Avalanche (AVAX) is a crypto coin, native to its own Avalanche blockchain. The platform launched in 2020 to be the all-in-one for smart contracts, token creation, and custom blockchains. It gained significant price traction in the summer of 2021 when Avalanche announced a $180 million liquidity mining incentive to draw in more Dapps and grow its DeFi ecosystem. Two of the largest DeFi protocols, Aave and Curve, led the way for this new incentive. But what makes Avalanche unique compared to its competitors?
Blockchain problems Avalanche aims to solve
Avalanche sets out to do what Ethereum is doing, but better. In several ways, Avalanche is superior to that of Ethereum.
▪ Transaction Throughput
o The Ethereum network is slow at only 14tps while Avalanche can reach more than 4,500tps. With the full, production-ready version of Avalanche, it has potential to process over 20,000 transactions per second – and this is before any sharding!
▪ Transaction Finality
o The Ethereum network takes 6 minutes to consider a transaction permanent and immutable. Meanwhile, Avalanche uses its own Avalanche consensus protocol. All nodes on the Avalanche network work in parallel to randomly check other validators’ transaction confirmations until it is statistically proven to be true. This results in an Avalanche transaction finality of sub-one-second.
▪ Safety threshold
o The Ethereum network uses Layer 2 scaling solutions, which jeopardizes its own security since transactions are processed outside of the Layer 1 blockchain. Ethereum, like Bitcoin, has a 51% safety threshold while Avalanche is at a unique 80% parameterization with a Proof of Stake consensus.
Avalanche’s three-chain solution
Avalanche has three different interoperable chains for varying purposes.
▪ The contract chain (C-Chain)
o The C-Chain is used for the creation of smart contracts to make DApps. A key feature of the C-Chain is that it is compatible with the Ethereum Virtual Machine (a digital computer system on Ethereum). In other words, Ethereum smart contracts can be deployed on Avalanche. Existing Ethereum DApps can be easily copied into the Avalanche network.
▪ The exchange chain (X-Chain)
o The X-Chain creates, manages, and transacts Avalanche assets, with the most popular cryptocurrency on the platform being AVAX. Transaction fees are paid in AVAX.
▪ The programme chain (P-Chain)
o The P-Chain permits anyone to create a Layer 1 or Layer 2 blockchain. These creations are called subnets, with the default subnet being the P-Chain. The P-Chain keeps track of the validators of other Avalanche subnets, and in turn these other subnets will validate the P-Chain.
The importance of Avalanche’s subnets
Subnets are in essence a clone of the Primary Network (the default blockchain of Avalanche which validates Avalanche’s three built-in blockchains). Once a subnet is created, it can go on to create even more subnets with its own P-Chain. This is extremely useful in the case of exceeding traffic demands. Subnets are required to validate their own blockchain as well as the Primary Network chain. To validate the Primary Network, the subnet will need to become a Primary Network member via the staking of 2,000+ AVAX tokens. Subnets also must pay a subscription fee to maintain their blockchain on the network, in comparison to a one-off auction price with direct competitor Polkadot.