The Rise of Avalanche and Its Potential Impact on the DeFi Ecosystem
The space surrounding blockchain technologies is volatile, with new platforms emerging to improve on their predecessors’ shortcomings. One platform with the biggest potential for change is Avalanche. Avalanche is the fastest decentralised and most scalable smart contracts platform in existence. Its potential is such that we believe it is one of the technologies set to significantly disrupt DeFi.
Understanding Avalanche
Avalanche stands out among other blockchain platforms because it’s built on a stack of different blockchains each optimised for some task, making it very scalable and customisable.
A key building block in Avalanche’s architecture is its high-speed Byzantine fault-tolerant consensus protocol, which allows for Avalanche to achieve transaction finality below 1 second. Compared with Ethereum’s current performance, this is in the strike zone.
Implications for DeFi
This matters. Avalanche’s speed and scale are particularly complementary to DeFi applications, which could enjoy higher throughput and lower transaction fees as a consequence.
Furthermore, Avalanche can host the Ethereum Virtual Machine (EVM), and so can run all Ethereum-based applications on it. This allows existing Ethereum DApps to be easily migrated over to Avalanche, keeping all their users, while gaining faster transaction speeds and much lower prices.
Enhanced Security and Reliability
Security, as one would expect, is of the utmost importance in DeFi, especially when large amounts of money are frequently involved. Each application is on its own blockchain, secured from other applications on separate chains, a feature of Avalanche’s architecture that increased both overall performance and mitigated the potential consequences that could be caused by a full-scale security breach of a given chain.
Avalanche offers the additional layer of functionality known as ‘subnets’, where a group of validators work together to reach consensus on specific chains of blocks. These subnets enable the creation of private new blockchains, which could make private DeFi applications for institutions a real prospect.
A Growing Ecosystem
The number of projects that have selected Avalanche as their main layer-one blockchain is growing fast – everything from DEXs to lending markets and stablecoins are migrating to or launching on Avalanche, propelled by a rising tide of developer support and funding for projects building on Avalanche that helps to form an extensive and comprehensive DeFi ecosystem.
Conclusion
Defi is going to be forever changed by Avalanche. Soon, increasing numbers of projects will migrate to it, taking advantage of its extremely high throughput, extremely low latency and new security features. For DeFi, the future is now.
Innovators and speculators who are monitoring Avalanche’s progress view it as an indicator of where the rapidly expanding universe of DeFi could be heading next.
