Avalanche (AVAX) 2022 Overview
Avalanche a leading scalability solution for Web3 applications.
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What is Avalanche (AVAX)?
Avalanche is a blockchain platform that aims to address the blockchain trilemma of scalability, security and decentralization thanks to its unique Proof of Stake (PoS) mechanism.
Avalanche’s primary network supports three built-in blockchains that handle different tasks. Here are each of the blockchains and how they work:
Exchange Chain (X-Chain): A decentralized platform for creating and trading digital assets, such as crypto tokens. Transaction fees on the X-Chain are paid using AVAX.
Used for: Creating new AVAX native assets, trading AVAX native assets
Platform Chain (P-Chain): The metadata platform that coordinates Avalanche's validators. It also tracks and enables the creation of new subnets, which allow developers to create their own blockchains.
Used for: Chain Validation & Creation of subnets
Contract Chain (C-Chain): Avalanche’s Ethereum Virtual Machine (EVM) component meant to replicate Ethereum with a modification to the POS consensus mechanism to boost throughput and reduce transaction costs while still providing developers with an Ethereum toolkit to build out applications and smart contracts for AVAX Users
Used for: : dApp(s), ERC20, ERC721(NFTs)
Unique Consensus Mechanism
Avalanche features a unique consensus mechanism. The core idea of their consensus is to guide all the nodes into one common outcome via a systematic and recurring subsampled voting process. This mechanism ensures with a high probability that all nodes will fall into the same outcome after more than one round. Due to its exponentially decaying feature, the chances of it still being divided after more than one round is astronomically small; this allows for instant finality of transactions (>2 seconds).
Key Takeaways:
Exchange Chain (X-Chain): a protocol for the creation and transfer of digital assets. Permits peer-to-peer transactions for subnet transfers between chains. Uses the Avalanche mechanism for consensus.
Platform Chain (P) coordinates validators, generates subnetworks, and controls them. The P-Chain enables permissioned or permission less blockchains that employ distinct virtual machines to run on the Avalanche Network and communicate with one another. Utilizes the consensus protocol Snowman.
Contract Chain (C-Chain): permits the development and use of smart contracts. The C-Chain uses a customized version of the Ethereum Virtual Machine (EVM), providing faster deployment of Ethereum-based decentralized applications (dApps) on Avalanche. Uses the consensus protocol Snowman.
The Avalanche Ecosystem at a High Level
Two important metrics when assessing an ecosystem are developer and user activity.
Wallets, Exchanges, and Bridges
Up until recently, users could only have full access to the Avalanche network and its ecosystem by using an EVM-compatible plug-in wallet like Metamask in conjunction with the Avalanche Wallet (to access the X- and P-Chains). To bridge this gap and create a simple and comprehensive user experience, Ava Labs, lead developer of the Avalanche network, recently announced the beta release of Core. Core is a browser extension and mobile wallet that allows users to traverse the entire network and ecosystem (decentralized applications (dApps), subnets, and internal chains), as well as to natively bridge and swap assets.
The Avalanche-native Avalanche–Ethereum bridge is the largest Ethereum-connected bridge by total value locked (TVL). In addition to supporting ERC-20 token transfers to the C-Chain, the Avalanche Bridge plans to add support for the Bitcoin network (currently available through the Core Extension). For bridging assets from other chains (e.g., BNB, NEAR, Solana, etc.) the most popular bridges by TVL are Multichain, Stargate, and Synapse (in that order).
dApps and Subnets Overview
Over 200 projects call the Avalanche network home. These projects can be broadly categorized as either native or non-native. Thanks to the C-Chain’s EVM-compatibility and the robust bridging ecosystem around the Avalanche network, many live projects are non-native, meaning cross-chain (e.g., Aave, Curve, etc.). However, a subset of projects are native, meaning they only live on Avalanche, were started on Avalanche, or have the vast majority of their activity on Avalanche.
Another distinction between projects is where they’re deployed on the network. While the overwhelming majority of projects are still on the C-Chain, the first projects began to deploy their own subnets through the P-Chain starting in April. These custom, application-specific blockchain networks prevent projects from clogging up the network by splitting up traffic and isolating performance. In turn, the projects benefit from better performance and customizability in terms of fees, the validator set, the virtual machine, and more.
Avalanche has had its first two custom subnets go live along with the roll out of a number of testnet subnets. Looking forward, they are expected to play an increasingly important role in the ecosystem.
Recap
Avalanche aims to become the “blockchain of blockchains” composed of thousands of individual subnetworks that communicate and work together to construct an interoperable network.
VALANCHE IMPORTANT FEATURES
Speed – The Avalanche platform uses a novel consensus protocol created by distributed systems researchers in 2018, also called “Avalanche”, to permanently confirm transactions in 1-2 seconds.
Scalability – Avalanche handles thousands of transactions per second and can accommodate thousands of validators with no loss of performance.
Security – Avalanche provides stronger security guarantees than either classical or longest-chain consensus protocols.
Smart Contract Support – Avalanche supports creation and use of Solidity smart contracts as well as all your favorite Ethereum tools like Remix, Metamask, Truffle and more.
Private/public Blockchains – Users can create their own public or private blockchains.
Finance-focused – Avalanche was built with serving financial markets in mind. It has native support for easily creating and trading digital smart assets with complex custom rulesets that define how the asset is handled and traded. The assets could represent financial instruments such as equities, bonds, debt, fractionalized real estate, or anything else.
Tokenomics
The $AVAX coin is the utility token of the Avalanche Network, meaning that all blockchain transactions are paid for with it. The maximum number of Avalanche $AVAX tokens in circulation is 720 million. At launch, half of the entire token supply (360 million AVAX) was created, with vesting periods ranging from 1 to 10 years. The remaining 360 million AVAX will be utilized as staking incentives in the years to come..
AVAX Token Distribution
Staking Rewards: 50.00%
Public Sale: 10.00%
Team: 10.00%
Foundation: 9.26%
Community and Dev Endowment: 7.00%
Strategic Partners: 5.00%
Private Sale: 3.46%
Seed Sale: 2.50%
Airdrop: 2.50%
Testnet Incentive Program: 0.28%
Key Insights
Throughout the second quarter, the macroeconomic climate did not hinder Avalanche's growth or network health, and thus the plans to continue developing the network were productive.
The network saw significant drops in network usage as a result of macro pressures, which also led to a shift in activity away from the Avalanche C-Chain and toward the subnets.
Avalanche's Q2 TVL decreased by around 75% in USD terms compared to the previous quarter, but the quantity of AVAX locked in DeFi grew.
The continuing development of subnets and the release of Core will play a crucial role in the interoperability between subnets and the network's expansion.
Partnerships
Ava Labs, the company behind Avalanche, is working with big-name companies across the finance and crypto industries. Here are highlights of the deals and partnerships Ava Labs has set up so far:
Mastercard (NYSE:MA) chose Ava Labs for its Start Path Crypto program. The accelerator program is designed to help crypto and blockchain start-ups scale their businesses.
Deloitte, one of the Big Four accounting firms, partnered with Ava Labs and is using Avalanche to improve its cloud-based Close As You Go platform. The platform assists state and local governments with distributing disaster reimbursement payments.
BitGo, an institutional digital asset custodian, added AVAX support in December 2021. This allows BitGo's clients, which include multiple large crypto exchanges, to offer AVAX to investors.
What is Avalanche?
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