Blockchain company profile: Ava Labs

One of the newest crypto coins that has gained a lot of traction recently is Avalanche (AVAX). But where did AVAX come from? The company behind the coin, Ava Labs, has developed an innovative tech stack combined with a new consensus protocol. Their Avalanche platform emphasizes customization, interoperability, and the ability to scale quickly. So, who is Ava Labs? 

In this post, we’ll take a look at what the company does, how its services are unique, its history, and where it’s headed.

What does Ava Labs do?

The Avalanche protocol

To understand why AVAX has gained so much popularity in the cryptocurrency market, you need to understand the work Ava Labs is doing and how it stands out from its competitors.

Ava Labs is innovative because the company uses a different type of consensus protocol called the Avalanche consensus protocol. This protocol was described in a whitepaper by an anonymous group called Team Rocket. It served as the inspiration for Ava Labs as they developed Avalanche.

Let’s back up and go over what consensus protocols are. Consensus protocols essentially dictate the way nodes agree to verify the transactions on a blockchain. The first type of consensus protocol, Classical protocols, say that every single node needs to agree that a transaction is correct. While this can be done quickly and successfully, it isn’t scalable the more nodes you add.

Then came the Nakamoto consensus protocol, with the creation of Bitcoin in 2008. This protocol says that as long as the majority of nodes agree on the current status of the blockchain, it’s ok if some nodes don’t. 

This is because over time, as more blocks of transactions are added, any discrepancies won’t end up mattering in the long run if the majority of nodes keep agreeing.

So, what does the Avalanche protocol do? The Avalanche consensus protocol runs on a secure proof-of-stake system and combines the Classical and Nakamoto protocols into a new protocol that is more secure, scalable, and fast.

It does this through a system of “network gossiping,” which put simply means the nodes repeatedly ask each other about the validity of a transaction until a majority of them reach a consensus about whether it should be accepted or not.

The Avalanche platform and tech stack

With this system in mind, Ava Labs has combined this consensus protocol with their own tech stack and created the Avalanche platform. The Avalanche platform emphasizes smart contract technology and other DeFi services, but its platform can be used for anything. First, Avalanche has a Primary Network made up of three different blockchains: the X-chain, P-chain, and C-chain. 

The X-chain is used for managing the creation and transactions of AVAX tokens on the platform. The C-chain is for smart contracts, and the P-chain is for managing the user-created subnetworks, or subnets, that make up the platform.

These subnets are essentially a platform within a platform. They can be either proof-of-stake or proof-of-work, public or private, and they can even have their own tokens (though the AVAX token is still needed to create the subnet).

A subnetwork can have any number of validators, and validators can join as many public subnets as they want. In addition, each subnet can have its own blockchains and consensus rules.

This makes Avalanche much faster at processing a smart contract and transactions compared to other systems, where every validator must approve every transaction. 

Instead, validators can just be responsible for the transactions within their subnet. Since each subnet can process thousands of transactions per second, this makes Ava Labs faster at processing than other networks like Bitcoin and Ethereum.

So, as you can see, Ava Labs has created a large, decentralized platform that is customizable and scalable. In addition, the other unique feature of Avalanche is that it’s interoperable, meaning all these different subnets can easily communicate with one another. 

But beyond that, Avalanche seeks to connect to other platforms as well. For example, Ava Labs created a bridge between Avalanche and Ethereum, allowing users to easily transfer their assets between the two systems.

AVAX

So, what role does the AVAX token play in all this?

Since Avalanche runs on a proof-of-stake model, validators must stake their AVAX tokens in order to participate in the validation process. Just like crypto staking on other platforms, they will receive more AVAX as a reward for successfully validating transactions.

AVAX is also used to pay transaction fees within the platform. These fees are actually “burned,” instead of being given to the validator, meaning they are essentially destroyed. Combined with the rate of creation of new coins, this ensures that AVAX keeps a steady valuation for everyone, not just validators.

The AVAX crypto has a capped supply of 720 million coins. 

Key milestones in Ava Labs’ history

In 2018, an anonymous group called Team Rocket wrote a whitepaper outlining the Avalanche protocol.

In that same year, a computer science professor named Emin Gün Sirer started Ava Labs. Sirer, along with a team with an extensive background in computer science, economics, finance, and law worked to create the Avalanche platform using this new protocol.

The Ava Labs team worked on developing the Avalanche tech stack for two years before it went public in July 2020 to sell some AVAX tokens to raise money for the platform. While the initial campaign was set to be 15 days, they were able to sell out of their tokens and raise $42 million in only four hours.

A few months later in September 2020, the Avalanche platform officially launched. 

More recently in May of 2023, Ava Labs announced the launch of ‘No-Code’ Web 3 Launchpad AvaCloud.

What does the future hold for Ava Labs?

Ava Lab’s technology, along with the Avalanche consensus protocol, could completely change the way that other blockchain platforms reach consensus. 

The unique architecture of the Avalanche platform and its proof-of-stake system allows it to process transactions extremely quickly. The network can support thousands of nodes, and with the platform’s structure, there is no need for a hash rate.

It is environmentally friendly, and also secure given the fact that if there were ever an attack, the hackers would need to take over 80% of the network compared to the 51% for Bitcoin and Ethereum.

However, Avalanche is a newer company with less name recognition than other crypto companies out there doing similar work but with different technology, such as Polkadot.

But Ava Labs has had several big-name investors, including Deloitte, Andreessen Horowitz, Initialized Capital, and Polychain Capital, and since the company is so new, upgrades are being made to keep optimizing the system. 

With this fact plus the rapid growth of the AVAX token, it seems that Ava Labs could easily become a major player in the smart contract and DeFi space in the future.