It makes me happy to be part of a successful story and I am always glad when happenings proved me right. That was the situation with Avalanche. The main net on September 22nd was a huge success and many other success stories followed it. AVAX coin is now listed on top cryptocurrency exchanges and can be tracked on CoinMarketcap.
News and Updates
Do well to keep yourself up to date with happenings around Avalanche with WeAvax– a weekly newsletter about updates and news by Edward. This week the most important event has been the MoneyDance Hackathon powered by Avalanche. The event has been impacting with a lot of insights from the speakers- catch the recap from the first set of videos here. The opening session was a chat between Emin Gun Sirer, CEO Ava Labs, and Sergey Nazarov, Co-Founder of Chainlink. Each began to recount how the first encountered blockchain technology and what their perspective is about crypto today.
A Magic that Takes 18years to Complete
A striking part of Emin Gun Sirer’s story was that he, as a Professor at Cornell University, had been researching about peer-to-peer systems and a way to incentivize people who contributed since 2002 even before bitcoin began. He stated that he came up with a monetary system to encourage participants of a peer-to-peer system – ‘magic internet coins that you cannot just manufacture out of the sky, that you need to download a file and you get by uploading files’- sound quite familiar to mining. He created the first proof of work system called Karma in 2002 and published in 2003. Eighteen years later, the Avalanche protocol goes main net- magic? No, it is the result of proof of Concept and many years of hard work and contributions from many people.
Avalanche’s mainnet went live on September 22nd and after a week and a few days, there are 521 Validators with 212,255,103 AVAX staked (58.96% staking ratio) as at the time of writing. More and more validators are joining the train each day after they have been dumped by Bitcoin or Proof of Work mining.
I feel the results and metrics above are because Avalanche is not only great as a platform, that can be used to launch highly Decentralized applications and blockchains, but because they have weighed the options and seen the best.
Avalanche Proof of Stake Ahead of Proof of Work Mining
There have been a lot of articles that weigh Proof of Stake above Proof of Work mining especially in terms of the advantage to the miner or validator.
! Proof of Stake uses validators while proof of Work Algorithms use Miners
Capital and Running Cost
Mining bitcoin for individual developers in 2020 is almost unprofitable even with the latest ASIC miner. Iskander Khasanov (a Cointelegraph Writer) concluded while discussing Cryptocurrency mining profitability in 2020, that Proof of Work Mining will not be profitable even in a bull run. Individual miners have to consider the cost of lone mining such as the huge capital to buy an ASIC miner, getting a large memory space (as Bitcoin is now about 300GB), the cost of electricity, etc. The only option is to join a mining pool, even this doesn’t guarantee enough return to break even.
Capital cost is also a major concern in mining Ethereum, the second-largest crypto, and also a Proof of Work coin. Even though it will soon switch over to Proof of Stake when miners will be forced to stake before they can earn coins, the issue of huge capital and running cost for nodes might still be very much a bottleneck.
To run an Avalanche node there might be no capital cost if you already have a laptop with a minimum of a dual-core, and 4GB of RAM. These are the minimum system requirements which I believe almost everyone has. A validator also needs to stake a minimum of 2000AVAX. A validating node on Avalanche is very easy to run- with the easy steps in the documentation, medium blogs, or chatting with the devs on Discord you can get it set up in no time. This is super easy and far less capital intensive when compared with Proof of Work Mining. See the testimony of a delegator and the help gotten from developers on Avalanche discord:
I live for this stuff pic.twitter.com/zLOERjwSEf— Kevin Sekniqi ∀ (@kevinsekniqi) September 25, 2020
The process of validation does not consume any more energy than what a laptop will consume daily thus no additional cost for electricity except your normal bills.
Because nodes (miners) have to run complex calculations (do work) before they can validate transactions, they need a lot of power. In 2019 it was estimated that Bitcoin mining consumes 7 Gigawatts of electricity which is about 0.21% of the energy generated in the world. This was about the power that can be generated by seven Dungeness nuclear power plants at once. The energy consumption would have grown since Bitcoin hits an all-time high hash rate this year.
As explained above, validating on Avalanche requires far less energy. While explaining Avalanche Consensus in Avalanche Consensus 101, Collin Cusce, explained that unlike bitcoin that requires perpetual action (work), Avalanche nodes only work when there is work to be done. If there are no conflicting transactions to vote on, the nodes don’t do anything but listen until new transactions are heard. This is the reason why the platform can process up to 4500 transactions per second- it works smarter not harder.
Ease of Setting up a node
There is no doubt that setting up a proof of work node will be a tough break for noobs who do not know anything about Bitcoin mining. This is because it requires an ASIC miner. But as stated above, setting up Avalanche is very easy to set up. It is all about switching on your laptop, downloading and installing some files, and sending a few command lines.
Validating on Avalanche Vs Validating on Other Proof of Stake Networks
Being a very new network, Avalanche competes against other proof of stake networks in terms of profitability, stability, and ease of running a node- Avalanche is arguably the best. Let’s consider a few matters:
An integral part of Eth2 is that to keep the network safe from bad actors, there is a need for a reward slashing mechanism that will place penalties on nodes when they remain inactive for sometimes or malfunctions. Rado Minchev while writing about staking and delegating on Avalanche reported that the methodology does not foresee a situation where there is a general problem with node clients- it is rigid and unforgiving. Some other PoS networks also use this mechanism but it raises a lot of eyebrows from the community.
Instead, Avalanche uses a “calm” and powerful technology. Validators must stay online for not less than 60% of the time they specified that they will be validating. Yes, validators specify the time frame they wish to validate but not less than a week. The tokens they stake will be returned to them at the end of the period they specified with their rewards if the node stayed online for >60% of the time. But if less, there will be no staking reward, only the stake will be returned after the period. For people who are unsure that their nodes will be online for >60% of the time, they can opt-in for cloud computing services for a small fee. A full guide for that is here.
Only a few PoS platforms allow validators to also earn when people delegate to them. Well, Avalanche allows a validator to each a minimum of a 2% fee from the rewards of those who delegate to them. Validators set their preferred validation fee. Only five times the amount a validator stakes can be delegated to them up to a maximum of 3 Million AVAX tokens.
An opportunity to be part of Something great (Multi-Chain Validation)
Because of the way the platform has been designed. Validators can create subnets that allow other validators to come together to reach consensus, run a virtual machine, and create blockchains. A validator can join any subnet so far they fulfill the requirements as requested by the creator. Subnets can create permissioned and permissionless blockchains. They can be structured to comply with governing laws of any jurisdiction. This is because Avalanche supports application and network layer programmability.
You can just imagine the opportunities opened to a validator.
Validating Vs Delegating on Avalanche
If you do not have enough resources to validate and run a node on Avalanche you can easily delegate your tokens and gain as high as 12% APR minus the validator fees. But if you are contemplating either to delegate or validate why now check out an infographic by Orhan K, a community member, on this matter:
If I have enough resources to run a node I would have but even if not, I still enjoy myself delegating to a node that I can trust. There are enough exciting opportunities already for being an Avalanche Validator some of which I pointed out in this article. I strongly believe that there is still more great news coming for validators which will attract so many miners and validators to switch over to Avalanche but as you know, the early birds always get the best part.