Coin to Watch: Avalanche ‘the first major crypto breakthrough' since Bitcoin

“Layer one” high-performance blockchains have been among the hottest things in crypto lately – and a platform called Avalanche has been a major beneficiary.

© Stockhead Australia Avalanche crypto

Launched a year ago, the smart contract platform is now the No. 14 cryptocurrency, up from No. 47 at the start of August.

Avax tokens were trading yesterday for US$55.44, up from around US$3 at the start of the year. That gives Avalanche a market cap of US$12.2 billion, slightly more than that of nearly 10-year cryptocurrency Litecoin.

Other than Ethereum itself, Avalanche is the biggest cryptocurrency compatible with the Ethereum Virtual Machine, meaning it is moderately easy to port projects from Ethereum to Avalanche.

A US$180 DeFi incentive program that began last week has also helped Avalanche attract a mountain of attention recently.

To learn more, Stockhead reached out to Ava Labs, a team supporting development of the Avalanche blockchain. Patrick Sutton, the New York City-based company’s director of communications, was kind enough to answer our queries.

Because of time zone differences, questions were submitted and answered in writing.

 

Spurred on by ‘Team Rocket’

Stockhead: So can you tell me a little about the history of Avalanche and how the project came to be?

Sutton: Avalanche is built on the first major breakthrough in decentralised systems since Satoshi Nakamoto released the Bitcoin whitepaper in 2008.

In the 13 years since, there have been many efforts to create networks that enable decentralised applications to flourish, but relying on the existing body of consensus research led to either poor performance systems or trade-offs that undermine the value of meaningful decentralisation.

In 2018, a whitepaper outlining a new consensus protocol called “Avalanche,” was published anonymously by a group that calls itself Team Rocket.

Cornell Professor Emin Gün Sirer and PhD candidates Maofan “Ted” Yin and Kevin Sekniqi had been working on the same idea.

[Author’s note: Some have posited that Sirer, Yin and Sekniqi are in fact Team Rocket – but that’s just speculation]

Spurred on by the proofs provided by Team Rocket, they decided to build the next-generation blockchain platform around the Avalanche protocol and founded Ava Labs to support its development.

Avalanche is now the fastest smart contracts platform in the blockchain industry, as measured by time-to-finality, with low fees and a rapidly growing ecosystem of users and applications.

It is blazingly fast with near-instant transaction finality, supports the entirety of the Ethereum development and user toolkit, and empowers meaningful decentralization with over 1,000 full, block-producing validators and the ability to scale that number up dramatically without any drop-off in performance.

 

Platform a ‘blank canvas’

Stockhead: What would you say the project is trying to achieve?

Sutton: As an open platform, Avalanche is available to builders around the world to create their own vision, knowing that the underlying platform is of the highest performance, without any trade-offs. So it’s hard to say there’s a uniform goal, when the platform is designed as a blank canvas.

That said, the Avalanche community and Ava Labs team that supports development of the platform and teams building on it have been most focused on three key areas.

First, Avalanche is empowering a next generation of decentralised finance applications and use cases that remain economically viable for individuals. That ranges from supercharging the core set of DeFi applications known today, and also new use cases that hadn’t been possible before due to technical limitations.

Second, Avalanche is the premier platform for individuals and enterprises to easily create powerful, reliable, and secure private or public networks with complete control over their implementation. These “subnets” can be the foundation for the creation of new ecosystems of value in asset tokenization and regulated institutional use cases that can be connected to the main, open network.

Finally, Avalanche is well-positioned in the NFT space. Perhaps no segment of the crypto ecosystem has reached the masses faster than non-fungible tokens (NFTs), but there’s so much more potential to be seized here. High fees and the real concerns about environmental impacts have been a barrier for both collectors and creators, and those two questions are resoundingly addressed by Avalanche.

Stockhead: Would you agree that Avalanche has been a little bit under the radar in the broader crypto community until your Avalanche Rush announcement?

Sutton: That’s probably a fair assessment. Avalanche is younger than its peers by years, and has always been a project of builders who are passionate about solving problems and delivering on promises, rather than just making them.

That said, the Avalanche community has always been vibrant and there are enormous benefits to growing organically. It has made a huge difference in the experience for first time users who are exploring Avalanche Rush, and then discovering all of the projects and a deep-rooted culture of creative, fun-loving people who want to build something that lasts longer than any of us individually.

Stockhead: Any hints about what Phase 2 of Avalanche Rush will look like, and when it might be coming?

Sutton: Unfortunately, I can’t spoil any of the fun specifically, but I can say we expect more blue-chip apps, expanded network connectivity with the cross-chain Avalanche Bridge, and constant refinements to make the user experience when you land on Avalanche to be even better.

 

Three core blockchains

StockheadI’ve heard Avalanche described as a “layer 0” protocol. Can you explain what that means? It’s three different blockchains, each optimised for a specific purpose, secured by a base layer?

Sutton: The “Layer 0” categorisation is interesting. I first heard it in the Avalanche Telegram last July or August 2020 in the run-up to mainnet, but it’s never stuck entirely because it’s hard to encapsulate everything Avalanche is capable of today and tomorrow in a single phrase.

Layer 0 as a concept describes a platform that is capable of even more fundamental responsibilities than Layer 1 blockchains, like Bitcoin and Ethereum, where on-chain activity happens. Layer 0 would be responsible for coordinating information flow and a shared security across these chains so they can safely interoperate.

In that regard, I see how it’s readily applied to Avalanche in the context of its multi-chain structure and the longer-term vision for being a platform that connects many, many custom private and public subnets as I mentioned earlier.

Avalanche has three core chains that cover all capabilities required for users today. They are partitioned, by design, to optimise each function.

The platform chain (p-chain) manages validators, coordinates staking of AVAX to secure the network, and will be the connection point for subnets to communicate.

The exchange chain (x-chain) is a directed acyclic graph (DAG), rather than a traditionally ordered blockchain. This enables super-fast payments with negligible fees across a fully decentralised network. Today it’s used primarily for peer-to-peer payments and by some exchanges for user withdraws and deposits, but it can also be used to create native Avalanche assets or be the bedrock for a global payments network like we use with credit cards at points of sale.

The contract chain (c-chain) is the default smart contract chain where DeFi lives on Avalanche today. It is a high-speed implementation of the Ethereum Virtual Machine, the operating system for Ethereum apps, which makes it compatible with all Ethereum tooling like MetaMask and easy for applications like Aave, Curve, and Sushi to expand to Avalanche.

For what it’s worth, I think Layer 0 is a bit too inward-looking for non-crypto people to grasp. Onboarding the masses is where I want the entire crypto and blockchains ecosystem to focus our attention, and I think that’s a communications challenge of education way before it’s a technical challenge.

 

Comparisons to Polkadot and Solana

Stockhead: Is this approach similar at all to Polkadot’s? Are more blockchains going to be added in the future?

Sutton: I see the similarities in approach, but I’m not an expert in Polkadot to comment with any authority. There will definitely be more blockchains added to Avalanche through the subnets I’ve mentioned a few times.

Any existing blockchain network could create a copy of itself on Avalanche as a subnet, replacing its underlying consensus algorithm and keeping the application layer and “rules of its roads”. Leaning into that Layer 0 idea, I believe that the value proposition of upgrading the core engine without losing years of development will be very attractive for crypto projects and communities.

Steakhead: I’ve been using Avalanche for a few weeks now and I’ve got to say it’s very very fast, a lot like Solana in that respect. Other than offering compatibility with the Ethereum Virtual Machine, what are the differences between Avalanche and Solana?

Sutton: Like Avalanche comparisons to any other network, it comes down to the consensus protocol powering the network.

Avalanche Consensus is a breakthrough in the space, and its ability to deliver that speed with modest node hardware requirements and inclusive participation from each node as a full, block-producing validator is what differentiates Avalanche from any other network right now.

 

No killing Ethereum

Stockhead: The term “Ethereum killer” gets thrown around a little bit in crypto circles…. how do you feel about that phrase? Would you say that Avalanche is an Ethereum killer?

Sutton: I hate it. I love what Ethereum has shown the world to be possible, and I see Avalanche and Ethereum as complementary networks. I know that can be read as a cop-out, but I’ve been working in this space since 2014 and it’s hard not to think about how much further we could be along in adoption if not for in-fighting and tribalism.

I hinted to this earlier when I said the real goal for crypto builders should be bringing in the masses, and the “killer” and competitor positioning will hold back the industry.

People love war metaphors and rally cries, but if projects keep fighting over the same pool of current users, assets, and applications, then crypto adoption will continue to take much longer than it has to.

Stockhead: One of the interesting things about crypto I find is that all these different communities arise around projects, with their own memes, ethos, even political beliefs. Bitcoin seems a bit right-libertarian; Ethereum, left-wing libertarianism, Dogecoin is a bunch of fun dog memes… I know Avalanche is fairly young… has it found a sense of community yet, and if so, can you describe it?

Sutton: Oops, I accidentally answered this earlier hah. But I’d echo that and say the Avalanche community is amazing. That culture of creative, fun-loving people who genuinely want to build tech that outlives any of us is what jumps to mind (even before you asked!).

Gotta go with @avalancheavax, think we got a solid ecosystem that offers basically everything and plus, no other coin has better memes pic.twitter.com/apsc6HYr3j

— cryptofolk01 (@cryptofolk01) August 2, 2021

Memes, technical debates, support for home-grown projects, excitement for projects expanding to the ecosystem, you regularly find it all. I’ll add that I think “community” gets wielded by thought leaders as this big, monolithic organism that thinks and acts as one, but the reality is far from it (at least with my fellow Avalanche friends).

I know for each new development around the ecosystem, there will be a diversity of strongly held opinions that contribute to better outcomes for everyone. That shows me that there’s so much passion in the people I share these internet spaces with for much of my week, and it’s hard not to be excited by that.

 

Why ‘Avalanche’?

Stockhead: A lot of cryptocurrencies have pretty esoteric names – “Ethereum,” “Solana,” “Tezos”. “Avalanche” feels very grounded … maybe even a little bit menacing if you’re a skier! What was the thinking behind the name?

Sutton: Ah, yes – I like the way you put that, grounded. It comes from the consensus protocol at the heart of it all, which comes from the way the consensus algorithm accelerates its movement toward a decision as soon as it begins to tip toward one.

StockheadHow many people are working on the project?

Sutton: Over 100 people are supporting Ava Labs work to support Avalanche and teams building on it. Harder to count the number of open source and community contributors.

Stockhead: Decentralisation is of course something that many members of the crypto-community care deeply about… how decentralised is Avalanche? Does Ava Labs have some control over the protocol?

Sutton: Ava Labs does not have any special powers or control. Avalanche is highly decentralised with over 1,000 full, block-producing validators currently maintain, secure, and facilitate transactions on the Avalanche public blockchain.

Avalanche is unique in that every validator participates in block production, rather than a small group of miners controlling the vast majority of new blocks or a group of validators nominated to lead block production. In this regard, it is the most “inclusive” decentralised network running today, meaning that anyone can acquire the minimum amount of AVAX required to stake and participate at the deepest level.

Decentralisation really comes down to how many nodes have the power to write to the network’s history, so if a network of 1,000 relies on a group of 30 nominated nodes to gather votes on a transaction, then you really have a network of 30.

 

What’s next for Avalanche

Stockhead: What can users expect next from Avalanche? Both in terms of dApps coming to the platform and any protocol upgrades being worked on.

Sutton: I expect we’ll see the pace of development on top of Avalanche accelerate, as more users, applications, and assets migrate to the platform. At the same time, the tooling that supports users on Avalanche is undergoing a massive overhaul to provide a better user experience for the whole spectrum of user sophistication and knowledge.

Performance enhancements to the core platform, more applications, a better Avalanche Wallet, more cross-chain connectivity with the Avalanche Bridge, entirely new asset classes like Initial Litigation Offerings, enhanced subnet capability, on and on and on.

With how much progress has already been made, it’s hard to believe September 21st will be Avalanche’s first birthday. Exciting times ahead.

Stockhead: Is there anything else I haven’t asked that I should have, or that people should know about Avalanche?

Sutton: Nope, think you got it all!

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

For more crypto news, follow the author on Twitter as well as Stockhead’s new dedicated crypto feed, Coinhead.

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