoing Avalanche Rush program, a $180M DeFi incentive program that saw projects like Aave and Curve join the ecosystem back in August 2021. In Q1 of 2022, Avalanche saw a new Avalanche-native DEX Pangolin (PNG), as well as Terra (LUNA), join the program, with a combined $2M in AVAX incentives offered to promote usage. While there was a TVL decline of 5.5% over Q1 2022, the decline would have been noticeably worse if not for the continued influx of newer and smaller DeFi protocols. Notably, Aave, Benqi, and Trader Joe saw declines of 4%, 18%, and 20% respectively, resulting in a combined 12% decline, which was recuperated by the performance of these smaller protocols.

Outside of DeFi, Q1 saw the launch of a highly anticipated GameFi subnet, Crabada. The game quickly reached 5,000 users measured by unique wallet addresses, and from 60,000 to over 400,000 daily transactions throughout the quarter, amassing a daily volume ranging from $130,000 to $1.5M. Certainly, GameFi is one sector of Avalanche, like other blockchains, that is gaining traction at an accelerated pace. It will be exciting to see what scalability improvements and greater developer activity will emerge in upcoming projects.

 

Market Performance

Since July 2021, Avalanche has grown at an exponential rate on all metrics. The following section delineates Avalanche’s progress from July 2021 through Q1 of 2022, as reported by nansen.ai.

Number of Daily Transactions – Daily Transaction Volume has shown a continuous upward trend since July 2021 and consistently processes over 600k daily transactions as of April 2022. When looking at the unique number of addresses, this number grew from 79,200 addresses after 1 day, 278,000 addresses after a week, and 593,000 after a month since July 2021. This is over 5x the number of monthly addresses active on Arbitrum, which is Ethereum’s most popular L2 blockchain.

Transaction Count – When compared to Ethereum, we see a significantly higher growth rate in the number of total transactions over time for Avalanche. Since November 1st, 2021, Avalanche’s total monthly transactions rose from 200k to averaging slightly less than 1M in the span of 8 months. In other terms, Avalanche’s transaction ratio percentages increased from 19% to nearly 75% as of April 2022, demonstrating a noticeably greater adoption rate for Avalanche.

 

DeFi Comparison

On the decentralized finance frontier, Avalanche is quickly emerging as one of the top blockchains for decentralized finance protocols, ranking 4th on DefiLlama in terms of total value locked (TVL). Sitting at $4.05B, it follows only Ethereum ($72.39B), BSC/BNB ($8.8B) and Tron ($6.15B). With a total of 211 unique protocols, as well, Avalanche ranks 5th in terms of total market size.

With DeFi standing as the most critical sector in the crypto industry, as it has for a long time and likely will for many years to come, investors in the AVAX ecosystem will be glad to know that the blockchain already has an incredibly healthy and competitive ecosystem of veritable projects.

 

Developer Community

Compared to similar L1 blockchains, Avalanche maintains a noticeably large developer population given its relatively smaller ecosystem, and that population is growing noticeably faster than many of its competitors.

The following chart from Electric Capital shows the total change in the number of community and protocol developers for over 200+ web3 projects from December 2020 to December 2021. Among ecosystems with 51-300 developers, Avalanche more than tripled its total number of developers within the year, becoming one of the largest “mid-sized” developer communities in the year as well. This rate of growth, from roughly 100 developers to 300 developers, falls short of only Solana, NEAR Protocol, Terra, ICP, Fantom, and Harmony. While there are certainly larger developer communities out there, Avalanche has been able to demonstrate fantastic growth in its short lifespan.

It is worth noting that a large contributor to this growth is the ease of access that new developers can enter the ecosystem and begin creating new applications. While other blockchains like Ethereum may generate new developers as a result of the momentum it generates through recognition and widespread adoption, Avalanche is able to onboard new developers due to the wide variety of coding languages that are compatible with the network, including AvalancheGo, AvalancheJS, Avash - a local testnet creation function that supports Lua scripts, and Avalanche Postman - a wallet and faucet server for developers to test-exchange funds across the network.

 

 

Tokenomics

The Avalanche Network launched with 360M $AVAX minted through private and public sales. The remaining 360M $AVAX have been reserved for distribution over the next few decades. This extended vesting schedule is a strong indicator of AVA Labs’ dedication to the project over the long term and their intention to burgeon an ecosystem with a scale that rivals that of Ethereum and other L1 blockchains.

Token Distribution

Staking Rewards – 360M $AVAX (50%) minted at launch; 260M $AVAX (50%) reserved as staking rewards released over decades

Seed Sale – 18M $AVAX (2.5%) sold to participants in seed sale at a price of $0.33 with a one-year vesting schedule. 10% of this allocation (1.8M $AVAX) was released on mainnet launch, and the remainder released every three months over a year.

Private Sale – 25.2M $AVAX (3.5%) sold to participants in private sale at a price of $0.5 with a one-year vesting schedule. 10% of this allocation (2.52M $AVAX) was released on mainnet launch, and the remainder released every three months over a year.

Public Sale Option A1 – 7.2M $AVAX (1%) sold to participants in Publc Sale Option A1 at a price of $0.5, with a maximum allocation per user of $25K. 10% of this allocation (720K $AVAX) was released on mainnet launch, and the remainder released every three months over a year.

Public Sale Option A2 – 59.76M $AVAX (8.3%) sold to participants in Public Sale Option A2 at a price of $0.5, with a maximum allocation per user of $2.5M. 10% of this allocation (5.976M $AVAX) was released on mainnet launch, and the remainder released every three months over 18 months.

Public Sale Option B – 4.8M $AVAX (0.67%) sold to participants in Public Sale Option B at a price of $0.85 with no vesting period.

Foundation – 66.672M $AVAX (9.26%) are allocated to the Foundation and used for ecosystem-building initiatives – marketing, bounties, and incentive programs. This allocation has a 10-year vesting period.

Community and Development Endowment – 50.4M $AVAX (7%) are allocated to individuals and groups that are developing core tooling and infrastructure for Avalanche.

Testnet Incentive Program – 1.944M $AVAX (0.27%) were allocated to participants that validated the network in incentivized testnet programs, who could complete challenges to earn up to 2000 $AVAX. These tokens were locked for a year.

Strategic Partners – 36M $AVAX (5%) were allocated to strategic partners with the specific instruction of being distributed to groups, organizations, and enterprises building on the Avalanche network. This allocation has a 4-year vesting period.

Airdrop – 18M $AVAX (2.5%) were allocated to various communities in an effort to onboard more people to the Avalanche community. This allocation has a 4-year vesting period.

Team – 72M $AVAX (10%) were allocated to founding and non-founding members of AVA Labs with a vesting period of 4 years.

This allocation is not a community-centric distribution. Compared to many other blockchains, there was significantly less $AVAX made available at launch to public sale. Instead, a greater percentage was allocated to insiders, including the team as well as various VCs, amounting to nearly 40% of the total supply. This can call into question the level of decentralization and equity that Avalanche truly offers its community, at least from the perspective of critics.

 

Vesting Schedule

When observing Avalanche’s vesting schedule, one will notice that the temporal distribution of tokens for each allocation is conducive to preserving scarcity for long-term growth.  Notably, only the seed, public, and private options have any linear vesting, which has just begun in Q1 of 2022. All other allocations have intermittent unlocks across the next few years until 2025, which goes to show that all parties involved in Avalanche are in it for the long haul.

A final note on Avalanche’s tokenomics: As discussed at length in The Block’s Layer 1 Platform Comparison commissioned by Algorand, it can be incredibly difficult to compare the native tokens of distinct blockchains, unlike DeFi tokens, which behave in accordance with traditional finance. Native tokens, given their unique staking mechanisms, varying rates of token inflation, and unique use cases within censor-resistant environments, are in these ways and many others too “different” to compare.

However, it can be said that native token value does have a direct correlation with network security. In Proof-of-Stake networks, the aggregate value of staked tokens can serve as a proxy for the associated costs of enacting an attack on the network. A high token value, wide token distribution, and higher proportions of staked liquidity all contribute to greater security. In this light, Avalanche can undoubtedly be touted as one of the more secure networks, with the fourth-highest price among smart contract blockchains and over 1000 distributed validators. This fact alone may help impart optimism on the part of investors, eliciting a greater increase in token value over time.

Governance

Avalanche truly shines among its L1 peers on the decentralized governance front, being highly inclusive due to the innate structure of its consensus algorithm. Any token holder is able to vote, without having to delegate any decision-making, on key financial parameters and system-wide changes for the ecosystem. These include minimum staking amount and time, minting rate, transaction fees, etc. There is a strict set of predetermined parameters that can be modified through on-chain governance; other platforms may allow changes to a variety of arbitrary aspects in the system without limit. This, however, can be arguably beneficial to the system as a whole, in that system can function more predictably and safely while still granting decision-making privileges and freedom to its constituents.

 

 

Team & Investors

Internal Team

The key players in the Avalanche ecosystem can be narrowed down to the original co-founders of Avalanche and the incumbent leading decision-makers for Ava Labs, the creator of the Avalanche blockchain.

The founders all hail from a deep Computer-Science educational background, and all either attended or taught at Cornell University. Together, they determined to create an open, programmable blockchain by congregating talent across the tech and finance industries.

Additionally, there are two key decision-makers in the C-suite of Ava Labs that are worth mentioning for their direct influence over the ecosystem.

Backers

Avalanche has raised approximately $350M from private investors at a valuation of $5.25B, according to Bloomberg. Additionally, Avalanche Foundation, having launched its Avalanche Multiverse in March, raised an additional $230M in November 2021 to support this $290M incentive program. Its key investors are

A16z

Polychain Capital

Dragonfly Capital

Three Arrows Capital

Galaxy Digital

Initialized Capital

Bitmain

 

 

Areas for Improvement

While Avalanche presents a never before seen blockchain solution that has soared in popularity and success over the past year, it is not without its shortcomings. The following section delineates briefly some infrastructural dynamics of Avalanche that are, for the most part, detrimental to the ecosystem’s users, whether by way of security, decentralization, etc.

No Penalties for Malicious Validators

Most PoS blockchains like Ethereum make use of a policy known as slashing, by which fraudulent or careless validators will lose their stake in the network for mistakenly or intentionally approving invalid transactions. In some cases, the stake that is lost is a fixed percentage of the validator’s total stake in the network, and in other cases, validators may be stripped of their entire stake in the network and be banished from the validator group temporarily or permanently. In either case, the repercussions are steep. For example, the Ethereum network requires 32 $ETH for anyone to be a validator; at a price even as low as $1770 at the time of writing, the combined loss of over $55,000 is nothing to scoff at.

Unfortunately, Avalanche is one of the only PoS networks that imposes no such slashing penalty. Part of the reason for this could possibly be that the Avalanche consensus mechanism, both Snowman and Avalanche alike, maintains a greater capacity to fend off attacks on the network from larger proportions of malicious actors than other blockchains. As a result, Avalanche only strips malicious validators of their reward but does not bill them of their respective stakes in the network. Regardless of Ava Labs’ rationale behind omitting a penalty, this ecosystemic decision is one that many $AVAX holders hope to change in the future.

Costly to Be A Validator

To become a validator, one must stake 2,000 $AVAX tokens or more, equating to roughly $48,000 at the time of writing. This stake must be locked in for a minimum of two weeks or a maximum of one year. This is a relatively steep staking requirement to become a validator, comparable with Ethereum. 

Alternatively, those that cannot afford the 2000 $AVAX requirement can choose to be delegators, who are required to stake 25 $AVAX.  

Development Timeline

One final, and arguably the most important, area of improvement that Avalanche should focus on is its development schedule. It is true that Avalanche, despite its massive amount of funding and institutional backing, has missed a number of significant deadlines for ecosystemic updates and the roll-out of new services. One example of this is the Avalanche wallet, which has been in development for quite some time without any indication of its release.

Overall, there is a dearth of clarity from the Avalanche team regarding its plan for the blockchain in the future, which is expounded upon in the next section.

 

 

Roadmap

Avalanche has a very ambitious roadmap ahead for the year of 2022, but it is worth noting that the roadmap webpage and the Avalanche forum website have been removed entirely from the Avalanche website. There is no immediately available roadmap that is written and published clearly for the public to see. According to a verified manager of the official Avalanche Telegram group, there is an extensive roadmap available only for the internal team at Ava Labs, as was verified by CoinBureau on YouTube.

However, from a variety of interviews with Emin Gun Sirer, there are a few key milestones that can be gathered.

AVAX Bridge plans to connect to many more blockchains this year, including private and permissioned chains run by large institutions.

AVAX will implement superpruning, a practice designed to reduce the size of the blockchain in order to maximize decentralization as it grows over time.

AVAX intends on continuing the tokenization of real world assets.

AVAX Version 2 will be coming, but no features of it have been disclosed thus far.

AVAX will provide support for native $BTC via the Avalanche Bridge.

AVAX will roll out a Generation 2 version of its wallet.

AVAX hopes to become the largest blockchain by TVL, by total daily users, and by transactions per second (1M transactions/second with the use of subnets).

 

 

References

Website

General Whitepaper

Platform Whitepaper

Consensus Whitepaper

Token Dynamics Whitepaper