Weekly DAO#2: Avalanche's Directed Acyclic Graph
From Snowflakes to Avalanches: The Innovative Consensus Mechanism Behind Avalanche
Greetings, Curious Minds! Welcome to another edition of Polymath Playground – Your Weekly Dose of Knowledge and Discovery.
As we wrap up the first quarter of 2023, it’s time for a quick review of my productivity in March. I must admit, I can’t recall my February recap, so I decided to revisit it:
Unfortunately, I haven’t been able to pick up where I left off on my Solidity course or CS50x. This has led to a loss of momentum for these two endeavors. It’s often incredibly challenging to resume a project after the initial drive has waned, partly because we must confront our own shortcomings, and partly because it’s difficult to recall where we last left off. Nevertheless, after some soul-searching, I’ve pinpointed the obstacles, and I’ll share my progress and insights along the way.
In this week’s featured section as part of the weekly DAO, we’ll be delving into the fascinating world of Avalanche, an innovative blockchain platform that’s been making waves in the decentralized space.
Featured: Weekly DAO#2: Avalanche's Directed Acyclic Graph
This is the second featured article in our series, “A DAO a Week Keeps FOMO at Bay,” following the first piece on Arbitrum.
This week, we will delve into Avalanche (AVAX), “an open-source platform for building decentralized applications (Dapps) in one interoperable, highly scalable ecosystem,” as described on its website.
Two Whys We Ask For Every DAO:
Why I pick Avalanche this week: Initially, I thought it was the second most valuable DeFi project after Ethereum when I selected the “DeFi” category on CoinMarketCap (CMC). Later, I discovered that its position as the second largest DeFi is not substantiated. However, upon further investigation, the Avalanche ecosystem demonstrates potential to address scalability issues. Unlike Arbitrum’s Layer-2 solution, Avalanche is a Layer-1 solution that aims to compete with Ethereum.
Why the founders created Avalanche in the first place: While the blockchain community has been debating the consensus mechanism between Proof-of-Work and Proof-of-Stake, the founders of Avalanche employed a unique consensus protocol. This approach enables the platform to process thousands of transactions per second, addressing the scalability issue that has long plagued the blockchain space.
Who are in the game:
Although crypto is virtual and intangible, what truly matters are the people involved: who created the project, who takes the driver's seat, and most importantly, who participates in the game. Given the open-source nature of most crypto projects, it is usually the builders and believers who make it possible. That’s why even though you can fork any DAO project with a snap of your fingers, you won’t be able to recreate the same ecosystem.
The major players in the Avalanche ecosystem:
Ava Labs: Ava Labs is the company that developed the Avalanche platform. The company is led by Emin Gün Sirer, a professor of computer science at Cornell University. According to Crunchbase, Ava Labs has raised a total of $640.1M in funding over 8 rounds, the last of which was on Apr 14, 2022.
Avalanche Foundation: In addition to Ava Labs, there is Avalanche Foundation, which has launched Avalanche Multiverse and Blizzard to support ecosystem development.
Aave: Aave is a lending protocol that runs on the Avalanche network. The protocol allows users to lend and borrow a variety of cryptocurrencies.
Trader Joe: Trader Joe is a decentralized exchange (DEX) that runs on the Avalanche network. The DEX offers a variety of features, including liquidity pools, limit orders, and stop-loss orders.
SushiSwap: SushiSwap is a decentralized exchange (DEX) that runs on the Avalanche network. The DEX offers a variety of features, including liquidity pools, limit orders, and stop-loss orders.
How does it achieve its mission:
Avalanche Consensus: Avalanche employs a unique consensus approach that expands upon the PoS model. When a user initiates a transaction, a validator node receives it and samples a small, random group of other validators to confirm agreement. Validators continuously perform this sampling process, communicating with one another to eventually reach a consensus. This process involves a validator's message being shared with other validators, who then sample additional validators, and so on, until the entire system agrees on an outcome. Similar to how a single snowflake can grow into a snowball, a single transaction can ultimately trigger an avalanche.
Avalanche is a directed acyclic graph (DAG)-based consensus protocol. This means that transactions are not processed in a linear chain, but rather in a network of interconnected transactions. This makes Avalanche more scalable and efficient than traditional blockchains. Here are some additional details about how DAG works in Avalanche:
Transaction: When a new transaction is created, it becomes a node in the DAG. The transaction node points to one or more parent transactions, creating directed edges. These parent transactions are the most recent transactions that the new transaction's creator is aware of.
Consensus: As the validators repeatedly sample and share their opinions with each other, the transaction nodes represent their acceptance or rejection by the network. A transaction is considered to be in consensus once it reaches a certain threshold of acceptance, usually above a predefined percentage. Once consensus is reached for a transaction, it becomes a part of the accepted DAG structure. Due to the gossip-based protocol and the DAG structure, Avalanche can achieve high scalability and fast finality, usually in a matter of seconds.
Pruning: As the DAG grows, older transaction nodes can be pruned or removed to maintain efficiency. Pruning is possible because the consensus mechanism ensures that the majority of validators agree on the validity of transactions, and any conflicting transactions are resolved before they become a part of the accepted DAG structure.
Subnetworks: Avalanche allows users to create specialized chains with their own rule sets, a concept comparable to other blockchain scaling solutions like Polkadot's parachains and Ethereum 2.0’s shards. Consensus on these chains is achieved through subnetworks (or subnets), which are node groups that validate specific blockchains. All subnet validators are also required to validate Avalanche’s Primary Network.
Built-in Blockchains: The Avalanche blockchain is made up of three different blockchains: the Exchange Chain (X-Chain), the Contract Chain (C-Chain), and the Platform Chain (P-Chain). The X-Chain is used for creating and exchanging assets. The C-Chain is used for creating and executing smart contracts. And the P-Chain is used for coordinating validators and managing subnets.
What are its challenges?
Competition from other blockchain platforms: Avalanche is not the only blockchain platform that is designed to be scalable, secure, and efficient. There are a number of other platforms that are competing for market share, including Ethereum, Cardano, and Solana.
Lack of user adoption: Avalanche is still a relatively new platform, and it does not have the same level of user adoption as some of the more established platforms. This could make it difficult for Avalanche to attract developers and users. For example, according to DeFi Llama, the total value locked in Avalanche is about $858 million. This is significantly lower than the total value locked in Ethereum, which is $29 billion.
References:
Google Bard
Avalanche page at CMC
Avalanche page at Kraken
The Writer’s Muse
[Four] Common Misconceptions About Intuition:
3. Intuition is inferior to deliberate thinking. Deliberate thinking and logic is not generally better than intuition, or vice versa. Logic (or statistics) is best for dealing with known risks, while good intuitions and rules of thumb are indispensable in an uncertain world.
Risk Savvy: How to Make Good Decisions by Gerd Gigerenzer
Intuition, while not always reliable, is essential for decision-making. We make sound choices by balancing it with analytical thinking. Intuition excels when we’re experienced or time-constrained, like a doctor drawing on years of knowledge to guide patient care, a negotiator handling high-stakes and urgent conversations, or a chef adapting to a lack of certain ingredients while cooking.
Stay Sharp & Safe,
Jason Lai
Disclaimer: Not legal advice. You can see the full disclaimer & disclosure here.
Credit: Originating from my idea and draft, this post was reviewed and edited by ChatGPT and Google Bard.