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Avalanche’s Snowman Consensus protocol is the fundamental mechanism powering the Avalanche network and is crucial for its remarkable speed and security. In this report, we’ll break down the role of consensus protocols in the blockchain validation process and delve into what makes Snowman such a revolutionary breakthrough. By looking at the inner workings of Snowman, we can have a deeper understanding of the impact it has on Avalanche and the future of blockchain technology.

The Role of the Validator

To understand the role of a validator in the functioning and security of blockchains, we first need to break down the definition of a blockchain. To put it very simply, blocks make up the core components of the blockchain and contain a group of transactions or any other type of relevant information. As a literal chain of blocks, each block cryptographically stores the information of the previous block, meaning that every block is unique and the information inside cannot be changed.

Blocks can contain a range of information such as:

• Financial transaction data
• Smart contract executions
• Data storage requests

Blockchains are distributed systems, meaning that they operate across a network of computers (nodes) located around the world. This distributed nature underpins the decentralized character of blockchain technology, where control and decision-making are spread across many nodes rather than being controlled by a single entity. By having a network of nodes maintaining and validating a shared ledger, this structure provides transparency, security and resilience against centralized parties.

At the heart of this decentralized structure is the network of Validators, who are responsible for determining the validity of transactions before including them in the next block. The consensus protocol provides validators with a set of rules to ensure that they can reach a majority agreement on the current state of the network.

On Avalanche, validator nodes, queried as part of the consensus process, play a key role in influencing the network. To earn this influence, they must stake AVAX, with the quantity of AVAX bonded by a node increasing the frequency at which it is queried by others. Validators are incentivized to participate and be responsive, as they are rewarded for their honesty and active engagement in the consensus process.

The purpose of consensus is to enable validators to collectively establish a single source of truth across the network. The effectiveness of validators and the consensus protocol they follow is crucial for ensuring the network’s speed, security, and scalability.

A Brief History of Consensus Mechanisms

“How do we achieve agreement between a set of machines?”

This was the question asked by computer scientists Leslie Lamport and Barbara Liskov in the 1970s, which resulted in their pioneering research paper: The Byzantine Generals Problem. The challenge of reaching consensus is explained through the following analogy:

A group of Byzantine Generals must agree on a unified plan to attack a city, communicating only through messengers, with the possibility that some generals may be traitors who are trying to sabotage the plan. The central problem is how the loyal generals can ensure that consensus can be achieved when there is uncertainty about the loyalty of others. This problem is fundamental in understanding and designing algorithms for distributed systems where network nodes must agree on a state.

The paper demonstrates that consensus can be achieved as long as two thirds of the generals are loyal. This concept has formed the basis for various fault-tolerant distributed systems.

Classical Consensus

The first solution to the consensus problem was Classical Consensus, designed by Lamport and Liskov. It involves a key property which is all-to-all voting – meaning that every validator node must vote on whether they would like to accept or reject a transaction. As long as the number of participating nodes is small, transactions are confirmed very quickly. However, as the network grows, each node must communicate with an increasing number of other nodes, making scalability challenging. Classical Consensus also requires that each node has knowledge of every other participating node; a characteristic which limits its usability in open, permissionless networks.

Nakamoto Consensus

The next major development in consensus protocols was introduced by Satoshi Nakamoto in the Bitcoin Whitepaper. This new approach, known as Nakamoto Consensus, operates under a fundamentally different principle where nodes do not need to identify other nodes to achieve consensus. It is built on probabilistic safety guarantees which means that nodes send the same number of messages regardless of the network’s size.

Nakamoto Consensus offers a significant advantage in decentralized environments, due to its ability to achieve consensus without requiring knowledge of all participants. However, this approach has its drawbacks. These protocols are very slow, with transactions taking up to 1 hour to be finalized. Nodes must solve complex cryptographic puzzles in order to produce the next block, requiring heavy computational power which makes it very energy-intensive to run.

Despite these challenges, Nakamoto Consensus represents a pivotal shift in enabling trustless digital systems.

Avalanche Consensus

The Avalanche Consensus family combines the strongest elements of the Classical and Nakamoto designs to redefine the capabilities of consensus protocols. Inspired by gossip algorithms, its probabilistic nature enables it to be a lightweight protocol that doesn’t compromise on speed, scalability or security. Rather than asking every single node to vote on a transaction, Avalanche Consensus uses repeated random subsampling of a small set of nodes – the number of messages each node has to handle doesn’t change, even as more nodes join the network. This innovation allows for lightning-fast consensus to be achieved without the need for intensive computational work.

The Snowman Consensus is an implementation of the Avalanche Consensus, specially tailored for blockchains which require linear, ordered consensus – such as those built for smart contract execution.

Avalanche Consensus is a groundbreaking milestone in the evolution of consensus protocols and has paved the way for a new generation of blockchain networks.

For a deeper look into Avalanche Consensus, read the full whitepaper here.

Breaking Down the Snowman Consensus Protocol

The distinguishing feature of Snowman Consensus, setting it apart from its predecessors, lies in the use of a sub-sampled voting process. This decision-making process is enabled by the Snowball consensus algorithm, which has pre-determined parameters to efficiently achieve consensus:

• The number of participants in the network
• Sample size – the number of nodes queried by the validator
• Quorum size – the number required to reach a majority reply
• Decision threshold – the number of times a majority must be received consecutively in order to come to a final decision

The Validation Process

When a validator receives a broadcasted transaction, it must first determine the validity of a transaction before beginning consensus.

Example: Alice has 2 AVAX in her wallet. She tries to send 5 AVAX to Bob – this transaction is clearly invalid as Alice doesn’t have enough AVAX in her wallet.

Once a transaction is determined to be valid, the consensus process can begin.

To determine whether a transaction should be accepted, the node asks a small set of randomly selected validator nodes on their preference. Each queried node then replies with their preferred transaction, with the quorum size determining the majority reply. In order to come to a final decision, the subsampling process is repeated with different sets of nodes until a majority reply is received for a pre-determined number of consecutive rounds.

Transactions can be finalized quickly if there are no conflicts. In the case of conflicts, honest validators quickly gather around the conflicting transactions. This creates a reinforced feedback loop, where each round of consensus increasingly aligns their preferences, until everyone reaches an agreement.

It’s important to note that the sub-sampling performed by nodes is not entirely random – selection is weighted by stake amount, meaning that nodes with more staked AVAX are more likely to be queried.

Through the sub-sampling process, validators actively adjust their own preference to guide the network towards a unified, collective decision.

See here for an excellent visual demo of the Snowman Consensus in action.

Benefits of Snowman Consensus

Scalability – Enabled by its subsampling process, Snowman Consensus ensures that the number of messages each node sends remains the same, whether the network is made up of 100 or 100,000 nodes.

Speed – Without the need to query every single node on the network, Snowman achieves an extremely lightweight design that can rapidly process and confirm transactions. This efficiency is amplified by the fact that the Avalanche Consensus protocol guarantees that if an honest validator accepts a transaction, all other honest validators will inevitably reach the same conclusion.

Security – Snowman’s probabilistic approach, where each node repeatedly queries a random subset of nodes, greatly reduces the chances of malicious nodes consistently influencing the network, thus maintaining the integrity of the network’s decision-making.

Decentralization – The performance of the network is unaffected by the number of nodes, promoting an open and permissionless environment where any node can contribute to securing the network.

Efficiency – Instead of operating on fixed slot times, like other consensus protocols, Snowman adopts a dynamic approach to block production based on the activity of the network. This versatility ensures a more responsive and efficient block generation, tailored to the current state of the network.

Conclusion

The Snowman Consensus, as a key component of the Avalanche Consensus family, represents a significant evolution in distributed systems. By addressing the limitations of previous consensus mechanisms, Snowman introduces a more scalable, swift, secure, and decentralized approach to blockchain consensus. Its innovative subsampling and probabilistic methods, coupled with dynamic block production, mark a notable advancement in ensuring faster transaction processing, robust security, and efficient network operation without compromising on decentralization. This makes Snowman Consensus a crucial element in the development of more resilient and adaptable blockchain networks, paving the way for a new era of distributed digital systems.

The landscape of Web3 gaming has undergone a remarkable transformation. Today we find ourselves at the stage where the underlying technology enhances rather than restricts creativity and innovation in game development, moving beyond initial experimental models like Play-to-Earn. Leading the efforts is Beam, who has taken on the responsibility of ensuring that the potential of this space can be fully realized. Blending revolutionary technology with a nostalgic feel, Beam addresses the issues that have held the space back in recent years, with every aspect of the platform designed to shift power back into the hands of the players. We will be exploring the individual components of Beam, demonstrating its commitment to bringing to life a new way of gaming.

An Introduction to Beam

Beam stands at the frontier of the gaming evolution. As a pioneering gaming blockchain leveraging Avalanche’s Subnet technology, Beam is building a platform for game developers to easily integrate the Web3 features that are revolutionizing the fundamental framework of game design. By empowering developers with a rich suite of tools, an entire ecosystem of games is taking shape on Beam, offering players a gateway into a multitude of new experiences.

The decision to utilize the Subnet design was an easy one – Subnets are one of the few solutions that offer such a high degree of flexibility whilst still being rooted to the speed and security of the Avalanche network. A sovereign blockchain allows the freedom to choose your own native gas token, a customized validator set to ensure regulatory or hardware requirements are met and of course, private blockspace. Crucially, with Avalanche’s consensus mechanism, it achieves sub-second finality – a vital component to the gaming industry where high throughput and low latency are key requirements.

Merit Circle DAO: A Collaborative Force Behind Beam

Beam aims to offer the most powerful set of gaming-focused tools as well as an ecosystem for a passionate community to come together and foster growth. But above all, games building on Beam have the opportunity to collaborate and tap into the expertise of Merit Circle DAO, a leader in the Web3 gaming industry.

Since its original roots as an Axie Infinity guild, bringing together an entire network of players from across the world, Merit Circle has not only experienced first-hand, but has also been a key contributor to the Web3 gaming evolution. Throughout this journey, they have gained a profound understanding of the industry’s missing pieces and what it will take to usher in a new era of gaming, which has resulted in the creation of Beam. Few teams possess the extensive knowledge of the gaming space that Merit Circle has, along with their deep commitment in pushing the industry forward.

A Player-Focused Philosophy

The core philosophy of Beam is to empower players with new gaming experiences that allow levels of ownership that have simply not been possible in traditional game design. They also understand that this may not be for everyone, which is why Beam has removed all blockchain complexities for the average player. However, it simultaneously caters to those who do want to take ownership of their in-game assets. This flexibility to opt-in for ownership is perhaps what makes Beam’s approach so effective, striking a unique balance between innovation and accessibility.

Beam has a crystal clear vision: to give power back to the players by simplifying Web3-enabled game development and accelerating the next generation of games being built. With an entire library of games already integrating with the network, Beam is a testament to how far the gaming industry has come through the impact of blockchain technology.

How Beam is Reshaping the Future of Gaming

Beam has been carefully designed to give players a superior gaming experience that expertly merges Web3’s capabilities with uninterrupted gameplay. Every element of Beam embodies this philosophy, ensuring that all players can benefit from this revolutionary era in gaming.

Effortless Ownership

Blockchain technology has redefined the concept of ownership in gaming and with it, what players should expect from the hours they put into a game. Beam’s Companion App allows players to easily link their in-game profile to set up an account which gives them full ownership of their in-game items. Working with OpenFort to leverage Account Abstraction, a player can setup an account with their chosen social login in seconds. Their private key is securely encrypted into their device so that there is no need to worry about any recovery phrases. This simple flow addresses one of the biggest challenges that has been holding the space back, preventing adoption from millions of traditional gamers.

By giving players the option to take ownership only if they choose to, Beam empowers them to simply enjoy the gameplay without ever having to deal with the blockchain layer. For experienced Web3 gamers or those who want to explore the ownership aspect, the Companion App can be used to swap assets, send in-game items to friends or lock up their items in a secure vault. This level of flexibility also allows players to unlock true ownership only when they feel it is worthwhile.

The Companion App showcases Beam’s dedication to building an inclusive blockchain-powered platform. It offers a versatile and robust solution, designed to meet the diverse needs of all players on Beam.

Player-Driven Economies

The industry’s shift away from the Play-to-Earn model has brought into focus a key element that is lacking in traditional games: the ability to freely trade digital assets which hold real value. Before the integration of blockchain infrastructure, players faced very fragmented and limited ways of trading their assets. There was no true ownership involved as these items technically belonged to the game studio and there was no reliable way of verifying the authenticity of an item.

As digital items found their space in the Web3 landscape, multitudes of NFT marketplaces have appeared but none have focused solely on gaming. Merit Circle took this problem into their own hands and have built Sphere – a marketplace built specifically for trading gaming assets. Although it can act as a standalone marketplace, Sphere’s primary role is to enable games to easily build their own in-game marketplace which uses Sphere’s API as its foundation.

At Beam, transparency is one of the core values. Unlike many other platforms, Sphere will include information that is important to gamers – such as the context of the rarity of an item and its actual utility within the game. These are small but essential details to enhancing the gaming experience, which have often been overlooked. Sphere’s design is centered around a seamless user experience and aims to offer the premier solution to facilitating player-driven economies.

Simplified Integration

To best serve the players, Beam first has to provide game developers with the tools needed to build the most fun and engaging experiences. Beam SDK acts as the invisible link for builders to seamlessly integrate their game to the Beam Network and leverage blockchain’s capabilities. It has been created to allow developers to focus on the creativity of game development and not have to worry about the complexities of blockchain integration. At its core, the Beam SDK is a flexible tool that gives developers the power to maintain control over their game design throughout the development process. By utilizing Beam SDK, developers gain access to the innovative possibilities offered by the Beam Network, enhancing the overall gaming experience without compromising their creative vision.

A Unified Ecosystem

Beam’s core mission is to foster an ecosystem that unites passionate gamers and developers, driving the advancement of Web3 gaming into the mainstream. Beam Hub acts as the home of the Beam ecosystem, where players can come to discover new experiences, rate and review games and connect with other players. Its thoughtful design caters to two key audiences – early access players and competitive players, making Beam a truly universal platform. Because at Beam, the voice of the player matters and building a strong player-first community is central to its vision. Beam Hub is not only a place for discovery but empowers players to actively participate in the development and evolution of their favourite games.

As Beam’s product suite grows, BeamOS is where you can discover every tool and feature built on Beam.

The Beam Expansion

Launching as an Avalanche Subnet was the first step in Beam’s vision of evolving into a chain-agnostic gaming hub. Beam has recently announced that it will be joining forces with the Immutable zkEVM, powered by Polygon. This collaboration will kick off with two major developments: the launch of the Sphere marketplace on Immutable and the integration of the Immutable Passport into Beam’s Companion App. This is a significant step in making Sphere the go-to marketplace for all games.

Through Beam, we are witnessing the largest names in Web3 gaming working together to unlock the most powerful gaming infrastructure. In doing so, this will accelerate Web3 game development and create an even more enriching gaming experience. Beam’s commitment to becoming chain agnostic will enable it to reach players from all corners of the gaming landscape.

The BEAM Token

With the launch of Beam and the approvals of MIP-28 and MIP-29, the Merit Circle token ($MC) has now migrated to the $BEAM token. BEAM has several built-in utilities which include:

• Delegation – BEAM holders will be able to participate in securing the network by delegating their tokens to a Beam Validator.
• Governance – Participate in the governance of the Merit Circle DAO.
• Gas Token – Every transaction on Beam will require BEAM to be paid as gas, with part of this fee distributed to validators and another portion burned.
• Validation – Secure the network by running a Beam validator node and receive BEAM rewards.
• Buyback & Burn – As part of MIP-7, which ensures that the Merit Circle DAO maintains a self-sustaining system, 15% of the DAO’s investment proceeds will be used to buyback & burn BEAM to decrease its supply.

Beam Spotlight

City of Greed

“Mastermind your strategy, accumulate resources, and triumph over escalating land taxes as you navigate this dynamic blend of Roguelike, Resource Management, and Deck-building.”

🕹️ Play City of Greed

Megaweapon

“Prepare for an action-packed gaming experience in the fast-paced, top-down shooter world of Megaweapon, featuring various avatars, game modes, and maps to explore!”

🕹️ Play Megaweapon

Raini: The Lords of Light

“A card game set in the fantasy world of Rainiverse where players have to strategically manage an army of creatures to defeat the main enemy, Quantum Rug.”

🕹️ Play Raini: The Lords of Light

Castle of Blackwater

“Experience the mysterious fantastical 2D social deduction game with Castle of Blackwater, where players can play different roles, scout the village, and finish quests.”

Coming Soon

Explore and keep updated with all the new games building on Beam.

Conclusion

Although Beam’s journey has just begun, it represents a monumental force in the gaming industry, bringing together the expertise of Merit Circle, the powerful engine of Avalanche technology and deep industry partnerships such as Immutable and Polygon. In the search for the perfect balance between Web3 features and enhanced creativity in game design, we are finally seeing this vision come together. Players’ growing desire for ownership and agency in their gaming experience is central to Beam’s philosophy. The platform’s unique approach of allowing players to opt-in to the ownership element, while simultaneously abstracting the complexities of crypto, is pivotal in attracting a broader audience. Beam is dedicated to solving two fundamental challenges – streamlining the on-chain experience for players and simplifying all blockchain elements for developers.

However, Beam is much more than just a place to have fun, it’s a platform where communities can come together to create meaningful experiences whilst pushing the technological boundaries of innovation. The ultimate goal is to bring these dynamic experiences to a global audience. Beam’s ecosystem represents a significant leap forward in the gaming industry, where player engagement and cutting-edge game development converge to make way for the next generation of gaming.

The Rise of Tokenization: Understanding its Importance

In recent months, the tokenization of real-world assets (RWAs)  the blockchain ecosystem. Tokenization is the process of converting the rights to an asset—whether tangible or intangible—into a digital token on a blockchain.

These on-chain tokens act as a digital representation of ownership, encapsulating the value and rights associated with a physical or digital asset. This transformation is facilitated through the use of smart contracts – enabling the entire process to be seamlessly automated.

In contrast to traditional systems, tokenization allows transparent and secure issuance, along with efficient management of these digital assets, therefore overcoming the inherent limitations and inefficiencies of current frameworks.

This powerful use case of blockchain technology has found a compelling synergy with the values of DeFi – creating a unique opportunity which significantly amplifies their combined impact on the financial system. By combining the virtues of DeFi with the tokenization of RWAs, we now have the ability to source more stable collateral. This not only results in more sustainable yield and diversified risk for these protocols, but also solidifies DeFi’s inevitable position within the broader financial landscape. As DeFi continues to innovate towards a transparent, open economy, tokenization stands at the forefront as an instrumental tool, providing a clear and direct path to this ambitious goal.

It’s important to note that tokenization does much more than merely streamline the financial system – it has the potential to revolutionize the global economy on a fundamental level. It realistically enables a future where opportunities are democratized and legacy systems are reconfigured to push forward a new era in the evolution of humanity. By tokenizing RWAs, we are actively enabling global, inclusive participation in wealth creation, thereby transforming the economy and laying the groundwork for a fairer world.

The Tokenization Market Outlook

Leading institutions are viewing tokenization as a trillion dollar market opportunity due to its ability to unlock the liquidity of currently illiquid assets – primarily in the private capital markets. Boston Consulting Group projects that, as a conservative estimate, the global market for tokenized illiquid assets could reach $16 trillion by 2030. However, on the higher end of the projection, the market has the potential to reach an astounding $68 trillion.

Considering the exponential scale of the tokenization market, an increasing number of leading financial institutions are recognizing the magnitude of its potential. In this sector alone, tokenization is firmly positioning itself as the catalyst for widespread adoption of blockchain technology.

What is being tokenized?

Whilst financial instruments are leading the way, there is a wide spectrum of traditional assets that can be tokenized:

• Traditional financial instruments
  • Securities – This broad category includes equity securities (stocks), debt securities (bonds), derivatives and various types of investment funds.
  • Structured Investment Products – Complex financial instruments crafted from multiple underlying assets like bonds, commodities, currencies, equities or mortgages. They strategically combine various elements from securities and derivatives to tailor risk and return profiles.
  • Private equity – Involves investments in private companies – typically reserved for high-net-worth individuals (HNWIs) and investment funds.
  • FX Market – Includes all currencies that are traded internationally.
  • Derivatives – Financial contracts whose value depends on an underlying asset – can include futures, options and swaps.
• Commodities
• Insurance
• Intellectual Property
• Real Estate
• Wine, Fine Art, Luxury goods and other rare collectibles

The Transformative Potential of Blockchain

For Investors

• Democratized access – Tokenization facilitates asset fractionalization, which substantially broadens market participation – especially in private markets and structured investment products, which are historically reserved for HNWIs. The significantly reduced operational costs for issuers also enables smaller investment minimums, further empowering retail investors.
• Ownership rights – Blockchain provides a secure ledger where each token represents a stake in an underlying asset. This immutable record ensures that the investors’ ownership rights are not just recognized, but also easily transferable – making the investment process much more flexible.
• Transparency & security – On the security layer, blockchain’s immutability ensures accurate and transparent records, giving investors peace of mind and greater confidence in their on-chain investments.
• Efficiency – Automation via smart contracts streamlines the distribution of payouts, dividends and interest, making the investment process more effortless and efficient.

For Issuers

• Increased liquidity – The ability to fractionalize assets plays a huge role in unlocking liquidity across various markets. Bain Capital estimates that private assets outside the financial system are worth around $540 trillion – a large amount of which face liquidity challenges. Tokenization is emerging as an effective solution in unlocking value and providing easier access to capital for traditionally illiquid assets.
• Real-time settlement – Unlike traditional systems, where settlement can take days, blockchain facilitates near-instant settlement, thus eliminating counterparty risk and transforming the investment workflow.
• Operational efficiency – Manually-intensive operations can be automated via smart contracts. Boston Consulting Group reports that asset tokenization could save $20 billion in global clearing and settlement costs alone.
• Regulatory compliance – Subnet technology on Avalanche provides issuers with the ability to create customized blockchains that can be easily configured to meet compliance laws of any part of the world they operate in.

Interoperability – powering innovation

Interoperability, one of the key virtues of blockchain technology, serves as a powerful catalyst for innovation, enabling seamless composability between applications.

For investors, this unlocks an increased number of investment opportunities, which further diversifies their portfolio. Meanwhile, for issuers, it allows them to leverage the benefits of interconnected applications, expanding their reach to a broader number of market participants.

Interoperability plays an important role in cultivating a more inclusive and connected ecosystem across various industries, allowing for capabilities beyond the restrictions of legacy infrastructure.

The Tokenization Landscape on Avalanche

Avalanche’s dynamic Subnet technology is empowering institutions and traditional companies across industries. Leveraging their customizable features, these companies are not only seamlessly transitioning their existing offerings on-chain but also introducing new innovative tokenized products. Here’s an overview of 9 tokenized products being built exclusively on Avalanche:

Financial Services

Securitize & KKR

Securitize, an industry-leading tokenization platform, has been instrumental in driving accessibility to the private markets through compliant tokenization. In September 2022, they collaborated with prominent global asset manager, KKR, to provide tokenized exposure on Avalanche to KKR’s healthcare fund, typically reserved for HNWIs. This pioneering effort signified a major advancement in Avalanche’s objective to digitize RWAs.

Further pushing market transformation, in July 2023, Securitize initiated the offering of tokenized shares in a Spanish real estate investment fund, specializing in commercial healthcare real estate. Securitize is the first to offer such digital asset securities under the EU’s new pilot regime for digital assets.

Intain

As part of Avalanche’s Evergreen initiative, Intain was one of the first structured financial services to build a Subnet with IntainMARKETS – a tokenized marketplace for asset-backed securities. Intain leverages automation and blockchain transparency for operational efficiency, enabling real-time investor reporting and swift payouts. This increased efficiency means a reduction in costs, which in turn allows for lower investment minimums, broadening the reach of their structured investment products.

By unifying all trust intermediaries onto a single platform for its administration services, Intain showcases blockchain’s ability to substantially streamline the entire deal structure process.

DEFYCA

Digital securities firm, DEFYCA, is building a tokenized private credit protocol that aims to open up investment opportunities in the private markets. Utilizing blockchain technology, DEFYCA is the first company to offer tokenized securities to professional investors under the EU’s upcoming cryptocurrency regulatory framework – MiCA.

In traditional systems, debt issuance is a manually-intensive operation, which involves liability matching, settlement, payment flows and price discovery. DEFYCA automates these steps through smart contracts, greatly improving administrative efficiency.

AmFi

AmFi is a financing platform that combines traditional financial products with blockchain’s efficiencies, enabling companies to easily set up and manage real-world credit solutions through automated processes. Its first product, AmFi Liquidity Pools, allow established financial services to create Funding Pools that are collateralized with tokenized RWAs. These Liquidity Pools faciliate funding for businesses whilst offering innovative products to investors. AmFi’s current focus is on democratizing access to capital for smaller businesses in Latin America.

INX

INX, an SEC-registered platform, facilitates compliant trading and investment in both cryptocurrency and security tokens. INX also helps companies raise capital through the issuance of digital securities and in doing so, provides unique investment opportunities. As part of its services, INX offers a comprehensive solution for issuing SEC-compliant digital securities, from token modelling and smart contract deployment to management of the token’s lifecycle.

INX works closely with regulators to ensure compliance, actively contributing to the development of regulatory frameworks in the digital asset industry.

HiYield

As part of Avalanche Vista’s initial cohort, HiYield is developing a user-friendly platform that aims to consolidate the global on-chain capital markets. The platform provides investors with an expanding set of strategies designed to generate sustainable yields across a diverse range of institutional-grade asset classes.

HiYield is building towards a more inclusive financial system powered by blockchain technology. It aims to offer features such as fractional ownership, enhanced liquidity & accessibility, peer-to-peer lending & borrowing, and interest earning opportunities.

Cables

Cables is innovating in the tokenization space by integrating blockchain settlement technlogy into the FX industry – establishing itself as one of the first protocols to focus on this sector of the market. A self-custody DEX built on Avalanche, Cables is focusing on stablecoin and cross-chain pairs. The platform’s mission is to incorporate blockchain rails into the FX market as well as bringing FX derivatives to the stablecoin market. This unique approach gives both institutional and retail investors access to transparent pricing and unified liquidity, all within a non-custodial framework.

Insurance Services

Re

Re’s vision is to streamline the process of connecting capital in the nearly $1 trillion reinsurance market, increasing accessibility to this traditionally ambiguous asset class. Simply put, reinsurance is ‘insurance for insurance companies’ – it allows insurers to transfer their risk to a reinsurance company. This ensures that they can maintain a healthy balance sheet to allow for seamless payouts when claims are made.

The Re protocol gives accredited investors the opportunity to provide backing for real-world insurance policies and companies across a variety of risk portfolios. To achieve this, Re is building a dual product model on Avalanche. This involves the main dApp that lives on the Primary Network and a Subnet designed to store all private information – demonstrating the versatile use cases of Avalanche Subnets.

By leveraging blockchain’s transparency and speed, Re not only offers a superior experience to insurers, reinsurers and policyholders, but also expands opportunities for participation in the reinsurance market.

Lemonade

In March 2022, digital insurance company, Lemonade, made a significant move into the blockchain industry. They launched an initiative to protect African smallholder farmers from climate change risks by offering permissionless on-chain insurance. Built on Avalanche, the offering is one of the first projects by the Lemonade Crypto Climate Coalition, a DAO funded by the Lemonade Foundation.

The project addresses a pressing issue facing 300 million smallholder farmers in Africa, who largely lack protection against climate-related risks. Their dependence on rainfall for crop growth is increasingly challenged by environmental conditions such as drought, which can have serious impacts on their livelihoods. Traditional weather insurance is usually unavailable or expensive in these regions due to high operational costs and inaccurate weather data.

Lemonade’s innovative solution leverages smart contracts for policy management and automatic claim payouts, combined with Chainlink oracles for real-time weather tracking. With the huge reduction in backend costs, Lemonade is able to offer affordable insurance to farmers. Insurance capacity is provided through on-chain capital pools, which offer investors an opportunity to participate and receive a share of the farmers’ premiums. This transparent and efficient process eliminates counterparty disputes and streamlines the payout process, effectively delivering much-needed insurance services to emerging markets.

Lemonade’s pioneering efforts signifies an important milestone, showcasing the potential of blockchain technology as a solution to global challenges.

Avalanche Vista – Fueling Tokenization

In July 2023, the Avalanche Foundation announced the launch of Avalanche Vista – a $50 million initiative dedicated to propelling tokenization innovation on Avalanche. The initiative aims to accelerate innovative tokenization efforts, by using the alloc ated funds to purchase tokenized assets and support teams that are making significant developments in the tokenization space.

Avalanche Vista marks a pivotal moment in Avalanche’s journey, underlining their firm commitment to redefine traditional systems. By digitizing RWAs, Avalanche is playing a major role in democratizing access to investment opportunities, particularly within the historically-exclusive private markets.

Conclusion

The current financial system is undergoing a profound transformation, deeply intertwined with the rise of tokenization. As we tokenize RWAs, we are witnessing the reshaping of a global economy, through the convergence of traditional finance and DeFi. This unification is empowering the blockchain industry as a whole to demonstrate real change in creating a more inclusive financial landscape. The exponential impact of tokenization is gaining momentum and recognition across all sectors, evident in the surge of tokenized products in the ecosystem.

The potential of blockchain is no longer just an abstract vision – it’s a tangible reality being materialized on Avalanche today. As a leading player in this paradigm shift, Avalanche’s unique features and dedication to driving change provide a powerful framework in revolutionizing our global infrastructure.

The Blockchain Evolution

Since the creation of Bitcoin in 2009, blockchain technology has evolved through three significant generations. Bitcoin first revolutionized financial transactions on a global ledger, eliminating the need for trusted intermediaries. Ethereum, the second generation, expanded blockchain’s scope with smart contracts, which allowed the creation of decentralized applications (DApps) and what we now know as DeFi. However, as the user base grew, so did the demand for improved scalability. Avalanche, a third generation blockchain, has dramatically redefined a blockchain’s fundamental capabilities, establishing the foundations for an interconnected global landscape, specifically engineered for sophisticated, impactful applications.

BTC.b – Unifying the Three Generations of Blockchain

To bring us full circle, we have BTC.b – a native representation of Bitcoin on the Avalanche network. BTC.b retains Satoshi’s foundational principle of being a decentralized value transfer, while simultaneously expanding its functionality to actively participate in Avalanche’s rich DeFi ecosystem. By unifying the three generations of blockchain development, BTC.b democratizes access to new opportunities for both individual investors and traditional institutions alike. Moving beyond the traditional perception of Bitcoin as merely ‘digital gold’, the integration of BTC.b into the DeFi ecosystem not only taps into its $500B market cap (at the time of writing) but also further revolutionizes its potential as an asset class.

Understanding BTC.b – What sets it apart from WBTC?

BTC.b is a native ERC-20 token on Avalanche that represents Bitcoin bridged from the Bitcoin network, which can then be used across the ecosystem in yield-generating strategies.

It provides a superior alternative to WBTC, by eliminating the inherent risk associated with its reliance on third party custodians. WBTC requires the user to submit a request to a merchant, who then interacts with a custodian – who is responsible for executing the minting and redeeming of the WBTC. Since this process doesn’t usually happen on-demand, WBTC holders are exposed to price volatility and a poor user experience.

In contrast, BTC.b is minted and redeemed on-demand. This is done using the Avalanche Bridge, a non-custodial bridge that leverages the new Intel SGX technology. Its design ensures that the bridge can securely execute transfers without any one party ever having access to the bridge’s secret keys. This is crucial because the Avalanche Bridge is secured by 8 Wardens who are in charge of indexing and verifying transactions.

Each BTC.b is fully backed by a Bitcoin locked in the Intel SGX-secured bridge application.

In the 12+ months since its launch, BTC.b has swiftly surpassed the supply of WBTC, with WBTC’s supply on a notable downturn, indicating a clear market preference for BTC.b.

BTC.b vs WBTC supply – gfkacid’s Dune Dashboard

In short, BTC.b allows users to:

• Mint and redeem their Bitcoin whenever they like
• Bridge at a low cost
• Be protected from price volatility & risk of depegging
• Participate in DeFi to earn yield on their Bitcoin

The previous risks associated with WBTC have now been replaced with a decentralized, borderless Bitcoin, marking the beginning of a new chapter in Bitcoin’s development.

A Borderless Bitcoin

In its evolution, BTC.b has become an Omnichain Fungible Token (OFT) built on top of the LayerZero protocol. This transforms BTC.b into a composable asset that can be used on Avalanche and all other major networks supported by LayerZero – including Ethereum, Polygon, Arbitrum and Aptos. OFTs function as native assets across all supported networks, which removes the need for reliance on centralized bridges.

The adoption of a universal token standard not only unifies liquidity but also enables seamless integration for protocols, thereby significantly enhancing the scope of yield-generating opportunities across the vast blockchain landscape.

A Look into BTC.b on Avalanche

At the time of writing, there is a current supply of 4955 BTC.b with a market cap of $148M. The majority of BTC.b opportunities are on Avalanche, which holds a significant 98% of the total supply. BTC.b has effortlessly exceeded the capacity of Bitcoin on the Lightning Network, which is Bitcoin’s scaling solution. Earlier this year in March, it reached an all-time high supply of 10,000 BTC.b.

BTC.b’s journey so far not only provides a glimpse into its immense potential but also signals an inevitable growth in demand as more individuals and institutions discover the opportunities it presents.

Overview of BTC.b lifetime supply – gfkacid’s Dune Dashboard

Bitcoin capacity on the Lightning Network – txstats

BTC.b Opportunities on Avalanche

The landscape of yield-generating opportunities on Avalanche is diverse, accommodating a wide spectrum of risk tolerance levels. Here are some notable strategies:

• Fixed rate vaults on Struct Finance offering 10% on your BTC.b
• Leveraged borrowing to generate yield across integrated protocols on DeltaPrime
• Supply BTC.b or deposit as collateral and borrow on Benqi or Aave
• Customizable concentrated liquidity strategies using Trader Joe’s Liquidity Book

Where to Bridge BTC.b

To participate in these opportunities, users can bridge their native Bitcoin to Avalanche with the Core browser extension to mint BTC.b, which is facilitated by the Avalanche Bridge.

BTC.b can then be easily redeemed and bridged back to the Bitcoin network using the Core extension.

For those who wish to explore further strategies outside of Avalanche, transfer your BTC.b across multiple networks using Layerzero’s Bitcoin Bridge.

What the Future Holds for BTC.b

As we look to the future of BTC.b, it’s clear that we’re only at the beginning of exploring its tremendous potential. As the number of institutions adopting Bitcoin as a reserve asset continues to grow, it’s likely that we will see the development of on-chain financial products specifically tailored for institutional investors, with a strong focus on BTC.b-centered offerings. This would be enhanced by an expansion of opportunities across multiple networks – leveraging LayerZero’s OFT standard, which enables more complex and robust strategies across various chains without the need for intermediaries. This in turn will inevitably lead to a broader range of automated vaults, further diversifying opportunities for users to participate in, so they can benefit from the evolving DeFi ecosystem in Avalanche and beyond.

Conclusion

BTC.b represents a significant step forward in the evolution of Bitcoin and blockchain technology as a whole. By merging Bitcoin’s transformative vision with the rich DeFi ecosystem on Avalanche, BTC.b is already paving the way for a broader and more sophisticated range of financial products, thereby redefining Bitcoin’s versatility as an asset class. Given that the emergence of DeFi was enabled by Bitcoin’s original concept, it is therefore fitting that BTC.b will play a key role in driving forward a more accessible and inclusive financial system – as this deeply embodies and upholds the core principles Bitcoin was first built upon.