Comprehensive Analysis of AVAX: From Consensus to Subnets, Dynamics, and Project Sharing
This issue will share with you what Avalanche is, what subnets are, some recent market actions of Avalanche, and several projects worth paying attention to, starting from the principles.Author: DiamondHands
Compiled by: TechFlow
The battle of public chains continues. Recently, Luna created an ATH, and the betting agreement of founder Do Kwon has made Terra shine. Cosmos remains very strong despite the unfavorable market environment, and has garnered a lot of attention thanks to the expectation of numerous airdrops.
As a T1 level public chain, Avalanche seems to have lost its voice recently.
Although there are many discussions about subnets, the market does not seem to have a clear understanding of the potential of subnets or the vision of Avalanche itself.
Recently, Avalanche launched a $290 million Multiverse incentive program, some parts of which have been overlooked by the "market." As a long-time observer of Avalanche, we believe these overlooked details can prove Avalanche's firm vision and development potential.
This issue will share what Avalanche is, what subnets are, some recent market actions of Avalanche, and several projects worth paying attention to, representing personal views and not investment advice.
This issue will not cover token models, lock-up situations, etc. This part of the content comes from the article by Galaxy Digital: Galaxy Digital Research Analyzes AVALANCHE, which has been explained very clearly. It is recommended to read this article in conjunction with this content for better results.
What is Avalanche
Snowball + DAG, Avalanche is an open platform Avalanche defines itself as: an open platform suitable for deploying Dapps and enterprise-level blockchains. Because Avalanche is suitable for many blockchain deployments, when comparing it to L1 public chains, it is actually more appropriate to compare it with multi-chain parallel projects like Polkadot and Cosmos in the long run.
Of course, in terms of the performance of the public chain itself, Avalanche's transaction speed and degree of decentralization are also relatively superior. Even with a doubling of nodes, the transaction speed and security on the chain will still not be significantly affected. Compared to COSMOS, in addition to Avalanche's efforts to bring traditional finance on-chain, which will be introduced later, the value capture of Avalanche's native token is also higher because each subnet requires staking 2,000 AVAX to establish.
The core difference between Avalanche and other public chains lies in its consensus protocol, which we will elaborate on.
Evolution of Avalanche's Consensus
Slush -> Snowflake -> Snowball -> Avalanche, from simple repeated sampling to complete consensus.
Consensus refers to the process by which a series of independent voters (i.e., validators) reach an agreement on a decision.
Past consensus protocols can be divided into two main categories:
Classical Consensus Protocols
Nakamoto Consensus
However, both have made compromises in terms of scalability, transaction speed, etc., leading to the blockchain trilemma we often discuss. That is: decentralization, high performance, and high security cannot be satisfied simultaneously.
Avalanche's consensus mechanism claims to break the limitations of the blockchain trilemma. Below is a comparison of different consensus mechanisms provided by the official team.
The formation of Avalanche's consensus mainly consists of four stages: Slush, Snowflake, Snowball, and finally the Avalanche consensus protocol formed by the combination of Snowball + DAG.
Before sharing the specific evolution of consensus, friends familiar with Avalanche may have heard a term called: metastability.
Metastability refers to: a trigger cannot reach a confirmable state within a specified time period. This is also related to Avalanche's continuous subsampling, starting from Slush.
Stage One: Slush - Introducing Metastability and Simple Repeated Sampling.
This is the foundation for Avalanche's evolution. The inspiration for Slush comes from the Gossip Protocol (also known as the Epidemic Protocol), which Bitcoin uses to broadcast transaction and block information.
To visualize the gossip protocol, imagine the process of rumor spreading or how you hear gossip; it often starts with one person telling you "what the gossip is," and then you "spread this gossip" to others, until everyone "knows about this gossip."
Image from Zhihu user @juniway Slush optimizes the above "gossip process" by continuously verifying the authenticity of the gossip with people around you, ultimately confirming whether you believe it or not. This process is called: repeated subsampling.
In essence, suppose you have three states:
Uncertain state: you have not been informed yet, you do not know what the gossip is;
Believe this gossip: you believe this gossip is true;
Disbelieve this gossip: you believe this gossip is false.
As an uninformed person, you will complete consensus through the following process.
a) Start sampling with the expectation of believing or not believing;
b) The sampled nodes return their belief or disbelief results;
c) According to the principle of majority rule, if the majority result is belief (e.g., believe: disbelieve = 3:2), the sampling node chooses to believe; if the majority result is disbelief (e.g., believe: disbelieve = 1:4), the sampling node chooses to disbelieve.
Node graph provided by Zhihu user @JoeQuant-Jackal To ensure safety, multiple samples will be taken, and only when the results are consistent several times will the node finally change its state. The dynamic sampling process is as follows:
Image from Zhihu user @JoeQuant-Jackal
The number of nodes selected and the number of consecutive consistent samples refer to the parameters k and α mentioned in the white paper.
However, this sampling process encounters a problem.
If there are malicious nodes adjusting themselves to the opposite state, causing the sampled node to fail to confirm the correct state, the network's security will be insufficient.
Based on this issue, the concept of Snowflake was introduced, adding a counter concept to Slush.
Stage Two: Snowflake - Adding a Counter to Slush to Record the Consensus History of Nodes.
A characteristic of Slush is: memoryless, meaning nodes only retain the final state but do not record sampling history. Snowflake allows nodes to keep track of "the number of consecutive consistent samples," executed as follows:
Add a counter for each node;
If the sampling result differs from the previous round, reset the counter to 0;
If the sampling result is the same as the previous round, increment the counter by 1;
Ultimately, when the "number of consecutive consistent samples α" exceeds "a certain value β set by the system," the state is confirmed.
The benefit of this is that even if there are erroneous samples in between, if the accumulated α of past sampling results is greater than β, the state can still be switched.
However, this confirmation process still encounters a problem: if malicious nodes frequently occur, the counter will repeatedly reset to 0, causing some nodes to be unable to reach consensus and thus continuously repeat sampling.
Based on this issue, the concept of Snowball was introduced, improving the counter in Snowflake to a confidence concept.
Stage Three: Snowball - Adding Confidence to Snowflake to Measure the Quality of Historical Validation of Nodes.
The core issue of Snowflake is that malicious nodes cause the counter to reset repeatedly, ultimately preventing the network from reaching consensus.
After improving to a "confidence counter," nodes will not change their state or reset the counter due to a single sampling differing from the previous one; instead, they will lower their confidence, and the final color change will be determined by the confidence value.
This is the origin of the Snowball consensus and is one of Avalanche's cores.
Interested friends can also experience the formation process of Snowball consensus by dragging the mouse in the matrix diagram to simulate malicious nodes.
On this basis, Avalanche has made an additional upgrade.
Stage Four: Avalanche - Adding the Concept of DAG to Snowball to Increase Transaction Efficiency and Security.
To make the network more efficient and secure, Avalanche also adds the concept of DAG to Snowball.
DAG: Directed Acyclic Graph.
The data structure of blockchain is a linked list (not extended here), which is a linear structure, while DAG is a graph structure, allowing transactions to proceed in parallel and thus speeding up transaction speed.
Image from Zhihu user Peter Wang Guangzhong
Another characteristic is that because each transaction has a directional arrow (the concept of direction), the parent-child relationship between transactions intertwines, thus increasing the complexity of tampering with a transaction; the cost of malicious actions will rise.
Thus, Snowball + DAG is what we refer to as the Avalanche consensus protocol. It should be noted that not all three chains of Avalanche use the Avalanche consensus.
Because the data of the P-chain and C-chain is still in a chain structure, the Avalanche consensus can only be used for transactions on the X-chain, while the P-chain and C-chain adopt a linear consensus called Snowman, customized based on Avalanche.
Based on the consensus of Avalanche and Snowman, the official team has conducted practical tests, showing that even when the number of nodes increases to 2000, the throughput does not change significantly. Even if the number of nodes increases further, Avalanche's consensus will still be completed through this "repeated subsampling" method, so theoretically, the network will maintain a relatively fast speed.
The above is the core introduction of Avalanche's consensus. Of course, the white paper also contains some details, such as how to quickly handle certain transaction conflict scenarios, the impact of node changes on latency, how Avalanche views sharding, etc. Due to space limitations, we will not elaborate on these.
We have made some simple annotations in the white paper. Interested friends can reply "AVAX" in the WeChat public account backend to obtain our simplified annotated version of the white paper and enter the community.
Distinction of Related Concepts in Avalanche
X/P/C Chains, Primary Network, Validators, the Relationship between Subnets and Blockchains.
A common diagram in the market is shown below, detailing the structure and characteristics of the Primary Network.
In simple terms:
X Chain: Mainly used for creating and trading assets;
P Chain: Carries the metadata of the Avalanche network and is used to coordinate validation nodes and create subnets;
C Chain: This is an EVM-compatible chain used for creating EVM-related contracts, etc.
It should be noted that only the X chain uses Avalanche consensus, so the X chain belongs to AVM (Avalanche Virtual Machines). Currently, the most common scenario for users is: interacting between the Avalanche wallet and exchange wallets, which does not truly represent the potential and wide use cases of the X chain.
Avalanche has a vision to bring more traditional financial assets on-chain, which requires defining assets, such as assets that can only be traded by people from certain countries, or can only be traded during certain time periods, or traded under other customized scenarios.
The definition of the X chain is: a decentralized platform for creating and trading digital assets. This functionality will have the opportunity to realize Avalanche's vision and is also one of the characteristics that Avalanche has been widely overlooked by the market.
As discussions about subnets increase, concepts related to validators, and the relationship with X/P/C chains need a more complete diagram for clarification.
We have summarized the relationships between the Primary Network, X/P/C chains, subnets, and validators in the following diagram. Here are a few preliminary concepts that need to be clarified:
A subnet is a network composed of a series of validators that reach blockchain consensus;
Each blockchain can only be validated by one subnet;
Validators on each subnet can validate multiple subnets;
Each subnet is a member of the Primary Network and requires staking 2,000 AVAX.
The diagram lists three Subnets 1/2/3, each validated by a collection of multiple validators A/B/C.
Delving into subnets, exploring the rules and potential of Subnets.
From the above diagram, each Subnet is a member of the Primary Network, and the P chain in the Primary Network serves all subnets. This is why it is said that customized subnets enjoy the overall network security of Avalanche while customizing their own blockchain.
As a subnet, it can be seen that Subnet 3 can validate Subnet 2 while not validating Subnet 1. This means that each customized subnet can focus on validating only the network data it is interested in, without the burden of validating uninterested networks.
This is the benefit brought by the structural characteristics of subnets.
At the same time, the core potential of subnets lies in the ability to customize network rules, making the chain more suitable for one's business. For example, as mentioned earlier, certain assets can only be traded by people from certain countries; similarly, you can restrict nodes on your network to be accessed only by devices from certain countries or impose other restrictions to create your own blockchain.
For example, for a blockchain focused on gaming, if you want validators to have higher hardware configurations, you can set requirements for relevant validators.
Recently, two popular gaming subnets are led by Crabada's Swimmer Network and Defi Kingdom's DFK Chain. Both have improved network speed and provided incentives, and both have made their main tokens the gas fee for the new public chain, increasing the usage scenarios (consumption) of the native tokens.
While customizing blockchains, you can also customize virtual machines, as shown in Subnet 3 above. Currently, Avalanche's C chain is mainly EVM-compatible, but theoretically, developers can customize various VMs (Virtual Machines) through Avalanche, even using Go language.
Currently, there are not many projects with subnet plans on Avalanche. In addition to the aforementioned Crabada and Defi Kingdom, there are also Ascenders, Shrapnel, Cryptoseal, etc., most of which are related to gaming and still in the development stage.
Although Avalanche has previously collaborated with companies like Deloitte to customize blockchains, the potential of subnets has not yet been fully realized. The current number of subnets on Avalanche can be continuously tracked by interested friends.
New Developments and Project Introductions in Avalanche
Hackathon competitions and the Multiverse incentive program.
Currently, Avalanche is engaged in several major events, including the Summit in Barcelona, the Asian hackathon program, and the recently launched $290 million Multiverse incentive program.
These actions are continuously creating fresh blood for the Avalanche ecosystem. There will be no further introduction to the hackathon and Multiverse here; interested friends can check it out themselves.
Here, I want to highlight something that has been widely overlooked: In the Multiverse plan, it is mentioned that Avalanche will provide on-chain native KYC functions for institutions.
This function is another important action for Avalanche to bring traditional finance on-chain.
Mainstream Projects Related to Avalanche and Subnets.
We will share by categories: Gamefi/Defi/NFT/DAO.
Gamefi
1. Crabada is the most popular chain game on Avalanche, and its developed subnet Swimmer Network has begun testing;
2. Defi Kingdom is the first game subnet project in the Multiverse plan;
3. CryptoSeal is dedicated to creating Loot on Avalanche, and its subnet has also gone live for testing;
4. Ascenders recently launched a demo public test for part of its gameplay, and its delivery quality is relatively high;
5. Wildlife, one of the largest mobile game developers in the world, is still worth watching for its subnet development progress.
Defi (Currently no officially announced subnet projects, welcome to supplement)
Trader Joe is the leading native DeFi on Avalanche, consistently ranking high in user numbers/TVL/profits. Notably, after Trader Joe changed its economic model, the value capture of its JOE token has also increased, and there are indications that the official team will further launch an NFT marketplace. If a DeFi subnet were to be launched, Trader Joe would be a strong candidate.
NFT (Currently no officially announced subnet projects, welcome to supplement)
1. Kalao is Avalanche's native NFT trading platform, where almost all Avalanche NFTs will be listed. Kalao also provides VR-like displays and may be one of the initiators of NFT subnet projects.
2. HopperGames is currently the top NFT by trading volume on Avalanche, with a team from PartyAnimals. For Hopper's NFTs, the team has set up very rich gameplay. In our view, the project team could open up some NFT gameplay and underlying design logic to more projects, thereby creating its own NFT subnet.
DAO
1. Colony is a community-driven DAO fund on Avalanche (currently not fully a DAO). Although Colony may not develop its own subnet, it has clearly stated that it will participate in the subnet staking program.
2. AVentures is a well-known investment DAO on Avalanche, with community members mostly being Avalanche OGs. Although it currently focuses mainly on investments, its status is also among the forefront of Avalanche DAO projects.
The above content is not any investment advice but merely an overview of projects that may be related to subnets. We welcome everyone to reply "AVAX" in the WeChat public account backend to enter the community and discuss with us.
After understanding the technical composition of AVAX and the potential development of subnets, we will have a clearer understanding of Avalanche as a whole. Additionally, while reviewing the white paper, this sentence left a deep impression on us:
Translated literally: Surprisingly, although the core operational mechanisms are very simple, these protocols bring about very idealized system results, making them suitable for large-scale deployment.
Translated into web3 language: x*y=k (the core principle of Uniswap, constant product)
Translated into web2 language: Simplicity is the ultimate sophistication.
Every year, new projects emerge, but the underlying infrastructure does not evolve as quickly as people imagine. This may surprise you, but there aren't that many fundamentally different technologies -- Ted Yin | Co-founder of Avalanche.
Technological innovation is not easy to come by, and once created, its impact can exceed expectations.
What the market truly needs is innovation, not various imitations. And when we study and explore innovation, the value this process brings to us can also be surprising.
