The Defi platform Avalanche is trying what Solana also wants: to compete with Ethereum. The share price growth and interest in the blockchain are high, but the project does not only have advantages.
Avalanche is an open source platform for defi applications and company blockchains, which was launched with the mainnet in September 2020. Ava-Labs' project is competing as an Ethereum challenger. Avalanche consists of three blockchains: AVAX tokens are traded and created on the exchange chain. Smart contracts and DApps run on the contract chain, while the platform chain is used for validation and enables subnets.
According to the initiators , they received a cash injection of over two billion US dollars for the development of the network at the beginning of November. The money will come from a fund in which various investors such as Polychain Capital, Three Arrows Capital and CMS Holdings participate.
As with Bitcoin, the number of AVAX tokens is limited: there can be a maximum of 720 million tokens. A difference to many blockchains is the burning of tokens. The transaction fees paid in AVAX tokens are burned. This is supposed to increase the token shortage and prevent inflation.
Initiators from Cornell University
The Avalanche platform was launched by Ava-Labs. It was founded by the Turkish-American computer science professor Emin Gün Sirer at Cornell University in New York together with Kevin Sekniqi and Maofan Yin, who both received their doctorate in computer science from the same university. "The fact that the initiators of Avalanche are renowned scientists and not shady types indicates that it is a serious approach," says Alexander Braun. The author and founder of a digital strategy consultancy has been developing internet projects and startups for over 20 years and supporting companies in digital change.
"Another advantage of Avalanche is that the network has a number of prominent investors who have a lot of knowledge and are very familiar with cryptospace," says Braun. Among the first investors were, for example, the American venture capital firm Andreessen Horowitz and the former Coinbase CTO Balaji Srinivasan.
The coin of the Avalanche blockchain rushed from all-time high to all-time high this year. But like many other cryptocurrencies, the AVAX token experienced a drop in price at the beginning of December. On November 23, the AVAX price hit its all-time high of $ 134. At times, Avalanche was among the 50 largest cryptocurrencies. The cryptocurrency currently has a market capitalization of over 19 billion dollars.
Avalanche and its competitors
Ethereum has a market capitalization of over $ 470 billion, making it the second-largest cryptocurrency after Bitcoin. The Avalanche network, launched in 2020, would like to push the giant off the podium. The points of attack are a low speed and the high gas fees of Ethereum. There are already plans for network upgrades to make Ethereum faster and cheaper.
While many use cases are currently unprofitable on the Ethereum blockchain, avalanche transactions cost only a few cents. “The question is, however, whether the prices at Avalanche will remain so low when the number of users increases,” says digital strategist Alexander Braun.
Why is Avalanche so fast?
By default, transactions on the Avalanche blockchain should be processed in less than a second. There are two influencing variables for the performance of transactions on a blockchain: the processing speed, i.e. the settlement time, and the number of transactions that can be carried out per second. “Bitcoin can process seven transactions per second, with Avalanche it is up to 4,500. Settlement takes around 60 minutes with Bitcoin, with Avalanche it takes less than two seconds, ”says Braun. “In the first step, the speed comes through a new consensus mechanism that Avalanche has developed,” says the digital strategist. But the division into three different chains also brings speed.
The distribution of the AVAX tokens should be viewed critically. More than 40 percent are currently still owned by the developers. It is similar with the still young SOL tokens. This concentration of ownership could be a problem in the beginning and dissolve as trade increases.
What are other benefits of Avalanche?
High decentralization
Avalanche secures a plus point compared to comparable projects like Solana with the decentralization. The system requirements for validators are quite low in the Avalanche network. “A simple computer without special hardware is currently sufficient to be able to validate. But if the network grows, the hardware requirements could increase and the validation could be outsourced, ”says Braun. More professionalized validators would then prevail and there could be centralization to just a few validators. "The advantage does not have to be sustainable."
Many possibilities
The Avalanche network combines many functions: Defi applications, DApps, and smart contracts run on the blockchain as well as NFT, gaming, or corporate and cultural applications.
Security threshold
Anyone who owns 51 percent or more of the Ethereum or Bitcoin network could take over the blockchain. Avalanche's consensus approach enables higher security values: attackers would have to own 81 percent of the Avalanche network in order to steer the proof-of-stake protocol in a different direction. “Ethereum also wants to improve this and move from proof-of-work to proof-of-stake. I'm curious to see whether security will also increase there, ”says Braun.
programming language
The programming language in which DApps and other applications for Avalanche must be written is compatible with that of Ethereum. So there could be synergies here. It is different with Solana, whose programming language is not compatible. "Access to the developer community and scalability without a completely new development of DApps is a great advantage of Avalanche," says Braun.
Conclusion
“Avalanche is flexible, versatile, open to programming languages, can connect subnets, and has high-quality applications. All reasons for the current hype”says digital expert Braun. Avalanche is particularly convincing due to the breadth of applications that are possible with the blockchain. “Like a Swiss Army Knife, Avalanche can be used in many situations. But there is always the risk that nothing is really well covered. "
Low speed, high transaction costs, security deficiencies, and the tendency towards centralization are disadvantages of older blockchains that Avalanche does not (yet) have. "It is still a very young network and it is not yet clear whether it will be able to keep all its promises," explains Braun.
"But tomorrow the next, even cooler blockchain could come out, because the market is extremely dynamic," says Braun. "Avalanche and Solana are both hot candidates for future success that could go in the direction in which Ethereum has developed," says the expert. “It is certainly not the stupidest idea for crypto investors to put even a small portion in Solana or Avalanche,” he says. However, this should not be understood as an investment recommendation.
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