*Just a reminder that nothing on this website or article is financial advice*

• TL;DR

• Impact / Green Staking

• Avalanche high-level overview

• Staking on Avalanche

• Conclusion

  • Tying it all together

  • Avalanche’s path forward and green staking potential 

  • Note about sustainability in the age of PoS

If you are new to Blockchain and staking, we recommend you skip the TL;DR and start at “Impact / Green Staking.”

We didn’t find Impact staking pools/validator-nodes on Avalanche. We believe the lack of impact staking operations stems from Avalanche’s design. Primarily since a validator node operator must set the “lifetime” of a node - after which it will shut down. Furthermore, in our opinion, creating a community and growing interest in green staking is a high-friction process on Avalanche that faces strong systemic headwinds.

However, there is a silver lining - Avalanche’s unique design has the potential to galvanize delegators around community-chosen missions and generate reliable donations for those goals - we outline potential foundations for setup in the article’s conclusion.

In this article, we use Impact and Green staking interchangeably. Put simply, impact staking is when someone uses blockchain to generate money intended to support or finance a mission-driven cause. To elaborate - impact staking comprises 2 main steps:

• First - an individual, an organization, or a community uses a Proof-of-Stake (PoS) blockchain’s staking mechanism to generate rewards (these are often in the form of the blockchain’s native coin or token)

• Second - the rewards are directed towards an NGO, mission-driven organization, or charity to help them support their cause and make an impact. Note: the rewards are often converted into fiat currency before being donated.

Green staking - is a subset of impact staking where the donations are directed toward NGOs, organizations, or charities that focus on nature, wildlife, or the environment.

Every PoS blockchain (Ethereum, Cardano, Avalanche, Solana, etc.) has a distinct staking mechanism, and some are more favorable for impact staking. In addition, the community that forms around a specific blockchain plays a role in the prevalence of impact staking on that blockchain.

For example, Cardano’s design is conducive to impact staking, and Cardano has a lively sustainability-oriented community - for more about Green staking on Cardano, check out our article - Link.

TL;DR - a PoS L1 with low fees, high speeds, and EVM compatibility (for more robust technical explanations, we recommend Avalanche’s official documentation - link).

Avalance is a Layer 1 blockchain that uses a novel Proof-of-Stake (PoS) mechanism, and its native coin is AVAX. Avalanche claims to be “blazingly fast, low cost, and eco-friendly”1 (more on that in our conclusion). 

Avalanche’s unique PoS mechanism allows it to operate at high transactions per second (TPS) - up to 4,500 2. Avalanche’s TPS is possible largely due to its use of subnets, which provide scalability, speed, and decentralization. Subnets can be thought of as self-governing and self-securing entities with their own logic, tokens, and economics.

Avalance’s design is somewhat complicated; it consists of three independent and interoperable chains:

• Contract Chain (C-Chain) - the smart contract chain and the external facing part of Avalanche. The C-Chain interacts with Defi, dapps, and wallets (e.g., metamask) and is compatible with the Ethereum Virtual Machine (EVM) - meaning Ethereum devs and tools can easily interact with Avalanche through it.

• Exchange Chain (X-Chain)​ - facilitates sending funds across “intra-avalanche” addresses. Its relative isolation from the rest of the Avalanche infrastructure allows it to reach very high TPS with low transaction fees. 

• Platform Chain (P-Chain)​ - secures the proper function of Avalance via staking and delegation.

Staking on Avalance happens on nodes located on the P-chain. Nodes must have an “operation time” ranging from 2-52 weeks. Throughout the node’s “lifetime,” the staked AVAX cannot be withdrawn under any circumstance. Once the node reaches the end of its “life,” it will return the staked amounts plus staking rewards to the operator and delegators and shut down. 

Delegators need to choose a node to delegate to and set the desired staking period (the maximum delegation time equals the selected node’s remaining “lifetime”). 

We first researched technical documents regarding the mechanics of staking AVAX, becoming a validator/delegator, and other relevant topics. Then, we set off to find impact staking pools on Avalanche by looking at various resources, including Defi llama, Avascan, VScout, and Staking Rewards (links can be found at the end of the article)). We also looked at Reddit and asked figures in the Avalanche community. However, we were unable to find a single green staking node. 

There are currently ~1,200 active validators on Avalanche - out of which the title of ~1,050 validators is just their node’s ID, many of which don’t have a website or are not identifiable. This made it difficult to find relevant nodes to asses. As such, we sampled some of the nodes that go by their node’s ID in an attempt to find additional information beyond performance metrics.

This effort didn’t bear fruit and led us to make the following assumption: if a node doesn’t differentiate itself by, at least, having a readable name, it is likely the node doesn’t have other, more complex, differentiating attributes - such as being mission-driven and donating rewards to charities.

We were then left with ~150 validators that have a human-legible name. We filtered the results by relevant keywords, such as “Eco,” “Nature,” “Sustainability,” “NGO,” and other terms that appear on the names of staking pools on other blockchains; this, too, did not bear fruit. 

Finally, we sampled some of these 150 pools randomly and evaluated their websites - however, we did not find any impact / green staking nodes.

Our research leads us to believe that impact staking nodes are currently not phenomena on Avalanche, and if there are such pools, they are few and far between. It is, of course, possible we’ve missed a relevant node as we did not assess every active node on Avalanch. Rather, we made certain assumptions in our methodology and used a combination of sampling and smart filtering to find impact nodes. Nonetheless, even if there are impact staking nodes on Avalanch, it is unlikely that the average delegator will go to the lengths we did to find them.

We think the lack of impact staking pool on Avalanche comes from a combination of design elements, its ecosystem, and its community.

On the technical side, the fact that nodes are constantly changing (aka ‘rotating nodes’) has a big impact on the current situation. For example:

• Rotating nodes add complexity to forming communities - Since there is no option to delegate assets and let them earn interest perpetually (i.e., delegate and forget), node operators must proactively recruit, maintain, and instruct delegators to redelegate their assets to a new node, once the old one finishes its life cycle.

  • Furthermore, since the delegation and the rewards are only accessible when the node shutdown - there aren’t many relevant developments a node operator can engage his community with while delegators sit and wait for the node to run its course and return the rewards

• A smooth transition requires high capital - To facilitate the smoothest transition between the end of a node (e.g., Node A) to the beginning of the next one (e.g., Node B), the operator should have node B running before node A’s end-of-life. Running two nodes simultaneously currently requires 4,000 AVAX (2,000 AVAX per node) - a high bar for the average crypto user.

We were not able to find validator selection tools and websites that showcased information beyond financial-oriented metrics. This makes it extremely hard for mission-driven staking communities to flourish on Avalanche.

• An impact pool is, by design, centered around a mission. The pool aims to gather delegators with similar passions and interests to support the pool’s cause. If a pool has no means to publicize and market its unique mission, it will have a hard time “recruiting” mission-driven delegators that will support the pool. Similarly, if a delegator prefers to delegate her assets to a mission-driven pool but she cannot find one, she probably will delegate to a standard pool, which is typically optimized for financial profits.

Comparing nodes that are constantly changing is hard - to do so, a node-comparison tool must compare the most common denominator among nodes - which is financial profits and performance data (e.g., rewards, uptime, etc.) Therefore, even if one had a mission-driven node, the current resources won’t be able to showcase it easily, and the differentiation would be “lost.”

Based on Twitter, Reddit, and other online activity, it seems that, at the moment, there isn’t an active and lively sustainability-oriented community on Avalanch. The lack of community appetite means there is little incentive for the creation of tools and mechanisms to promote impact staking.

• One aspect that we believe hinders the creation of a sustainability-oriented staking community is the delegation lockup period. Delegates cannot move their assets around if they find a more preferable validator to delegate to until their previous delegation frees up.

Avalanche is a well-known blockchain that enables fast transactions with low fees. However, its staking-mechanism design, existing ecosystem tools, and lack of community appetite render impact-staking nonexistent on the blockchain. 

We believe the future of blockchain is multi-chain, each optimized for specific solutions and target audiences. As such, it is OK that impact staking is not a thing on Avalanche - mission-driven delegators can simply choose a different blockchain. Nonetheless, as both blockchain and sustainability gain greater mainstream adoption, Avalanche might wish to avoid alienating itself from potential users due to its weak connection to sustainability.

• This is especially true for a blockchain that self-proclaims to be green and sustainable. Avalanche started in an era where Proof of Work blockchains (Bitcoin and (pre-merge) Ethereum) ruled the space. This allowed Avalanche to categorize itself as being green merely by being a PoS blockchain. The landscape today is quite different, and practically every new L1 is using more energy-efficient consensus mechanisms. As such, claiming to be green simply by being a non-PoW blockchain carries a much smaller impact today than it did in the past. We strongly believe that to be considered a green blockchain today requires more than having above-average energy efficiency.

Nonetheless, Avalanche has the potential to facilitate impact staking on its blockchain. General outlines for such implementation might look like this:

• Per mission nodes - A validator will set up a node around a certain mission. This will allow delegators to know ahead of time where the rewards will go and when they will be distributed (e.g., a node donating proceeds to WWF or a tree planting NGO).

• Nodes will run for shorter amounts of time - forming communities is a key aspect of sustainability and engaging a community is highly important for its vitality. Due to the delegation lockup design on avalanche, if nodes will run for shorter amounts of time (perhaps one quarter rather than a year), the operator and community can form a frequent discussion around the node’s donations and which organizations should be donated to next.

• New validator selection tools - Avalanche must have simple and easily accessible tools that allow impact nodes to market themselves and their activities - and simultaneously allow delegators to easily find the right impact node for their taste and preferences.

• New financing tools - setting up multiple nodes requires capital, and the easier it will be for upcoming validators to secure the initial investment for setting up a node - the more nodes we will see come online. Blockchain and smart contracts are ideal for setting up new ways to loan, crowdfund and source capital to facilitate this process.

As with many things in blockchain and web3, we ought to look to where we want to be and work our way backward to today rather than see the current state as the full potential of a given solution - and with the speed in which things change in this space, nothing is to say that Avalanche cannot be a top-tier sustainability blockchain in the not too distant future.

Works Cited

Allen, Andrew, and step guide. “Introduction to Avalanche Subnets.” Coinbase, 30 June 2022, https://www.coinbase.com/cloud/discover/dev-foundations/intro-to-avalanche-subnets. Accessed 9 November 2022.

“Avalanche's Website.” Avalanche: Blazingly Fast, Low Cost, & Eco-Friendly | dApp Platform, https://www.avax.network/. Accessed 9 November 2022.

Genç, Ekin. “What Is Avalanche? A Look at the Popular 'Ethereum-Killer' Blockchain.” CoinDesk, 23 March 2022, https://www.coindesk.com/learn/what-is-avalanche-a-look-at-the-popular-ethereum-killer-blockchain/. Accessed 9 November 2022.

“Subnets Overview.” Avalanche Docs, https://docs.avax.network/subnets. Accessed 9 November 2022.

Additional Websites used

https://defillama.com/; https://avascan.info/; https://vscout.io/; www.stakingrewards.com;