Avalanche vs. Ethereum

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Contributor, Benzinga
Updated: October 12, 2022

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Over the past several months, Ethereum’s (ETH) gas prices have skyrocketed. The metric, measured in gwei, has gone up exponentially. Fees have gone from less than $1 to sometimes surpassing $500 for a single transaction. This increase has led many to consider an alternative blockchain platform that offers lower fees. Avalanche is an alternative to Ethereum that focuses on low-cost transactions and high scalability. 

Smart Contracts Explained

Smart contracts are programs that facilitate transactions on the blockchain. They can be made by anyone on both the Ethereum and Avalanche network. These programs can be beneficial for automating tasks and increasing the utility of a blockchain.

In short, smart contracts are coded programs that use conditionals. They operate using an “if-then” structure. If an event triggers the smart contract, then it will automatically complete a task. A password is an example of a conditional. If the password is correct and matches the definition set by the program, then it will grant the user access to the account. 

Both Ethereum and Avalanche allow virtually anyone to create and upload a smart contract to their chain. However, the 2 chains have different ways of validating the transactions on their respective networks. 

Proof of Work vs. Proof of Stake

As of November 2021, Ethereum uses a proof-of-work (PoW) system to verify transactions. A PoW system employs computers to compete against each other to solve complex math problems. The first computer to solve the problem is allowed to verify the legitimacy of a transaction. 

Users who successfully verify transactions are given ETH, called a block reward. ETH blocks typically last between 12 to 14 seconds. At the end of each block, around 2 ETH are given out as a reward in addition to transaction fees paid to miners. 

The 2 major setbacks to Ethereum’s PoW system are the energy use and lack of scalability. The computers that verify ETH transactions use massive amounts of energy. The Ethereum chain currently uses around 91 TWh, which is comparable to the total energy use of the Philippines in a year. This energy amount is also far less than what ETH actually needs. The reason for Ethereum’s high gas fees is that there are more transactions than the network can process, so transactions are processed based on who pays the highest fee. Because of these issues, Ethereum unveiled ETH 2.0 in September of 2022. ETH 2.0 has a proof-of-stake (PoS) consensus model.

Avalanche currently uses a PoS model. A PoS model allows holders of a token to lock up their investment for a chance to earn block rewards. Stakers can support the network by verifying transactions. When a user stakes their position, the network has control over the investment. This process can help prevent fraudulent activity by allowing the network to punish those who do not comply. 

Users can stake AVAX, Avalanche’s native token, for any time between 2 weeks and 1 year. These validators must also have 2,000 AVAX to stake in order to receive rewards. Users can also delegate by selecting an existing validator. Delegators only need 25 AVAX to receive rewards. 

PoS is known to be faster and have lower costs, which combats the 2 major issues of the current Ethereum consensus model. 

Ethereum vs. Avalanche Use Cases

Ethereum and Avalanche both offer similar uses as of now, but this scenario is likely to change. As more people begin to use crypto, these uses can change dramatically. Ethereum is also larger and has been around for longer, so many new uses are being developed on Ethereum. Again, this trajectory may change if Ethereum’s fees continue to rise. 

Both Ethereum and Avalanche are primarily used for decentralized finance (DeFi) applications. These include decentralized exchanges (DEXs), peer-to-peer lending and stablecoins. A DEX is essentially a way for users to swap tokens. While a majority of DEXs primarily use ETH, several new DEXs are built with AVAX as the primary token, such as the Trader Joe DEX. 

Users can also send crypto to anyone else on the blockchain. This activity is referred to as peer-to-peer payments and can be used in a variety of situations. Avalanche beats Ethereum because of its low fees and fast transactions. 

Lastly, stablecoins can be built on both exchanges. Stablecoins are cryptocurrencies that are tied to an underlying asset, such as the U.S. dollar or gold. These tokens offer a variety of uses as well. Governments are even beginning to experiment with stablecoins as they combine the security of the underlying assets with the speed and decentralization of crypto.

AVAX and ETH are both primarily used in the DeFi space right now, but new projects with much more specific uses are being built every day. Most of these projects are on Ethereum, as its ecosystem of applications is much larger. However, these projects could eventually be built on different blockchains if ETH cannot corral its gas fee issues.

Music royalties are an issue that the Ethereum chain is looking to resolve. Many music artists are upset about the lack of transparency in the payment process. Ethereum could solve this issue by automatically distributing royalty payments based on a set agreement. The Open Music Initiative is currently exploring how Ethereum could be combined with their goals.

Current Debate Between Avalanche and Ethereum

Su Zhu is the CEO of a crypto venture capital fund named Three Arrows Capital. Su Zhu is also a strong backer of the Avalanche project. Su Zhu expressed his discontent with the high gas fees on the Ethereum network. In a November 20, 2021, tweet, Su said, “Yes, I have abandoned Ethereum despite supporting it in the past. Ethereum has abandoned its users despite supporting them in the past.” But, has Ethereum done right by users by releasing 2.0?

Su Zhu used his platform to speak out against Ethereum and in favor of Avalanche. His words caused a massive debate surrounding the scalability and overall usability of Ethereum. Many Ethereum investors jumped ship and took their investments to different blockchains.

So, Which is Better: Avalanche or Ethereum?

Is it impossible to say right now which chain is definitively better. Ethereum is currently struggling with high gas fees, but ETH2.0 may be the solution to this problem. Avalanche has seen a recent rise in popularity, but gains may not continue if Ethereum can increase speeds and lower costs. ETH 2.0’s success may be the deciding factor for the future of Ethereum.

Frequently Asked Questions

Q

What is the main differnce in Avalanche and Ethereum?

A

The main difference between Avalanche and Ethereum is their scalability. Avalanche can process around 4,500 transactions per second (TPS) while Ethereum can only do around 30. However, Ethereum’s TPS is subject to change upon the implementation of Eth2.0.

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