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The invention of Bitcoin changed the world of finance forever by introducing a revolutionary consensus technology known as Nakamoto Consensus using Proof-of-Work (PoW). With this technology, networks can timestamp and settle transactions without requiring any centralized coordinator. Today, PoW remains important for keeping blockchains secure from network-wide attacks, open for anyone to join, permissionless to use, and verifiable without trusting a third party. While these are key properties ensuring decentralization, crucial issues with traditional PoW have become clearer over time, primarily slow confirmation speeds, and more challenging network parameter updates.
This is where the Avalanche protocol comes in, a breakthrough consensus algorithm that allows a decentralized network to coordinate consensus much more quickly. This new protocol integrated with eCash, enhances the network’s speed and security and acts as a fundamental building block for its future scaling and functionality. With the Avalanche Pre-Consensus upgrade on eCash nearing its completion, let’s explore the many ways it redefines eCash’s capabilities and Layer1 PoW blockchain technology.
Avalanche-Enhanced Proof-of-Work
Avalanche is an additional consensus protocol working alongside eCash’s core Nakamoto PoW layer. While PoW secures the trustless nature of the network, the Avalanche layer helps it reach consensus in real-time. A helpful way to understand the relationship between Avalanche and PoW is to think of PoW as written language and Avalanche as speech. Like carving scripture in stone, PoW is slow to produce but permanent and verifiable by anyone at a later date. Avalanche, on the other hand, reaches agreements as efficiently and quickly as speech, but the information is fleeting and not preserved for future validation by anyone who joins the conversation later.
In more technical terms, when a transaction is broadcast, nodes use Avalanche to rapidly poll each other and finalize it within 3 seconds. This near-instant finality is very secure, providing confidence equivalent to dozens of block confirmations, which would usually take hours to accumulate. Yet, it’s only verifiable by network participants who are present during the polling. The PoW layer still has to eventually include the finalized transaction in a mined block to produce a permanent, verifiable record of it.
By combining both systems, eCash gains the best of each: Avalanche brings more granular, immediate coordination between nodes, while PoW ensures long-term security and auditability of the entire ledger. When a new node joins the eCash network, it can still bootstrap itself in a trustless manner using PoW, which is not possible using Avalanche only, synchronising to the network like with any conventional PoW blockchain. Once everything is synchronized, the node can participate in Avalanche consensus to gain all the additional benefits and capabilities without losing its trustless nature.
This setup is unique to eCash and different from other Proof-of-Stake (PoS) or masternode systems. Staking is used only as a Sybil-resistance mechanism to gain active participation rights in eCash’s Avalanche layer. This approach is technically best described as Avalanche-enhanced PoW (APoW) rather than a conventional PoW/PoS hybrid, where the validation of the ledger is switched between PoW and PoS nodes.
Staking Rewards
This APoW setup makes eCash a unique Bitcoin implementation that offers native staking rewards. Anyone can earn rewards while strengthening the network with an Avalanche-enabled staking node. The minimum required stake is 100 million XEC, which is at least an order of magnitude cheaper than on other chains, making staking operations on eCash far more accessible.
Importantly, you keep full control of your coins at all times. Staking on eCash is non-custodial, with no coin-locks or slashing of funds involved, meaning there is no risk of losing any of your staked coins. The rewards are sourced from the block reward, with currently 10% going towards stakers. The current Avalanche staking APY is around 6%. Running an Avalanche-enabled node is a simple method for earning eCash and a feasible alternative to mining.
Instant Finality
As outlined in a previous article, instant transaction finality is the most apparent improvement for users. On conventional PoW blockchains, transactions must go through multiple block confirmations to be considered irreversible. Even drastically shortening the block time isn’t quick enough for instant payments. The time to finality needs to be no longer than 2 or 3 seconds, otherwise the payment experience will feel slow.
Avalanche’s near-instant finalization of transactions gives immediate assurance that payments and deposits are securely settled. This means no more waiting times for exchange deposits and a snappy payment experience at the point of sale.
This Pre-Consensus mechanism is crucial to unlock the next generation of financial applications with true atomic settlement at internet speed. Instant finality on eCash is a foundational leap both for blockchain and conventional financial technology, as it fundamentally changes how value moves around the globe.
Real-Time Processing
A core limitation of Nakamoto PoW is its inefficiency and slow coordination. Nodes can only validate propagated transactions in bulk after a new block is found, which usually happens every 10 minutes, depending on the protocol. This means that during the block-finding interval, nodes can’t coordinate with each other in a trustless manner and therefore most of the network’s processing power sits idle, waiting for the next block to be found as a shared reference point. Only after a new block is found, nodes can begin processing it. This limits the potential size of a block because processing large blocks may at some point take longer than finding the next one, which would lead to disruptions in the network with nodes unable to keep up. It’s important to keep the block processing time as short as possible relative to the block-finding interval, in order to keep block orphan rates low.
Avalanche fundamentally changes this dynamic by enabling real-time transaction validation. As transactions are broadcast, nodes use Pre-Consensus to quickly agree on their finality before a block is mined. This lets nodes make use of the time between blocks to process transactions, so by the time a miner finds a new block, nearly all its content is already processed and agreed upon. This efficient use of what was previously idle time drastically reduces latency and allows eCash to support much larger block sizes and higher transaction throughput.
Agile Development and Governance
Upgrading or changing the base protocol in PoW blockchains usually requires careful coordination to avoid chain splits. Avalanche enables nodes to collectively agree on upgrades or policy changes through repeated, randomized polling. This process builds strong network-wide confidence in new rules before activation, making upgrades smooth and minimizing the risk of splits.
While some fundamental upgrades may still occur during scheduled bi-yearly upgrade events, many critical parameters like blocksize limits or transaction fees can be adjusted by the network on the fly. The Heartbeat feature for more consistent block times is another protocol leveraging eCash’s Avalanche integration. Further functionality comes with independently deployable subnets, which are sets of nodes with custom rule sets that enhance the network through optional features and interoperability with other blockchains. These subnets remain in synchronization with the main chain despite their custom rules, keeping the base protocol lightweight while benefiting from additional functionality. Not being part of the base protocol, these additional features are also unrestrained and easier to develop and iterate on.
The same mechanism enables a more responsive and inclusive governance while keeping the base layer lean. All participants can directly vote on parameter changes, such as funding mechanisms or network policies, without central coordination or social consensus campaigns to mitigate risks of network splits. Minority nodes stay in sync with the network, ensuring decisions are enacted smoothly and without disruption, making eCash adaptable to any necessary changes while keeping it united.
51% Attack Protection and 1-Block Finality
Traditional PoW security is cumulative. The more blocks mined on top of a transaction, the harder it becomes to reverse or be double-spent through a 51% attack. This cumulative security is also what enables trustless bootstrapping of nodes joining the network. Every block in a PoW blockchain is linked to the total work done by the entire network since genesis. This means anyone can independently verify the chain’s validity from scratch, with no need to trust any third party or centralized beacon nodes. Over time, accumulated PoW creates a very high confidence in the finality of a transaction.
Avalanche comes with a different trade-off. Its security does not increase with more confirmations and is not objectively verifiable at a later time. However, its advantage is that the security guarantee is near-instant to the full amount of coins staked in the system. Instead of slowly accumulating security over time, Avalanche on eCash provides security equivalent to dozens of confirmations immediately. This way, it protects more effectively and much quicker against 51% attacks than using PoW alone.
When a block is broadcast by a miner, it receives an additional polling round of Avalanche nodes to secure it. Much like the protocol finalizes transactions, it locks in the latest block as the valid tip of the chain, protecting the network even if a malicious actor controls most of the mining power. Once the block is finalized, the Avalanche Post-Consensus protocol rejects any attempts to alter its history, making double-spends and rollbacks virtually impossible.
Post-Consensus is the mechanism that ensures any network decisions are respected by all honest nodes. Without it, no Pre-Consensus finality could be enforced. Pre-Consensus and Post-Consensus are two pillars of Avalanche indispensable for eCash’s technological roadmap, making it among the most scalable, fastest, and secure networks in the world without having to rely on excessively high hashrates like conventional PoW chains.
In a hypothetical attack scenario, an entity would need 51% hashrate as well as over 87% of the entire staked coins on the network (currently over 6 million dollars in XEC) to have a potential attack chance, making eCash the most complete security model of any other Bitcoin implementation to date. Attempting to acquire this much XEC from the open market would cause severe price slippage, rapidly driving the cost far beyond the initial $5 million and potentially into the hundreds of millions or even billions. This exponential increase in required capital makes such an attack economically unfeasible, further reinforcing eCash’s robust security model.
Conclusion
Avalanche greatly enhances eCash and balances out the drawbacks of PoW through its rapid polling mechanisms. This Nakamoto/Avalanche hybrid consensus retains its decentralized nature while gaining unprecedented functionality, speed, and security. The eCash network is best-in-class technology, especially for robust and high-performance Layer1 PoW blockchains.
In its current form, eCash already stands out with the lowest fees in the space and quick transaction settlement through its 1-block finality. It’s one of the most secure blockchains, outperforming coins with much larger market caps. Looking ahead, instant transaction finality makes it among the fastest as well. Continued advancements like subnets expanding the platform’s capabilities and making it interoperable redefine eCash as a truly next-gen blockchain that remains true to its Bitcoin roots, capable of adapting and serving users, developers, and businesses at scale in an increasingly digital, interconnected, and decentralized world.
Originally Published: https://e.cash/blog/avalanche