What is Avalanche (AVAX)?
Avalanche (AVAX) is the native cryptocurrency for the Avalanche ecosystem. It serves as the utility token that has a number of uses on the platform, including transactions, staking, network security, and governance. Avalanche is known for its unique triple-blockchain structure that supports decentralization, scalability, and network security.
The Avalanche crypto platform was designed to offer smart contracts as scalable blockchain solutions. Users are able to deploy projects, build their own blockchains, and manage their assets. Avalanche-based projects include DeFi and GameFi applications. According to Avalanche, the platform can handle up to 4,500 transactions per second.
Who Developed Avalanche?
Emin Gün Sirer is the founder and CEO of Avalanche. He’s an academic and a computer scientist who has worked with computer networks, P2P systems, and blockchain security. Sirer has conducted research on potential Bitcoin attacks and developed security solutions.
Avalanche was developed to counter some of the key issues that many large-scale blockchains face, namely, decentralization, scalability, and security. It’s focused on competing against Ethereum in particular by presenting smart contract technology that is scalable, faster, and can handle a higher transaction load.
The platform officially launched in September 2020. At the time, the Avalanche price was around $4 and remained relatively stable until early 2021. Around this time, it started experiencing more market volatility, with frequent fluctuations. By the end of its first year in the market, Avalanche had reached the $50 threshold.
Throughout the years, Avalanche has followed the overall crypto trends with regard to market fluctuations. In November 2021, around the time when Bitcoin (BTC) nearly reached $70,000, the AVAX price broke the $100 barrier and peaked at $146.22.
What Are the Main Features of Avalanche?
The maximum supply of Avalanche is hard-capped at ​​720 million. It’s a deflationary token, designed to have an increased scarcity over time. This means that the Avalanche price will go up as more tokens are burned and the available supply decreases. 70% of all tokens are allocated to the network participants.
Avalanche offers a range of smart contract-based blockchain solutions. The platform claims to offer a higher transaction rate and better scalability than Ethereum without compromising network security. Avalanche is also more resource-efficient as it uses the Proof-of-Stake (PoS) consensus mechanism.
The efficiency of Avalanche is achieved via its innovative structure that combines three interoperable blockchains – X-Chain, C-Chain, and P-Chain. Each chain focuses on different aspects of the blockchain, such as transactions, smart contract operability, and network security, to decentralize the processes and maintain network scalability.
Similar to Ethereum, Avalanche has an Avalanche Virtual Machine. It’s used to develop decentralized applications (dApps) that use the platform’s smart contracts. Avalanche nodes can support the Ethereum Virtual Machine (EVM), as well as duplicate the cryptography constructs that the EVM uses.
- X-Chain – also known as the Exchange chain. It’s used to create new Avalanche-based tokens that can be exchanged for a specified AVAX price. Similar to Ethereum ERC token standards, Avalanche tokens can be both fungible and non-fungible (NFTs);
- C-Chain – also known as the Contract chain. It’s responsible for hosting Avalanche’s smart contracts. The Avalanche Virtual Machine also runs on the C-Chain, enabling the functionality of AVAX-based dApps;
- P-Chain – also known as the Platform chain. It’s used for blockchain validation and security. The P-Chain manages sets of validators known as subnets. Each subnet can work on validating multiple blockchains. However, no blockchain can have more than one subnet to validate it.
The Avalanche coin is used to cover transaction fees for the X-Chain services. The AVAX price for the fees depends on the scale of the project and the specific services required. Unlike other networks that use a portion of the fees as incentive payment, on AVAX, the fees are burned to increase the currency’s scarcity.
Based on the platform’s governance model, the users have a say in how fast new coins are minted. They can vote using their AVAX tokens. The governance system also allows users to submit their own proposals for protocol changes and conduct transparent voting.
Avalanche uses the Proof-of-Stake (PoS) consensus algorithm for the main blockchain as well as the X Chain. Network validators must stake a minimum of 2000 AVAX to begin their contributions to the network and earn rewards. They also work together as subnets to validate separate chains that run on Avalanche.
Staking rewards are determined by the governance structure. The compensations that stakers receive are based on how long they’ve been contributing to the network. Therefore, the longer a validator contributes to the network, the higher the Avalanche price value from the rewards is.
The staking rewards system has been designed to reduce variance and ensure that the rewards are not disproportionate between stakeholders that contribute larger or smaller amounts. This discourages the formation of staking pools and increases network decentralization.
Two of the interoperable chains, Contract and Platform, used a separate consensus mechanism known as the Snowman. It’s unique to the Avalanche ecosystem. Snowman is used to establish a linear timeline that makes the smart contracts run seamlessly.
