How it started
I first heard about Bitcoin in 2013 when I read that the Winklevoss twins had bought a significant amount but I never looked into it. I once again came across Bitcoin in mid 2017 when I was doing some research on how IOT devices/machines could transact value. At the time I noticed that the price had gained significantly in value since 2013 so I became curious and fell down the rabbit hole.
What was apparent by the peak of the ICO bubble was that there were lots of experiments and promises from a plethora of projects with different ideas which was akin to the dotcom bubble. Although a minority of these projects were very interesting, there was just one problem: They were all building on a platform which Ethereum had already stated on multiple occasions would have issues scaling whilst remaining decentralised and secure. This ‘unsolvable’ problem which he famously termed ‘blockchain trilemma’ became the biggest barrier, in my view, to worldwide adoption of public blockchains.
Over the last three years I have seen and studied countless projects claiming to solve the blockchain trilemma. In fact it has now become such cliché that when a project claims to have solved it, you must assume there is some kind of trade-off. For example, you either limit the number of active block producers/validators to achieve high speed, such as $EOS and the more validators you have the slower the network becomes. The other option is to create a second-layer solution built on top of the layer 1 protocol however these are either more centralised or less secure. Examples are Matic Network and Loopring on Ethereum and Lightning Network on Bitcoin. This defeats the essence of completely decentralised public blockchains that does not require trusting any entity.
My research on IoT-focused cyptocurrencies led me to Emin Gün Sirer on Twitter who I noticed criticised the claims made by a project claiming to be feeless, faster and secure. I also got to learn more about him especially his article on the famous DAO hack on Ethereum that caused the creation of Ethereum Classic: https://hackingdistributed.com/2016/06/17/thoughts-on-the-dao-hack/.
In mid 2018 I read a tweet by Emin stating that a whitepaper had just been released which was a breakthrough to the blockchain trilemma. I was intrigued. I kept track of developments over time and was excited to learn that Emin would lead a team to bring Avalanche to life.
I had already been down this path before with countless projects claiming to have solved it so all I wanted was to see this network functioning in mainnet. I run a validator node alongside 600+ other validators on the Avalanche platform and I must say that I am blown away by all of it for multiple reasons:
Scalability — Avalanche is able to process 4500+ transactions per second but what is even more impressive is the quick finality of ~1 second. Most blockchains you see today have finalities of between 15 seconds and 1 hour. I came across a lot of blockchain 3.0 projects which have higher tps/split into shards but have much longer finality (60 seconds or more). The issue with this is you cannot be certain a payment has been completed until the transaction is finalised. This would not be ideal in use cases like prediction markets or high performance exchange markets.
Security — Avalanche is secure and having been only live for 2+ months it already has $1bn of staked assets securing the network. This will of course increase as the network onboards projects and users.
Decentralisation — Avalanche is very decentralised with over 600 nodes currently validating the network and able to accommodate millions without impacting network performance. All other blockchains today typically have a cap of 100–150 validators before they are split into shards.
There are many other reasons why I am fascinated by the platform.
I believe there are key aspects to always consider when assessing a new crypto project and I will address all of them.
Founding Team
Emin is a Professor at Cornell University and is well known for his deep knowledge of consensus protocols, discovery of selfish mining in Bitcoin and discovery of the vulnerability in Ethereum prior to the DAO hack. This is why I had to take note when he announced a breakthrough in consensus had been discovered.
Ted is a PhD student at Cornell and is the co-author of HotStuff, the BFT consensus which is used by Facebook’s Libra.
Kevin has a PhD in Computer Science from Cornell and has worked for the likes of NASA and Microsoft.
John is also a Cornell alumni and has an MBA from Harvard. He has significant experience from traditional finance and founded Sureview Capital which was acquired by The Blackstone Group.
More info on the team: https://www.avalabs.org/team
Technology & Innovation
In the last three years, protocols I have come across derive from one of the two consensus protocols until Avalanche emerged: Nakamoto and Classical Consensus. To learn more about the consensus families and how they compare to Avalanche, click this link:
https://medium.com/avalanche-hub/avalanche-a-revolutionary-consensus-engine-and-platform-a-game-changer-for-blockchain-fdac008edc35
They key takeaway is that Avalanche has enabled fast finality, complete decentralisation with high security and permits users to run validators on PCs with simple requirements. You can even participate on a Raspberry Pi today!
The team at Ava Labs will keep innovating and have already demonstrated how effective they are with the roll-out of pre-Apricot and expected rollout of Apricot soon. This will unlock amazing features which will help onboard thousands of new validators to the platform. You can read more about it here: https://medium.com/avalabs/avalanche-to-unveil-novel-blockchain-features-with-apricot-its-first-major-upgrade-76ed092204a8
Many fast blockchains despite the lack of decentralisation have struggled because they have a closed ecosystem. Avalanche however, runs an Ethereum Virtual Machine as its smart-contract chain. This means that developers are able to easily port their projects from Ethereum to Avalanche and also use all the tools they are used to in Ethereum. Because Avalanche is a platform of platforms you can run multiple virtual machines which could be useful in future if a superior smart contract platform ever emerged.
Other projects are now attempting to build with Avalanche Consensus such as Bitcoin Cash ABC and Flare Networks (XRP).
Product Market Fit
First and foremost, Ava Labs created Avalanche because they saw a need to onboard assets (worth trillions of $) in traditional finance which cannot be tokenised today, due to the regulatory requirements some of them need.
Avalanche is great for such use-cases because Avalanche enables firms to create easily customisable blockchains that meet specific regulatory requirements. For example, only permitting validators who have completed a KYC check or country-specific validators or minimum hardware requirements.
There is a clear need for a scalable, fast and cheap as we saw fees as high as $100 per transaction in August this year. With more users expected in 2021, DeFi here to stay and Ethereum 2.0 not ready for at least 18 months to two years, a platform like Avalanche is needed. Some will say there are layer 2 solutions however it is quite clear that these solutions are less secure and will break composability. Some of these layer 2 solutions have existed for over a year yet have not been adopted.
Tokenomics
Avalanche has a capped supply of 720m tokens unlike all other PoS chains with infinite supply such as Cosmos, Polkadot and Tezos. 360m of those tokens were minted on mainnet and are being released in circulation over a vested period of 18 months for investors and 10 years for foundation.
The other intriguing part of the tokenomics is that all transaction fees are burned and those burned tokens can be reminted as rewards for validators of the network in the future.
As a validator, you are also able to earn more rewards in the near future by joining a subnet to validate new blockchains created.
Potential
Avalanche has great potential for the following reasons:
1. It caters for the needs of current developers in the biggest ecosystem of smart-contracts, Ethereum.
2. It caters for the needs of users who pay high fees in DeFi and experience failed transactions for not paying enough fees
3. Ava Labs is a very impressive and growing team with a vision and diverse expertise needed to progress in the space
4. It offers what many other layer 1 platforms cannot provide without trade-offs: Fast finality, high throughput, low and predictable fees, permission-less participation as a validator and no slashing for going offline.
5. It is capable of iterating and on-boarding new virtual machines as time progresses to meet future needs without rebuilding a new platform and debating whether it is a new platform or not.
To summarise, Avalanche solves a hair-on-fire problem we see today for users as well as institutions who have shown an appetite over the last 3 years for blockchain adoption. Avalanche can iterate to meet future technological demand coupled with a superb team ready at the helm to innovate.
It looks like after three years, I have finally found a platform that is ready for adoption and ready to onboard trillions of US dollars in assets locked in traditional finance. I cannot wait to see what other use-cases are unlocked once the bridge to Ethereum is released this month. The road to adoption is truly here.
You can follow me on https://twitter.com/born2hodl for more on Avalanche , Ethereum and Bitcoin.