An interview that might make you bullish on Avalanche
An overview of Avalanche in 2024
Welcome to the alpha please newsletter.
gm friends, today we are exploring Avalanche.
I’m delighted to bring you an interview with Luigi, VP at Ava Labs. He spoke about about the Avalanche vision, what they shipped in the bear, what’s in store for 2024 and projects you should be paying attention to.
I think Avalanche’s tech is incredibly strong, and hopefully this interview provides you a with a good overview of where Avalanche are right now and where they are heading.
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What’s the Avalanche vision?
Overall, Avalanche aims to be a network where people can permissionlessly deploy other networks or applications. I often say that the vision is simply to provide a platform for people to deploy their own blockchain in the easiest, fastest way possible.
We believe that not everything will run on one chain. There will be a need for multiple chains, whether they're for specific use cases or verticals, and we aim to provide the infrastructure for people to deploy these in a way that is customisable, scalable, affordable, and built on the best technology.
Take our consensus model Avalanche Consensus, which we introduced to the market, and which we believe is fundamentally different from anything else out there. Frankly, no one else can achieve this kind of finality, especially with the number of nodes we have. I know the industry doesn't really value this anymore—they won't until they do. That's usually how it works.
It's definitely something that will be utilised one day, and you would prefer to have a chain with 10,000 nodes if possible, without sacrificing other aspects. That's what Avalanche's consensus can do. So, to reiterate, the vision is to enable people to deploy their own blockchain.
Avalanche isn’t an L1. Would you describe it as a Layer 0?
I'm not sure if "layer 0" is the correct term, but yes, it essentially is a network of networks.
When we deployed the C-Chain, the idea was two-fold. Firstly, to create a hub where liquidity could be utilised, and secondly, to demonstrate what our consensus could achieve with the Ethereum Virtual Machine (EVM) specifically.
You might recall that at that time, there were no rollups, and the experience of using the EVM with one-click transactions that processed immediately was unheard of. When Avalanche launched and the Avalanche Rush initiative took place, the feedback was overwhelmingly positive. Everyone was amazed by the speed and efficiency, likening it to the familiar Ethereum environment but significantly faster. However, after rollups were introduced, which don't require consensus, they offered a similar user experience, making our initial offering seem less groundbreaking to the average user. Our goal was to showcase the potential of our consensus mechanism.
Importantly, subnets are VM agnostic. For instance, we have a team developing a Move-based subnet called Movement, and we're working on the Hyper SDK in-house, which introduces a completely different VM for subnets. It's worth noting that the X-Chain and the P-Chain utilize different virtual machines than the EVM. Despite some referring to us as a mere Ethereum fork, the reality is that our primary network supports three distinct VMs. We're also in discussions with multiple teams about implementing a Solana VM (SVM) subnet.
The overarching vision for Avalanche has always been to create a customizable environment where subnets are as flexible as possible. This allows for the use of any virtual machine or execution environment, paired with the best consensus mechanism available, making it easy to integrate and connect with other subnets. This is facilitated by our inter-subnet communication protocol, the Avalanche Warp Messaging (AWM).
I’d like to take a look at what you’ve been building during the bear market that people may not be aware of. What got shipped?
There are a few different things we've been focusing on from a tech perspective during the bear market. One is Avalanche Warp Messaging. If you're going to have a network of different subnets, a way for them to communicate is essential, otherwise, what's the point? Avalanche's architecture is designed to allow for very lightweight communication among subnets. With the P chain concept, where all subnets are already registered, the network can easily send messages across subnets, differing from IBC where validators must store all this information. In Cosmos, this means more overhead. We're close to launching Teleporter, built on top of AWS. AWM is a simple communication protocol, and Teleporter, built on top of that, is something people can use.
We've released an Avalanche Academy course for developers to learn how to use and deploy on Teleporter for transferring across subnets using BLS signatures. Teleporter is expected to go live on Mainnet within the next month or so, perhaps two months at most.
Aside from that, we've been working on two important projects, one of which is Firewood.
There's a lot of excitement around Monad and its approach to parallelizing VMs. Keone, Monad's founder, recently highlighted that while parallelizing the EVM's execution doesn't significantly enhance performance, their custom-built database does. Similarly, we've developed Firewood, our own database, after two to three years of research. The current EVM operates on LevelDB, unrelated to blockchain, so we focused on optimising read-write operations to disk, enhancing blockchain speed and cost-efficiency. Firewood, compatible with any VM, will also be featured on the EVM. We've open-sourced the code and plan to launch it on the Mainnet within this year.
The last major initiative is the Hyper SDK, a high-throughput SDK we built from scratch, offering a Solana-like experience on subnets. It's a high-throughput VM with a WASM layer for deploying contracts in various languages, including multi-dimensional fees akin to Solana's local fee networks. Despite being in the alpha stage, it's attracting attention, with teams like NodeKit using it to build a shared sequencer for roll-ups on an Avalanche subnet. The Hyper SDK is poised to be Avalanche's native SDK, akin to the Cosmos SDK but faster.
Wow, seems like you’ve been busy. With all this tech being released into people’s hands this year, what do you see changing from a user's perspective?
I'm not the guy to always know what's going to happen, but I will say, a lot of things on Avalanche are slept on and they're not going to be slept on this year.
Especially in the gaming space, we have a number of subnets launching that are quite massive. For instance, Shrapnel is a gaming subnet that many people are excited about, and it finally launches this year. Then there's Gunzilla, which is one of the most exciting subnets, but not only subnets, it's one of the most exciting projects in blockchain to me. They've been building this game for four years. It's going to be an Xbox and PlayStation game that will use a subnet in the background. The team, which has formerly worked on titles like Call of Duty, is quite experienced. Moreover, there are already people playing their mobile game to get access to NFTs, which will be usable in the game. So I think that’s going to be a very hot launch.
We have the TSM subnet going live soon, which is exciting. They're leveraging their Blitz app, which has 30 million users, to start integrating them into our chain. So, we're essentially building this network of networks with massive user bases that we can then introduce to things like DeFi and NFTs.
And what should users be excited about? There are also some other new areas we're exploring. I myself will be dedicating more time to social and consumer verticals. While I'll still be involved in DeFi, my focus will shift more towards the social and consumer sectors moving forward.
We see social as like the DeFi wave of 2019 and 2020, which we think is going to explode. Specifically, I'm thinking about consumer marketplaces, like bringing Yelp onto the blockchain, and similar concepts. We're dedicating a lot of our time and resources to finding teams to develop in these areas. We just launched a hackathon that has already attracted 200 people in just a week. We have $100,000 in prizes and it is specifically focused on the consumer and social sector. We're very excited about this initiative, so we’re putting our money where our mouth is.
We also have another program called Code Base that I'm leading. The Code Base program is an accelerator and incubator, which I liken to the Y Combinator of Web3. We select two cohorts a year, with up to 15 teams in each cohort. Each of these teams receives a $50,000 stipend to build for three months. There's an onboarding week followed by weekly sessions, culminating in a pitch day where there will be $400,000 in prizes and multiple VCs in attendance. This is our way of being more proactive in finding great founders in Web3.
In my opinion, we don't have a developer problem in Web3. The issue is more about finding projects with vision and longevity. Our program is designed to address this specifically and to be proactive about it. Avalanche has a lot going on, and while there are other initiatives I can't disclose yet, we're also focusing on innovating in terms of on-chain incentives. I'm hopeful that we'll be introducing some significant innovations in that area this year and bringing them to the market.
So to sum up, we want to find great apps with product market fit, but also want to have the infrastructure to support them. We don’t want to deploy an app with really really good product market fit with a lot of people using it, and realise we have no way to scale. We want to have enough throughput to handle what we want to do.
Subnets seem to be doing very well in the gaming vertical. Why is it such a strong choice for gaming companies?
I believe we've created a platform that simply enables developers to do what they want, and I'll explain what I mean by that. Gaming companies don't want to be concerned with what else is happening on a chain; it's just not reasonable for them.
Let me provide a few examples:
I'll start with the L2s issue in the context of gaming on L2s. Imagine there's a gaming chain where users are actively playing, making a bunch of transactions, and on average, they're paying one cent per transaction. Now, consider it's FOMC day, the Fed is making announcements and every L1 is blocked up and there are now higher transaction costs.
Suddenly, I'm in a position where I have to explain to my users on this L2 gaming chain why their fees have increased, even though it's unrelated to their gaming activity. This correlation doesn't make sense because those fees should not be correlated. But this is in their design; you inherit not only the security of the L1 but also its variable fees. I don’t feel this architecture is suitable for gaming and other specific use cases.
Whereas, if you operate on your own subnet, your fees are isolated to you. The costs are only from the activity on your chain. Moreover, the value generated within your chain remains internal. This is a critical point that's often overlooked because there's a lack of product-market fit in this area. Soon people are going to start thinking, “why the fuck are we paying fees to this other chain? Why don’t we just keep them all to ourselves?”
Also people are starting to just want their own environment, so they can customise it. Also for regulatory purposes. They want to customise who has access, who can validate, etc.
Second to that, Ava Labs has spent a lot of time building something called a cloud, which allows people to deploy a subnet with one click. You can customise certain things within the subnet directly, and it's all in a GUI. We have monitoring services, so we didn't just say, "Oh, go build your own blockchain and let us know how it goes." We approached it from a SaaS perspective, thinking, "You're going to need to monitor this chain, you need RPCs, you need a block explorer, you need all this stuff." We're going to give it to you out of the box, and that's something that a lot of them have really, really taken to.
And then lastly, I really do think there's one other element worth focusing on, and that's the team. Team matters. The support given to these projects is crucial. We recently had two projects from Polygon come over to Avalanche: Mirai Labs and Tilt Yard. These were two former Polygon gaming projects that announced their own subnets. They were very public in their releases about why they're coming to Avalanche. I think that really speaks to what the team is doing here and the focus it's placing on that specific vertical.
So you will have the benefit of an isolated environment, but also interoperability once Avalanche Warp Messaging fully launches. The best of both worlds.
Not only do you have interoperability, but it's also fast due to Avalanche's fast finality. It makes the cross subnet transactions fast. Nobody talks about this, but you can configure your subnet to reduce finality to around 500 milliseconds. So, if you're executing a transaction on one subnet and then moving to another, the entire round trip could be done in about three seconds across subnets, so it can be really fast. You don't have to wait for a third-party bridge provider to integrate your chain; you can do it yourself by deploying the Teleporter contracts. It's quite straightforward, and we even offer an Academy course that guides you through the process. The simple vision is to make a bunch of chains that feel like one that is really fast.
I’d also like to touch on tokenization. We recently had Larry Fink go on TV and say he thinks it is the future of finance. Avalanche seems to be perfectly placed for this narrative as well.
You can't fake the tokenization game, because it is a very long sales cycle. It takes a lot of time. We announced two things under Project Guardian, one with JP Morgan and Apollo, another with Citigroup and T Rowe and other clients. Different applications that all use subnets, and the JP Morgan one was tokenizing alternative assets. Citigroup was actually doing FX RFQs on chain.
That process started a year earlier. A whole year of work went into that, and you can't fake that. You need to have very smart people work on this stuff for a year with nothing to show that anybody can see. And not everybody has the capability to do that. We have shown a real dedication to the space since the beginning, right? Our motto was always to digitize the world's assets. That's been the Avalanche model since day one. So, we fundamentally believe that we built an infrastructure that will be really good for this.
I always use this example to illustrate the point. Imagine one day you have a JP Morgan subnet and another day a Citigroup subnet, and they want their systems to be completely isolated, controlling their own environments. With Avalanche's messaging, it allows Citigroup to send a message to JP Morgan, and the only entities involved in that message are the validators of Citigroup and JP Morgan. This is fundamentally important because they don't want to have to trust another third-party bridging network with random validators that aren't part of their current trust assumptions.
We have the notion of evergreen subnets, which are built as out-of-the-box regulatory compliance networks that institutions can deploy. I think this is one of the areas where we have a strong hook, and it's starting to show in the market.
Are there any projects that will go live this year that you’re particularly excited about? What do you think people should be paying attention to?
As I said earlier, I really like shrapnel. I really like Gunzilla. I think those are very, very, very exciting.
On the DeFi side, I'm pretty excited about a few different projects like Delta Prime, really good team, fun strategies that people are playing with.
Then we have our own subnets one is a CLOB called Dexalot. So you could think of something like feeling like Binance, but on its own chain, and it's decentralized.
And then we have one just starting out now called Hubble, which is like dYdX, but it's on a subnet and it’s a perps exchange.
Oh, and another one is Myna Swap. Myna Swap is really cool. They're tokenizing sneakers. They're putting that market on chain and I would definitely check that out. People are having a lot of fun buying sneakers and tokenizing them.
I read a proposal by Patrick O'Grady called “the road to 100,000 subnets”. I want to get your take on this - how does Avalanche get to 10,000 subnets from here?
It's going to take a few things. One is some of the things he laid out, like we need to lower the cost of subnets. That's what that initiative aims to do, while still maintaining all the things that we have. And I think he's got a great plan for it, which will really address what we need in order to move forward.
But beyond that, we need more use cases, fundamentally. That's why all the things I mentioned before, like the various initiatives, are what will get us there. Because we don't just want a lot of chains that end up fading away. We want successful businesses on-chain that thrive.
And that’s your alpha.
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Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Crypto currencies are very risky assets and you can lose all of your money. Do your own research.