It’s been a while since we last put the spotlight on Avalanche, and the active user base has more than doubled! Since the beginning of 2021 — the user base has steadily increased. In fact, the network experienced significant growth in the last quarter of 2022, while the rest of the world had concerns about a looming crypto winter. All of this was also propelled by the growing popularity of dApps like Benqi and Trader Joe — and hence has led to Avalanche being a thriving protocol in a volatile market.
Avalanche’s climb to the snowy peaks of success makes us take a second, closer look at its architecture in this article. We go through its unique consensus model, take a look at the three-chain approach in more detail and also look at subnets — all things that make Avalanche unique.
The Classical consensus model is very fast at achieving finality, but it requires direct discussion between the nodes. The Nakamoto consensus, on the other hand, has been game-changing as it does not require nodes to know each other. It has facilitated the development of the scalable and robust blockchain technology that we know and use today. However, a low throughput and inefficient energy management prevent it from being a reliable alternative to fiat currencies.
Avalanche Consensus tries to take the best of both worlds and combine their strengths. The inspiration is gossip algorithms — let’s say one person goes around the room asking people their preferred shape — a triangle or a square. This person, after asking everyone, makes a decision. It is quite possible that the person will lean towards the option chosen more often. This process is carried out by every member in this room till finality is achieved. In Avalanche, all of this happens in a couple of seconds using sub-sampled voting. When evaluating whether to approve a transaction, a node requests input from a randomly selected, subset of validator nodes regarding their choice. In multiple rounds of voting, once we have the same consensus with the required quorum size of voters — a verdict is made.
There is speed, high throughput, and low latency plus it is scalable and robust. Adding to it its energy efficiency makes this consensus model revolutionary.
The Three Chains
Solving the blockchain trilemma required Avalanche to compartmentalise itself into three chains, each with a unique use case. This allows users to shift digital assets between chains, depending on their use case. The X chain for exchange, the C chain is used for smart contracts, and the P chain for staking. It may sound alien to some people, but it is in fact just another varied approach to optimise the workings of a blockchain. Avalanche chooses to compartmentalise the issues.
This chain as the name suggests deals with the exchange of currencies i.e. buying and selling. This chain deals strictly with receiving and sending funds. There is no compatibility for wallets or DeFi applications.
The X-chain is an instance of the Avalanche Virtual Machine (AVM). The exchange of funds is carried out in the form of digital smart assets known as Avalanche Native Tokens — one of which is AVAX. One may wonder, why can’t we just use the C-chain for fund transfer as well — Won’t that be flexible? Yes, you certainly can send funds on the C-chain, but the gas fees might be inflated during times of high network usage.
That brings us to the reason X-chain exists — to offer a tailor-made approach for funds transfer. The gas fees are fixed at 0.001 AVAX, hence providing an affordable and fast funds transfer stream. The structure of the X-chain is designed unlike most blockchains — using a Direct Acyclic Graph (DAG) system. In a normal chain, each node has a single parent and a single child whereas in the X-chain a node may have multiple parents and multiple children. This allows vertices (refers to each node) of this chain to vote on transactions in batches — thereby increasing the throughput and speed of the network.
The “contract” chain handles the smart contract side of things. Smart contracts being crucial to all things DeFi, this chain is the one providing support for dApps, NFTs, ERC-20 tokens etc.
Every chain in Avalanche is an instance of a VM (Virtual Machine) — and the C-chain happens to be a VM instance of the Coreth (Core Ethereum) chain — therefore adding the interoperability factor. C-chain ensures compatibility with the Ethereum Virtual Machines and hence, has an Ethereum-style address starting with 0x. It achieves this compatibility by utilizing a linearized version of the Avalanche Consensus Protocol called the Snowman Protocol. As you might recall the Avalanche Consensus has a non-linear DAG structure, but the Snowman protocol makes every vertice have only one parent and child like a regular chain.
Further, usage of the Solidity language also ensures cross-compatibility of dApps. All of this ultimately also enables the use of bridge smart contracts, which move assets from one chain to another.
In the trilemma, this chain deals with the issue of scalability — using subnets or private networks this chain can scale very well. With 4500 transactions per second, it is an order of magnitude above other chains. The C-chain requires AVAX — the native currency of Avalanche to operate and be used.
The platform chain is all about the maintenance of the platform, hence this chain is concerned with staking — validators and delegators receive their rewards on this chain. This chain also enables the creation and management of subnets — more on that later.
This chain is based on the Platform Virtual Machine. Avalanche actively supports this chain and the validators using it, for example, the Avalanche Explorer provides a clear view of on-chain data on Avalanche’s validators, delegator transactions, staking, rewards distribution, Subnet creations, X/P/C cross-chain transactions, and much more.
Subnetting within the Avalanche chain entails the division of the Avalanche network into more specialized and manageable networks, known as subnets. Subnets are a set of nodes that are collectively responsible for reaching consensus on the transactions associated with one or more blockchains. They are a network within a network or a network built on top of a larger one. The Primary Network of Avalanche is a subnet in itself. A validator on any subnet needs to be a member of the Primary Network as well — ensuring a healthy supply of validators for security and decentralization.
A primary issue solved by subnets is scalability. By creating subnets, a significant amount of traffic congestion is taken away from the Primary Network. Moreover, these subnets can be tailored to suit the specific requirements of distinct applications or use cases. For instance, a subnet could be established to cater to a gaming application, a financial platform, or a supply chain management system.
Once a subnet materializes, it operates in complete isolation from the larger Avalanche network. This segregation ensures that the performance and security of one subnet remain unaffected by the activities transpiring in other subnets. This way we can create bespoke, secure and expandable networks for a particular purpose. For example, empowering a gaming enterprise to forge a dedicated subnet tailored for its online gaming platform. This subnet might be architected to deliver optimal throughput with minimal latency, ensuring seamless gaming transactions.
In a landscape marked by constant evolution and fierce competition, Avalanche has emerged as a trailblazing force, by providing secure, scalable, and customizable solutions. Avalanche has tried to solve the blockchain trilemma, create a revolutionary consensus model, incorporate an innovative multi-chain solution, and create customizable subnets — all in a single package. The efforts put into this have really made an impact with a steadily growing user base and market value. We believe that the Avalanche’s heyday is yet to come, till then we shall follow along its steps in the snow.
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