Don't look now, but Avalanche (AVAX 0.17%) -- a once high-flying crypto that collapsed by more than 90% in 2022 -- is making a comeback this year. In mid-January, Avalanche announced a major partnership with Amazon (AMZN -1.65%) that will essentially make it the default blockchain of choice for any client of Amazon Web Services (AWS). Avalanche is now the first blockchain to partner with Amazon's cloud computing platform.
To say that this is a big deal is an understatement. In the first 24-hour period after the deal was announced, the price of Avalanche jumped by more than 13%. More gains could be on the way over the long term if Avalanche fully realizes the plan to help bring blockchain solutions to businesses and governments around the world.
Why Avalanche?
One of the most interesting aspects of the partnership is that Amazon chose to partner with Avalanche and not Ethereum, which would have been the obvious choice. When it launched back in September 2020, Avalanche was billed as an "Ethereum killer," due to its superior speed and scalability. But last year was not kind to this upstart blockchain, so this announcement from Amazon was definitely surprising.
While the best-in-class speed of the Avalanche blockchain no doubt played a role in Amazon's decision, one key factor surely has to do with the underlying structure of the Avalanche network, which actually includes three different blockchains: the exchange chain, the platform chain, and the contract chain. The platform chain ("P-Chain") allows developers to create their own customizable blockchain networks, known as subnets.
Avalanche describes these subnets as "sovereign networks" with their own rules and their own tokenomics. As a result, each subnet on Avalanche is scalable and customizable to the needs of the client. Until now, subnets were primarily used by blockchain games, but now it looks like major enterprises and government entities will use them as well.
Image source: Getty Images.
So just imagine thousands of businesses running thousands of customizable subnets, all on the Avalanche network. This vision of the future seems like a great way to attract new business clients for Amazon that are looking for customized blockchain solutions. And, indeed, as part of the deal, it looks like Avalanche will become part of the AWS Partner Network and also get prominent placement within the AWS Marketplace. This makes Avalanche the natural partner of choice for anyone wanting to work with Amazon on blockchain projects.
A win-win?
The deal appears to be a win-win for both Amazon and Avalanche. On Twitter, Emin Gün Sirer, one of the co-founders of Avalanche, put it succinctly: "This is a big deal. It's not your grandfather's AWS partnership announcement." Avalanche will gain access to AWS assets and features, while Amazon will get the opportunity to offer "blockchain-as-a-service" to all of its partners around the globe. If you thought Amazon was dominant when it came to the cloud, just wait until it gets involved with blockchain.
That being said, there are certainly critics of the partnership. Judging from remarks and comments across social media, some blockchain developers are justly concerned that a decentralized blockchain is suddenly partnering with a centralized tech company such as Amazon. The fear is that Amazon might one day be able to exercise too much power and control over Avalanche. It's a story we've seen over and over again in the tech sector: A really hot tech start-up promising to change the world gets assimilated by a big, entrenched tech company focused on profitability, and things change.
An avalanche of future growth
The new partnership is designed to get more businesses, governments, and enterprises using blockchain and the cloud. If Avalanche becomes the go-to blockchain for businesses and governments, that would be huge for the future growth prospects of Avalanche. One caveat, though, is that it's not clear whether there is any exclusivity to the partnership. If there is not, it might be possible for other blockchains to partner with Amazon as well. Avalanche would still have the first-mover advantage, but it would make things a lot more competitive.
That being said, I'm bullish on Avalanche for the long run. After being battered by more than 90% in 2022, Avalanche could be headed for a huge landslide recovery in 2023.
