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Unlike traditional smart contract platforms, Avalanche is therefore made up of a network of blockchains . Each of them can be public or private , and has its own set of validator nodes . Like Ethereum, Avalanche has a virtual machine , capable of interpreting the instructions of smart contracts. But unlike its competitor, dApps are deployed on independent blockchains .
Avalanche is oriented towards decentralized finance : it is thus possible to create all types of digital assets in the form of tokens .
Its consensus works on the principle of proof of stake , just like Cardano or Ethereum 2.0 .
Reminders on proof of stake
The consensus-based mechanisms proof of stake or proof of issue are more energy efficient and more scalable than protocols based on evidence of work.
To be able to validate transactions, block producers must put money into play. Concretely, they place funds in escrow : this is called staking . If they fulfill their role of validator / producer, they are slightly rewarded for it; if, on the other hand, they behave badly, they are financially punished . One of the particularities of Avalanche is that to solve the problem of nothing at stake , the protocol does not use the slashing method . The funds are irreversibly locked in until the period chosen by the staker has elapsed.
The advantage of this mechanism, apart from its low energy consumption , is that it breaks the symmetry between the cost of an attack and the cost of defense . Indeed, with proof of work, you have to spend a lot of energy to secure the network. The cost of an attack is proportional to the energy invested to secure the system. The proof of stake is a method of making a distributed consensus lot less expensive to defend than to attack .
Limitations of existing consensus protocols
In distributed systems, all existing consensus protocols are limited . Designing them requires a compromise between the desired qualities - security , decentralization , and scalability .
A notable constraint is that of the number of validator nodes. Classic algorithms ensure the finality of transactions with a probability equal to one, that is to say that a transaction is finalized when the whole network has established its consensus. Whether it's PBFT algorithms, Hedera's Hashgraph, or whatever , there are many nodes that all need to communicate with each other. We speak of quadratic communication: this limits the number of nodes that can make up the system , and therefore its decentralization .
Of course, Satoshi Nakamoto had the genius to use proof of work to create a large-scale, highly resistant, probabilistic consensus algorithm . Even with a very large number of nodes, the probability of reorganizing the registry is extremely low. The more blocks produced, the more it decreases.
But the Nakamoto consensus has flaws: it consumes a lot of energy and the finalization of transactions remains slow (10 minutes to an hour).
The Avalanche consensus mechanism
The idea is to use the probabilistic conception of the finality of transactions brought about by Satoshi Nakamoto. Avalanche's consensus algorithm achieves this trade-off between minimum probability of error and performance : it enables network transactions to be finalized in one to two seconds, while being extremely decentralized.
This consensus mechanism is also the most secure of all: it can tolerate 80% of malicious actors , against 51% for Bitcoin and 33% for traditional PBFT algorithms . This value can be adjusted.
How the platform works
The new family of consensus protocols developed within Avalanche is called Snow . It is inspired by gossip type protocols (chatter): although they do not allow reaching a consensus, these protocols ensure the dissemination of information. They are for example used to maintain the oriented acyclic graphs of IOTA .
Directed Acyclic Graphs (DAG)
An acyclic directed graph is a data structure used to model networks of objects (in our case, transactions ). The DAG are composed of vertices (or nodes) and edges (connections between these summits). In a directed graph , the edges are not symmetrical: they have an orientation , and they are called arrows .
The graph is said to be acyclic if it does not have a circuit : there is no path whose ends are identical (“cycle”).
Each transaction in AVAX is then a node (top) of the graph. The advantage, compared to the tree structure of blockchains , is that it is much faster to browse and process the data. The shortest path problem - finding the shortest path between two vertices - is thus solved linearly .
Avalanche uses multiple instances where these consensus algorithms are deployed (called Snowballs ). The directed acyclic graph then groups together all the transactions.
To maintain it, you need a system to arbitrate conflicting transactions (such as double spending ). On Avalanche, the idea is to randomly and repeatedly sample the network: this is what makes it possible to access an irreversible state very quickly, and to limit the number of messages per node.
Here is a diagram by Collin Cusce summarizing how the Avalanche consensus works, taken from his article Avalanche Consensus 101 :
For more details on the Avalanche DAG and its reliability (especially its resistance to Byzantine faults), please consult the specific whitepaper .
Avalanche Default Subnet Structure
The Default Subnet is Avalanche's subnet, used to maintain its three native blockchains .
- First, the X-Chain. This blockchain is dedicated to the creation and deployment of digital assets . Thus, just like with the ERC-20 tokens on Ethereum, which allow shares, voting rights or commodities to be represented, Avalanche thus makes it possible to “tokenize” any asset.
- Then comes the P-Chain . It is used to manage the metadata of the Avalanche network. To create subnets , add validators and create blockchains, it goes through its API.
- Finally, the C-Chain makes it possible to create smart contracts in Solidity: it is an instance of the Ethereum Virtual Machine .
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