Avalanche at 3 months

It has been just over 100 days since Avalanche launched, and the system continues to achieve many firsts in the decentralized blockchain space.

It’s been said that blockchains can’t be fast. Avalanche finalizes transactions in under a second. It’s been said that if a blockchain is going to be fast, it has to be centralized. Avalanche has 660 full, block-producing validators participating in consensus, more than any Layer-1 network in the world. Avalanche’s power in speed and decentralization comes through its breakthrough consensus engine. No wasted energy, no complicated sharding that trades-off security, and no other secondary tradeoffs. The Avalanche of today achieves total, immutable finality in under a second and can clear transactions at 3x the speed of the centralized VISA network.

In the years ahead, I’m sure the Avalanche ecosystem will address the hardest challenges facing DeFi and institutional financial services. These challenges include alleviating the systemic risks of network congestion in DeFi, making micropayments more economical in emerging markets, and, overall transforming digital assets.

With 2021 here, I hope all of you are healthy and safe and will continue to be as new treatments and vaccines begin to come to market. I look forward to seeing so many friends, industry peers, and community members as soon as it’s safe enough to travel and begin a global reconnection to make up for lost time together this year.

Without further ado, I’d like to share an update on the State of Avalanche from my vantage point, a brief peek at what I know people are planning, and what I personally think we should expect in 2021.

Technology

Apricot: Fast Boot & Sync, Governance, and New Native Assets

Just three months after mainnet launch, we are preparing to unveil new functionalities not found on other blockchains through Avalanche’s first major upgrade, nicknamed Apricot. Apricot is coming soon, and will not only widen the technological advantage we’ve established over other networks but also appreciably advance the field by shifting what the ecosystem “knows” to be true.

With Apricot, Avalanche will disprove that blockchains must necessarily slow down and consume more resources as time goes on and their datasets grow. Apricot introduces three important low-level advances: “epochs,” “verifiable pruning,” and governance. These, in turn, enable important low-level and algorithmic optimizations, and thus accelerate the growth of the network. Let’s dive into what these mean.

“Epochs” introduce the notion of time into Avalanche’s high-performance X-chain. You will recall that Avalanche builds a highly concurrent DAG datastructure, where many nodes can extend the chain in parallel. While this provides speed, it makes it a bit difficult to easily summarize the set of past transactions, because the set can vary dynamically and does not have a convenient name. Enter Epochs. They enable Avalanche to summarize and archive swaths of its blockchain, in a verifiable manner.

Epochs, in turn, will enable Avalanche nodes to bootstrap in constant, O(1) time, no matter how long the network has been up. Better yet, they decouple the storage requirements of a node from the amount of time the system has been up. You may be used to chains that continually consume more space, and you may have heard other developers take it for granted that blockchains will consume space forever. Epochs and verifiable pruning will enable Avalanche to trim its space requirements such that a node need only consume space proportional to active usage (to be technical, in proportion to UTXO set size).

Apricot also lays the foundations for a novel fee mechanism to come that makes its fee market far lower and far more predictable than competing chains, as well as on-chain governance. These are vital components to Avalanche’s economic health and maturation as a decentralized system capable of global coordination on complex questions. Once governance is enabled, I expect the broad Avalanche community to make critical decisions around minimum staking amount, delegation fees, and more.

In effect, with Apricot, Avalanche will maintain a verifiably lightweight storage footprint. Nodes will be able to sync against Avalanche in a very short period of time, and will be able to continually run on low-end hardware, even as the network grows.

Finally, Apricot will introduce special “freezable assets,” where an asset issuer (e.g. an enterprise, or a fiat-backed stablecoin creator) can freeze accounts selectively or wholesale. Let me emphasize that this does not affect AVAX, but only certain new assets to be created in the future. In my conversations with large institutions who want to issue digital assets in a compliant way, this was the #1 requested feature. It will be core to many products launching in Q1 2021 and beyond, including ILOs, which I expect to see an explosion of in 2021. I also expect freezable assets to become a standard in the crypto industry for many regulated issuers. At the same time, I also believe we will see technologies for integrating Avalanche native assets more seamlessly with ERC-20 smart contracts on Avalanche and Ethereum.

Killer Apps and What to Expect

A question I often get is “What’s the killer app for blockchain?” It reminds me of the early days of the Internet, when everyone was asking the same question about the Internet. They demanded complex answers, Rube Goldbergian descriptions of a complicated future that they would then weigh in their minds and, probably, discard. In reality, the first application is the killer application. For the Internet, “email” was the prosaic, obvious killer application that got many of us on board. And afterwards, “the web” became the killer app. Everyone who was looking for applications that were more complicated ended up sitting out the dotcom boom.

So it is with blockchains. The killer app for blockchains is what we saw over and over again with 6000 assets to date, namely, valuable asset creation. Blockchains are a fantastic technology for creating assets with global reach, predictable behavior, and no intermediaries or central authority. First generation blockchains gave us a hint of the beauty of this vision, but were hampered by a number of technological limitations, such as scalability, centralization, and flexibility.

At the moment, no single blockchain does this task exceptionally well. With Apricot, Avalanche will be the first public, decentralized blockchains to offer a truly new benchmark experience for issuing and exchanging assets. Instant speeds, cheap transfers, low validation overhead, EVM compatibility, full interoperability with Ethereum, subnet functionality, and freezable assets simply make the Avalanche experience second-to-none.

As a side note, I also expect subnets to proliferate in 2021 after cross-subnet functionality is enabled, with a potential explosion in “Initial Subnet Offerings”, or ISOs, coming to market. ISOs could also enable other blockchains that are suffering from their current implementation limitations to move over to Avalanche.

I expect many exciting assets to proliferate into a Cambrian explosion. These range from fiat-backed stablecoins to novel algorithmic kinds. Given Avalanche’s performance, even when you take something as boring as a fiat-backed stablecoin, magic happens. Suddenly, these stablecoins can compete with the best offerings of digital money transfers in the world. The same is expected for novel and sophisticated synthetic assets and derivatives.

Finally, I also expect an NFT proliferation in the same way we had “DeFi Summer.” This explosion will not just be tied to things like digital art, but also to important uses-cases that have never been explored before, including digital passports.

On the application front, 2021 will be the year of the DEXes. These past few months we saw tremendous growth and a fascinating transition from centralized to on-chain trading. Naturally, this is to be expected as DEXes provide assurances and properties that CEXes simply can never provide. However, the massive costs and slow on-chain speeds have clearly hampered the potential transition speed. Given Avalanche’s value proposition, I will expect the DEX experience to become near indistinguishable from that of a CEX, such as for example on the upcoming Pangolin exchange. Paired with EVM support, I expect developers to make rapid shifts into Avalanche since the friction to adoption is near zero.

Ecosystem Development

To-date, DeFi primarily exists on Ethereum. As we’ve all been seeing these past few months, however, Ethereum’s network constraints held back what could’ve been even steeper growth, and introduced untenable levels of systemic risk in times of even slight market volatility. High costs, frontrunning, and other side effects of Ethereum’s infrastructure are clamping down on the true potential of on-chain, real-time, decentralized financial products.

Starting shortly this month, I expect Avalanche to introduce — for the first time since mainnet launch — a new era of DeFi. Core to this new market structure is a bridge for ERC-20 and ERC-721 assets — which are the token standards most frequently used in DeFi and NFT applications — to move between Avalanche and Ethereum. This bridge is now in the final phase of testing with independent partners Protofire, Hashquark, POA Network, and Avascan. I anticipate this bridge will be live on mainnet soon, and with it, a gateway for users to robust on-chain products. As Avalanche is fully compatible with Ethereum tooling but offers faster finality, higher transaction throughput, and lower fees, we expect Avalanche’s performance and value propositions to starkly contrast against the existing market structure.

In the last few months, Avalanche expanded its offering to include digital securities with Securitize and more initiatives building out its DeFi offering: Prosper, JellySwap, and Pangolin to name a few.

Over the next month, I expect several leading stablecoins to be issued as native assets on Avalanche. These integrations can bring liquidity onto Avalanche, as well as show the power of stablecoins when they can be transferred faster than cash, not first-generation blockchains.

Of course, this influx of ecosystem liquidity streams will only be actionable if high-quality applications are accessible and trustworthy. We expect a cornerstone functionality from Ethereum’s DeFi landscape will be launching on Avalanche shortly after the bridge goes live, and with it the most innovative liquidity incentive structure of any DeFi application to-date.

Final Words

2020 is the year Avalanche launched. I’m confident that 2021 will be the year Avalanche shows the world what blockchains and cryptocurrencies are capable of with many new milestones that carry on the project’s tradition of achieving breakthroughs that were once only dreamed of.

I look forward to sharing those moments with you all, as we take Avalanche, and the entire ecosystem of blockchains, to new heights.

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Emin Gün Sirer

Emin Gün Sirer

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