This will be a fun article because avalanche is such a new protocol that one day we might read this post in the future and realize how crazy it was for us to explain it so early.
Avalanche hardly has any promotional material, just nerdy documentation, and lengthy white papers. Lucky for you, that is exactly what we are into.
Welcome to Shavuna, the number one website for crypto education. Here we explain topics of the cryptocurrency world using analogies, stories, and examples so that you can easily understand them.
I this blog, we are going to explain what the avalanche network is, what makes it different than literally any other crypto application I’ve seen. In the end, you’ll learn the secrets of the AVAX token, including exactly why the price recently went from sixteen dollars to fifty five dollars in two weeks.
Let’s get started.
Avalanche Consensus Model.
To understand the avalanche network, we first need an economics lesson about their unique proprietary consensus mode to understand the avalanche network.
First, you need to know that the consensus model people used for a long, long time was called the Practical Byzantine Fault.
Around the 1980s, this thing took off and was essentially a computer science algorithm that helped a bunch of things come together and make a conclusion based on the information they had.
Next up, around 2009, we had the start of bitcoin, which introduced the Nakamoto era of consensus. Nakamoto created and shared the proof of work mechanism, which we have an entire article about, but is in many ways better than the old byzantine model.
Finally, in 2020 Avalanche launched their avalanche consensus model network. This thing is complicated, so I will attempt to give you a high-level understanding of it without upsetting any of their engineers.
Basically, the network follows proof of stake pretty closely, but it does have a few unique differences:
First, the Avalanche model uses a form of sub-sampled voting. This means that a large group of people volunteer to participate in the network and get randomly asked to check things to put it in their own words small random subsets of validators are asked whether they think the transactions would be accepted or rejected.
After it is initially thought to be valid, something called network gossip happens where the participants exchange information back and forth and continue to validate the transactions or deny them.
One of the benefits of this is that contrary to proof of work and proof of stake mechanisms, it doesn’t matter how many nodes there are and how many people there are in the system; consensus will be reached within a specific desired time frame.
Also, due to some technicalities, this consensus model is actually much more difficult to attack.
Unlike bitcoin, where you would need 51% of all the computers to attack the network, or Ethereum 2.0, where you would need 51% of all the staked tokens to attack the network, with Avalanche, you would need to control up to 80 percent of the network to perform an attack.
Let’s get on to the important stuff, though. This model allows for up to 4,500 transactions per second per subnet and has a finality clock of fewer than three seconds.
We’ll explain what subnetting is later because it is essential, but right now, you just need to know that each subnet can process up to 4,500 transactions per second, and if you have a thousand subnets, well, you can do a lot of transactions.
Compare this to bitcoin with seven transactions a second in an hour-long finality and even Ethereum pales to compare with 15 transactions a second and a 10-minute finality.
Now that I’ve basically explained how the avalanche consensus model works let’s get into the real thing where avalanche shines; its network infrastructure.
Avalanche’s Network Infrastructure.
First, Avalanche has one primary network that network has actually three built-in blockchains with it.
That’s right; Avalanche just isn’t one blockchain, it is at least three, but we’ll get to that in a second. The first blockchain in the network is called the x-Chain.
x-Chai is specifically for the creation, management, and transaction of tokens on the network. Now, the engineers would tell us in technicality. This is based on a DAG, a unique form of a consensus model, unlike a blockchain. But it is out of the scope of this post.
I just thought it would be interesting to add that the avalanche team is not married to one protocol.
Next up, we have the c-Chain. The c-Chain is specifically for smart contracts. It is an exact copy of the Ethereum virtual machine, so that way you can instantly copy and paste and start using Ethereum dapps on the avalanche network.
In my opinion, they were very smart with this, allowing developers to move their projects over without doing much work.
This chain also uses something called the snowman protocol, which I’ll talk about in a minute.
We have the x-Chain for transactions and the c-Chain for smart contracts.
Next, we have the p-Chain or the platform chain, and it is specifically for the management of the subnets. It also coordinates all the validator nodes and the staking mechanism.
Now. this brings us to a very big and very important question:
What are subnets?
Well. each subnet is a new network in the avalanche ecosystem. That’s right; this system is scalable in so many ways.
Let me explain subnets; each subnet can have multiple blockchains, just like the primary avalanche network.
Secondly, each blockchain in a subnet can have its consensus model. This means if you’re creating one, you can pick proof of work or proof of stake depending on your needs.
Another cool thing is that each blockchain can have its own VM or virtual machine. You can copy the Ethereum virtual machine just like the primary chain did.
Another important thing about these subnets is that they can be permissionless or permissioned. This means that they can either be public or private blockchains.
You might start to understand the purpose of this. If you are a government and you want the full power of a blockchain without developing the groundwork, you can just add a subnet in Avalanche’s ecosystem.
Maybe you’re a business, an organization, or some other protocol needing to use these potent tools without wanting to invest in something new.
In Avalanche, you can even change the rules for each blockchain in your network. You can make it so that it is compliant across many different geographic or political requirements.
For example, you could say every validator in your subnet needs to have a license, or maybe they need to fill out certain tax information Avalanche is built to be able to create and follow rules like that.
One last important thing that I thought I would add is that to validate your subnet; you also contribute to validating the entire network via the primary three chains.
Let’s get into something fun. Let’s get into specific detail about the network. The main primary network uses the avalanche consensus model, but ava labs created an even more powerful consensus model called the snowman protocol.
To make you understand them, let’s talk about the quick difference between the snowman protocol and the generalized avalanche protocol because the difference is relatively small. However, it is powerful.
The snowman protocol is the linearized version of avalanche to fit the needs of the Ethereum virtual machine. Basically, the snowman protocol has been optimized for smart contracts and high throughput.
On the other hand, Avalanche is a more general use case where it is implemented using a dag structure which is also seen on the x-Chain.
Summing it all up, these were a bunch of technical terms, but you just need to know that the avalanche developers are brilliant and basically optimize things as best they can for the situations that they see fit.
Let’s get into the tokenomics of the AVAX coin, which powers the network.
Tokenomics of AVAX
There is a max cap of coins at 720 million. This immediately makes it a deflationary asset. Secondly, AVAX coins can be used as governance on the platform, meaning the more coins that you hold and stake, you have more voting rights, and you get to make crucial decisions in the future of the network.
Here’s the bad news though, ava labs pre-sold 127 million coins when they launched, and many of those coins are subject to an unlocking period.
This means many investors who bought the coin at 50 cents may want to lock in some of their 100x profits and sell immediately whenever they can.
This is terrible news for investors, but the good news is that they aren’t dumping all of these coins at once. Here’s a picture of their unlocking:
If you’re considering investing in AVAX, be mindful of these dates and how the past dates have affected the price.
Another thing that’s worth noting is that the team and the foundation were also given around 20% of all coins.
Finally, what you’ve been waiting for:
The good news is about AVAX and why their price has recently spiked so much.
The avalanche foundation has announced a 180 million dollar incentive program to get people to try out their network.
This means they are quite literally giving away 180 million dollars for free as a form of advertising. This happens all the time in the DEFI world, and it’s not a scam.
The incentive program is supposed to bring two big players to the network; Curve finance and AAVE.
Curve and AAVE have tens of billions of dollars of liquidity locked up on networks like Ethereum and polygon. It was brilliant of the team to get them to come over to the ava network.
When this initially launched, we saw the price of AVAX spike from 15 to 55 dollars in a few weeks as hungry investors started bridging their money over using the AVAX bridge.
We will never give financial advice on this website, and we’ll probably never make price predictions, but this is a very bullish signal for anyone interested in the AVAX network.
Finally, I want to say thank you guys so much for reading. I hope that you’ve enjoyed it. I hope that you’ve learned something, and most of all, we hope to see you in the next blog post.