Avalanche is an EVM-compatible blockchain that attempts to offer new solutions to problems that the current Ethereum blockchain fails to solve. Avalanche is primarily trying to be better suited for DeFi and GameFi applications, with EVM being short for Ethereum V virtual M. This means that Avalanche is compatible with projects running on the Ethereum Mainnet, and protocols can be written in Solidity, a popular smart contract language used to interact with EVM-compatible blockchains.



When was the project launched?

Launching on Mainnet in September 2020 by Ava Labs , co-founded by Emin Gün Sirer, a computer science professor at Cornell, Kevin Sekniqi, a PhD student, and Maofan “Ted” Yin, Avalanche promised a faster endgame, more DeFi, and lots and lots of subnets. When you get right down to it, Avalanche is all about subnets, GameFi, and KYC.

During the current bear market, Avalanche has been forced to further refocus on GameFi and KYC, as seen with the announcement of Shrapnel, a AAA first-person shooter, and further investment in Metaverse. Subnets allow for customization to a customer’s specific needs, but are best when the subnet is gas-free, allowing players to trade with each other via p2p and marketplaces without the worry of unpredictable gas fees.

When I first hear about a new EVM-compatible chain, I tend to chuckle a little — there’s a natural tendency to roll your eyes and think to yourself, “Oh no! Another one.” If you’re new to the crypto space, I’ll warn you that there are countless facsimiles and copycats out there, but I’ll give Avalanche credit — it seems like they’ve actually carved out new territory in the realm of numerous new layer-one blockchains. That’s no easy task.



Avalanche is broken down into the following (3) chains, which provide a unique consensus mechanism.

You can think of it as the Inception blockchain or a Russian nesting doll. Avalanche has subnets or mini-blockchains living inside it. This allows for blockchain as a service or BaaS. There is still a lot to be done in terms of governance within the network, but the same can be said for all major blockchains.

The key is to keep developers interested and avoid the dreaded “ghost chain” moniker that all blockchains fear. Things seem to be going well at the moment, but with the market currently in a tank, it will be difficult to control the burn rate and keep developers interested.


X-Chain (Asset Creation/Exchange) - Exchange Chain

X-Chain is used to create and transfer digital assets. It also allows for inter-chain transfers of subnets. X-Chain uses the Avalanche consensus protocol. The consensus mechanism is unique and is explained in more detail below.

P-chain (subnets/validators) - Platform Chain

The Multiverse Incentive Fund is designed to accelerate the growth of the new Internet of Subnets (Individual blockchains within Avalanche).

Avalanche carves out a niche in the sea of ​​L2, EVM-compatible blockchains and enterprise solutions currently available. P-Chain allows you to run separate blockchains that can communicate with each other via specialized EVMs. These are subnets. They run on Snowball consensus and allow blockchains to communicate with each other, but allegedly in an internal, gas-free manner.

C-Chain Contract Chain (Smart Contracts/EVM)

For example, Avalanche Rush, another initiative by Avalanche, was aimed at increasing DeFi adoption on the network. “Avalanche Rush kicked off the second wave of DeFi growth on Avalanche. Since its launch on August 18, 2021, the total value locked (“TVL”) on Avalanche has grown from $312M to nearly $16B, unique addresses have grown from 137K to 2.2M, and transactions have increased from 4M to 112M.” (Avalanche Medium page)

The C-Chain chain runs on a modified EVM to quickly run Ethereum dApps, and again, the focus seems to be on time to completion and performance on gas-free systems in Avalanche.

While there are equally valid questions about why Avalanche won’t end up being just another Blockchain as a Service (BaaS) solution, I’d say if you’re looking to invest in a long-term project, it’s not the worst option, although it won’t earn you many decentralized friends on crypto Twitter. The new twist seems to make sense, and explains the focus of the new Multiverse Incentive Fund.


Multiverse Incentive Fund ($4 million AVAX) (Q1 22)

Focused on the C-chain. Focusing on blockchain use cases in gambling, DeFi, NFTs, and institutional use cases. Defi Kingdoms, Ascenders (very nice art), Shrapnel, Imperium Empires, Heroes Chained, Crabada are some of the games being built on $AVAX. Ava Labs, the core developer of Avalanche, is collaborating with Aave Companies, Wintermute, Jump Crypto, and others to build the first horizontally integrated blockchain specifically designed for institutional DeFi with built-in KYC functionality.

I feel like they will be competing with Fantom $FTM and Solana $SOL for this business, and if you see Jump Crypto involved, you better pay attention. Unfortunately, in my opinion, it looks like Avalanche will be a KYC GameFi/DeFi network with more of a web 2.5 feel. That's not necessarily a bad thing, I'm just more of a fan of decentralized systems.

Subnets seem to fix all of Avalanche's problems, though I'm not as negative about it as some of my friends on CT. They can make a lot of money simply by servicing the inevitable (in my opinion) influx of Web2 companies trying to have their own BaaS (Blockchain as a Service). Demonstrating real market fit now will only accelerate the process of blockchain systems like Avalanche joining the fiat Web 2.5 systems. If last year was the year of L1s, this year is the year L1s are heavily absorbed by web2.

Avalanche's maximum speed is unknown, as they usually talk more about the blazing speeds that can be achieved when running on a subnet. This is mainly due to Avalanche's unique consensus mechanism; it is a combination of (4) mechanisms: Slush, Snowflake, Snowball, and Avalanche. These mechanisms, without going into the math, are the secret sauce that allows Avalanche to achieve faster times to finals. I can imagine that in GameFi, time to finals would be very important, as you don't want game items to be in question here or there.

Imagine a player has purchased a gear set and/or NFT, completed their objective, and sent the item to a friend via p2p or bought it from a subnetwork marketplace. Snowball consensus is used for the P and C chains, and Avalanche consensus is used for the X chain.

"The basic idea of ​​consensus is to get all nodes to agree on a common outcome through a systematic and repeated process of sub-sampling voting. This mechanism ensures that all nodes will agree on the same outcome after more than one round. Due to the exponential decay property, the probability of still being split after more than one round is astronomically small; this allows transactions to be finalized instantly (>2 seconds).

The current trend of creating customizable, gas-free, EVM-compatible L2-style blockchains seems to be a turning point for L2 in the Ethereum blockchain space. Solana looked like the heir apparent to GameFi in late 2021, but with GameFi’s beloved AAA Star Atlas looking more and more like an expensive NFT project, the time has come for competitors like Avalanche to seize the moment. Carpe DiemFi!



Learn more about subnets

If you think of subnets as a virtualized copy of Avalanche, you're already halfway home. I first read about these concepts with Fantom in late Q4 2021. As you read this, the BaaS (Blockchain as a Service) industry is being created, and it looks like we're at a MySpace/Facebook intersection where only one or two products will survive, and the rest will likely be accumulated through M&A.

If we go to avascan.info/stats/staking we see that the US and Germany have more funds allocated, a little more in Europe, but it makes me think that there is reasonable support for developers in these countries. From a purely retail perspective, I see a lot of money in BaaS for Avalanche and Fantom. Capitulation may or may not be progress. It is difficult to say these days due to the instability of the international monetary system. Currently, I see that the developers of Shrapnel games have Subnets and Ascenders. Whether subnets will work on Avalanche, it seems we will find out soon. During this bear market, it will be very important for Avalanche to stand out against the Ethereum L2s like Arbitrum, Optimism, Polygon.


Ecosystem

Looking at the Avalanche ecosystem, I found 186 different tokens on $AVAX as of the week of May 9th. It’s not exactly an impressive list, but in the current climate, just staying alive is an achievement in my opinion. I would describe the ecosystem as what Solana looked like in mid-2021. You have Trader Joe ($JOE), the most recognizable trading platform on Avalanche. It’s a good combination of trading, pooling, farming, lending, launchpad, staking, and even some NFT stocks. The theme is useful and everything is put together very well.

There's Pangolin $PNG, a DEX with decent volume and reasonable numbers, and Platypus ($PTP), a swap solution for stablecoins - though the roadmap ended in Q4 2021?!?? Yeti Finance has a nice little stablecoin $YUSD, though it's currently struggling to hold its peg like most lower-tier stablecoins. You've got the popular ones in the past: Tribute coins: $TIME, $MIM, $ICE, $SPELL, and BENQI ($sAVAX) Liquid Staking.

Conclusion 

In conclusion, it is clear that subnets are the main selling point of the $AVAX ecosystem. AAA game developers seem to like the idea of ​​creating their own subnets that will run their own little private blockchains with their own parameters and settings. By creating a gas-free EVM-compatible gaming blockchain environment, Avalanche may just come out on top thanks to its connected investors, willingness to take risks, and urgent transition to the new KYC GameFi/DeFi narrative. It may not satisfy crypto purists, but it could make people a lot of money.