Avalanche (AVAX)
7 minutes
Advanced
Bitcoin was the original blockchain that inspired the design of all future networks, including Ethereum. However, the introduction of NFT and decentralized finance (DeFi) played an important role in changing the crypto-space.
Avalanche's creators, Ava Labs, believe they have invented the world's fastest blockchain platform for smart contracts. Moreover, Avalanche is working at the scale of the Internet for the future, in which cryptography is the global underlying technology with three different blockchains under a shell. In early 2021, about 100 million people are reported to be using cryptocurrencies. Similarly, the market value of DeFi applications exceeded $100 billion.
Avalanche is a blockchain platform with smart contracts capabilities that Ava Labs launched in 2020.
Avalanche aims to provide a scalable blockchain solution that supports decentralization and security, with a focus on low cost, high transaction speed and sustainability.
Avalanche has quickly gained popularity in the cryptocurrency world: Avalanche TVL is currently valued at $8.41 billion and growing in Avalanche decentralized applications (DApps). A native AVAX token and multiple consensus methods power Avalanche. Users can set up an infinite number of customizable and compatible blockchains with Avalanche.
Conceptualizing
Avalanche's smart contract structure supports decentralized applications (Dapps) and independent blockchains. Here are a few characteristics that set Avalanche apart:
- Rate of coin development
The maximum number of AVAX tokens is set at 720 million; however, AVAX cryptocurrency users can control the speed of new coin creation. By voting on the amount of AVAX offered as a reward for adding a new block to the Avalanche network, AVAX holders can influence the rate at which new currencies are generated. - Transaction fees
Transaction processing fees depend on the type of transaction and the level of network congestion Avalanche experiences. To keep AVAX getting smaller over time, all fees are burned off - removed from circulation. Avalanche transaction fees are determined by a vote of Avalanche users. Consequently, AVAX rates are subject to change. - Mutual approval mechanism
Before transactions in the Avalanche blockchain can be considered completed, they must be validated using a unique procedure that requires a large number of small, random groups of network users to validate. - Participation Rewards
A network member's ability to earn AVAX rewards for processing AVAX transactions can be enhanced by high uptime and fast response times.The Proof-Of-Stake (PoS - literally: Proof of Share) mechanism drives Avalanche as a whole. In exchange for the privilege of validating AVAX transactions, holders must stack their AVAX tokens. Validators for new Avalanche blocks will be chosen among AVAX holders who have the largest share and actively participate as validators. You must also be an AVAX token holder to vote for Avalanche management proposals.
How does Avalanche work?
The main innovation of Avalanche is that it consists of three blockchains rather than a traditional one. The rationale behind this architectural decision is brilliant: Instead of one chain managing everything, each blockchain focuses on a specific purpose within the Avalanche ecosystem.
By distributing jobs across many chains, the Avalanche platform can realize the golden trinity of blockchain's qualities - decentralization, security, and scalability.
Exchange Chain (X-Chain)
The exchange chain (X-Chain) is a blockchain that allows the creation and sale of Avalanche assets. AVAX, Avalanche's own token, is now the most popular cryptocurrency on the network, although JOE and PNG, the tokens of the decentralized exchange, are not far behind.Transaction fees in the X-Chain are paid in AVAX. This is similar to how Ethereum gas charges are calculated and paid in ETH. Even with JOE tokens, the commission is always calculated in AVAX.
Chain of Contracts (C-Chain)
A key feature of Avalanche is smart contracts. Developers can use this feature to create decentralized applications on Avalanche, taking advantage of the platform's security and scalability. C-Chain is an Ethereum Virtual Machine (EVM)-compatible smart contracts platform for the Avalanche platform. Since Avalanche is compatible with EVMs, anyone can use it to deploy Ethereum smart contracts. So what's so special about it?
Existing Ethereum programs, such as the DeFi giant Aave, can quickly release a version of their Avalanche product.When creating Ethereum smart contracts on top of Avalanche, developers can use the same tools that Ethereum developers previously used to access the latter's features.
Platform Chain (P-Chain)
In Avalanche, these blockchains are called subnets, and the P-Chain acts as the default subnet for everyone. The P-Chain tracks validators to manage the landscape of Avalanche's subnets. However, subnets are also responsible for validating P-Chain.
Avalanche Subnet
To be precise, Avalanche's scaling depends on subnets. A subnet acts as a default platform blockchain clone (for Avalanche, it is the core network) and functions similarly to Ethereum 2.0 sharding.
Users can create subnets on demand and as needed, which is a big plus. In practice, a subnet can create another subnet to meet network traffic needs and free up transactions as soon as its scaling limits are reached for a moment.
Although subnets are allowed to set their own rules for their blockchain operations, it is still critical that each subnet check both its own blockchain and that of the primary network.
Each subnet must be a member of the main network to verify the main network, which is granted to those who spend 2,000 AVAX tokens or more.
Avalanche Advantages
Avalanche's key advantages are mainly due to its development characteristics. Avalanche developers have found a way to overcome the usual blockchain problems by exploiting the unique structure of the network.
Compatibility
Few blockchains allow cross-platform trading of different types of cryptocurrencies and data. Avalanche allows individual blockchains to transfer data and essentially "interact" with each other, facilitating interaction.
Scalability
Bitcoin (BTC) mining requires a lot of energy and processing power. Ethereum has a transaction rate of 15 transactions per second. Because of these limitations, these blockchains are difficult to develop, despite their power and value. Avalanche, on the other hand, has been designed from the beginning to provide scalability, transaction speeds of less than a second, and enormous processing power.
Ease of use
Usability, or how easily a program or technology can be used and applied to different applications and use cases, is one of the main issues when implementing any technology. Avalanche has proven its effectiveness in various situations and is gaining momentum in the crypto-world at a rate that rivals Ethereum.
AVAX token
The Avalanche token, often known as AVAX, is a service token that serves as the primary medium of exchange in the ecosystem. In addition to being currency in the Avalanche universe, the AVAX token protects the network and compensates steakers for additional AVAX.The AVAX deflationary token scheme increases the value of stealing. This is because the number of AVAX tokens used to pay transaction fees is burned out of supply, permanently limiting the number of AVAX tokens in circulation.
Conclusion
AVAX is a cryptocurrency that is considered a high-risk investment. If you decide to invest in AVAX, make sure you are aware of the dangers and limitations. It is a good idea not to invest more money than you can afford to lose.
It is advisable to get advice from a cryptocurrency expert before investing. Avalanche's consensus approach can be considered safe because of its randomized nature. In addition, Avalanche makes sure that its platform has additional cryptocurrency security measures that make it less vulnerable to attack than other blockchains.
