Avalanche platform, with its mode of operation and practices, has revealed what blockchain technology should look like and has set a very great example and standard for Decentralized Finance projects. Failures can be avoided in most cases if we are willing to be patient and do what it takes not to take unreasonable risks. Most failures are a result of greed and influence.
Gone Too Soon- Yam Finance
The Decentralized Finance industry on August 12th received a big blow in the face via Yam Finance. The project made a line mistake in its smart contract which will not allow the DAO (Decentralized Autonomous Organisation) to reach a consensus. Essentially, the bug mints more tokens than intended into the reserves contract, thus the governance model will never be able to reach any agreement. The result is the same even if there is a vote to fix the bug because consensus cannot be reached. In a few minutes, the market cap of a project that has $500 million locked in its protocol, went from $60 million to zero- a huge loss for people who were unable to sell their tokens in time.
Decentralized Autonomous Organization, DAO, is an innovative idea that looks so much like a Proof of Stake Consensus. It is just like an organization but leaderless, decisions are made based on votes from the community. Members cast votes with tokens they hold based on the rules set. The DAO in Yam finance’s case will not be able to reach an agreement because a large portion of the tokens in circulation are locked in reserve contracts meaning that most “members” of the DAO are not voting.
What Went Wrong
Lefteris Karapetsas, the founder of Rotki, made a simple enough analysis of what went wrong with Yam finance and what should have been done. He pointed out that the bug was a result of no pre-production testing since the Developers of Yam finance stated that the project was an experiment- thus it was undergoing production testing. Statista, in a report from 2015 on leading reasons why software projects fail, stated that 21% of respondents believe it is because of time constraints and premature software release. The project itself was a lump of multiple DeFi contracts, and worse still, shilled on social media by huge and respected crypto influencers. For the investors, the major error was the inability to do thorough research and be patient- greediness took over as they were yield farming. The project did not have a third party smart contract auditor to check and it turned into a 2-day failure for DeFis.
A CEO worth Following
Emin Gun Sirer, the CEO and Founder of Avalabs made a statement when he saw Yam finance gathering huge attention in the crypto space:
In only a few hours after this tweet, the walls came crashing. Emin’s tweet pointed at what everyone should have taken notice of at first- the code. Even if investors don’t know about smart contracts, there should be a demand for a third-party smart contract audit before they trusted the system.
Avalanche Platform- A Standard for DeFis
Avalanche platform which presents tools to build decentralized applications like DeFis has revealed itself a standard for DeFis.
Avalabs was founded in 2018 and yet the Avalanche platform (built by Avalabs) is only less than a month away from mainnet. Why? The developers put a huge premium on preparation in patience rather than a hasty launch with huge failure in no time. Denali incentivized Testnet campaign, which was the final public testnet after the first test with over 300 validators, had 1000 validators to impact test the platform so that errors can be corrected before launch. Features of the platform like P-Chain, C-Hain, X-Chain, creation of subnets, and blockchains, etc. were tested during the events and was reported a huge success. These tests, I believe, were aside various internal tests that must have taken place over the years. Surely, testing will never stop even after the mainnet launch at the end of August.
Security of Subnets
Subnets on Avalanche platforms are built such that the default node can specify an arbitrary set of requirements to be met by validators who wish to join in. This makes compliance very easy. The requirements can be passing KYC or possession of some qualifications. DeFis and D’apps will become more secure and comply with existing laws with this implementation.
Third-Party Audit and Partnerships
Avalanche made a partnership with Whiteblock– a third party blockchain auditor to ensure security and optimized performance of the platform. The platform is putting the security of its community members first. No wonder why it has gained attention from popular personnel in crypto space. Avalanche recently joined LACCHAIN global Alliance a 25-member alliance with popular blockchain companies like Consensys, MIT Media Lab, Enterprise Ethereum Alliance, etc. The platform hasn’t even gone mainnet.
Avoid Ponzi Schemes- They are without Value
Lefteris in the article I referenced above on the analysis of DeFis, also related the tokenomics of Yam Finance to a Ponzi scheme and Game. Via rebasing, the tokens frequently increased in numbers, though the value remains the same. Early members are incentivized to shill the tokens on social media to find new members to whom they will sell the tokens.
To be realistic, any scheme that drives its major value based on multi-level marketing in most cases is not worth it. It’s ok to create a one-level referral model to incentivize members of the community, but making it the center of the project is a pointer to the Ponzi scheme and people should desist from it. It is painful that people never learn, greediness makes them always want to make quick and huge profits.
This week, I made a report on a back-and-forth between Vitalik Buterin, Ethereum Co-Founder, and Forsage Asia on Twitter. Vitalik told Forsage to leave and not pollute Ethereum in the future. He stated that Forsage is a Ponzi scheme that rips new members to profit old members via MLM (Multi-level Marketing) methodology. For Forsage, apart from MLM, there are no other use-cases of the platform, it is pivoted on Ponzi and when the time comes when new users are no more willing, there will be problems for recent members. This is why SEC Philippines warned people in its jurisdiction against the project.
How Avalanche plans to Drive Value
Avalanche platform plans to drive value in many ways which are beyond what this article can cover. The platform with its plan has proven that it is not a Ponzi scheme.
I pointed out in the first article I wrote about Avalanche why it is innovative and a next-generation blockchain model that can be used to launch decentralized applications and supports the interoperability of blockchains. It supports Virtual Machines (VMs) from any blockchain, an example is Athereum, a friendly fork of Ethereum on the platform. With Proof of Stake (PoS) and anti-Sybil mechanism, it proves decentralized and incentivizes validators and stakers fairly, thus discouraging platform take over by a set of validators.
Specified Token utility and Use Cases
I have covered a wide variety of potential use cases of Avalanche (check navigation below). This is beside the applications that are already waiting for the mainnet like Polyient Games to launch a decentralized marketplace for NFTs. AVAX tokens have a variety of uses as stated on public sale info page and other documents on Avalanche. AVAX tokens will be used to pay transaction fees (normal transactions, subnet creation fee, and when validator stakes). Validators and stakers will stake tokens and gain rewards in AVAX tokens. AVAX tokens can be seen as platform fuel.
It is also exciting that the tokenomics of AVAX is deflationary, fees paid for all sorts of operations on the platform are burned, thus making it scarce. For those who know the law of supply and demand, the lesser the number of tokens the higher its value.
Partnership and Recognition
The public sale info page also covers opinions and statements of popular people in the crypto space about the platform. Earlier in this article, I have reported just two of the strategic partnerships that Avalanche and Avalabs have made while we all wait for the main net. All these drive value to the project and its token.
The personality of the leaders
The code is only a reflection of the coder. Avalanche as a project can be seen as the sum total of the work ethics of all team members’, and community members’ attitudes. Emin Gun Sirer has shown through his attitude to the world what Avalanche means as a platform. Take a look at his pinned tweet from 2018:
Personally, as a man who is into academics seeking a Master’s degree in Agricultural Engineering, it motivates me and has taught me that research is only the beginning. These are not just mere words but something everyone can see in him via his achievements in the Blockchain Technology space from 2013, he has researched, published papers, and changed things with implementations which is incredible. You can check part 4 below to see what I mean. Right in this article, you have seen how he values due diligence before moving forward to make decisions. This can be said of John Wu, and other team members too (you should research and know who they are!)
And many others…
@jstodd (J-Stodd), in a medium article, did a very wonderful job by documenting how Avalabs plans to drive value in the Avalanche Ecosystem. You should read it. The article pointed out strategic plans that have been made by Avalabs to make Avalanche worthwhile some of which I have highlighted in this article.
The Avalanche platform has set a new record for innovations which, in my opinion, will take over Blockchain Technology in the near future. It has set new standards with its thorough strategy for blockchains to follow.
Follow The Series
This is the fifth article I have written in a series about Avalanche platform, catch up with the previous ones:
- A Blockchain of Multiple Blockchains with great Pecs- Why Avalanche Protocol is a Blockchain 4.0 (Part 1)
- Three Obvious Use Cases of Avalanche Protocol Hiding in Plain Sight (Part 2)
- Avalanche Opening Endless Possibilities: Five Real World Use Cases of the Blockchain you cannot afford to Miss (Part 3)
- Blockchain of Blockchains: Four Projects That will Breakforth if Migrated to Avalanche (Part 4)