AVAX is the native token of Avalanche, and as of July 2024, it ranks 12th globally by market capitalization, with a total market value exceeding $10.6 billion. Let’s explore what this ecosystem offers and what sets Avalanche and its token AVAX apart from numerous other crypto projects.
Introduction to Avalanche
Launched in 2020, Avalanche was developed by Ava Labs, a team of experts in computer science, finance, and law with experience in major institutions such as Google, Microsoft, Morgan Stanley, and NASA. Ava Labs was founded in 2018 by Emin Gün Sirer, a Cornell University professor and scientist, who is also the visionary behind the Avalanche network. Sirer is known for creating the virtual currency Karma, which predates Bitcoin by several years.
The project’s original idea was presented in a paper written by an anonymous group known as “Team Rocket.” Sirer was impressed by their concept, refined it, and developed the Avalanche network as we know it today. Alongside Sirer, Maofan “Ted” Yin and Kevin Sekniqi are co-founders of Ava Labs. More information about the current leadership team can be found on the Ava Labs website.
What is Avalanche?
Avalanche is a fast and scalable smart contract platform that can be customized and adapted for various needs and use cases. As of 2024, the blockchain can handle over 4,500 transactions per second.
Avalanche is a decentralized network that allows developers to create their own blockchains. It can also be used for NFTs and DeFi. The ecosystem consists of three different blockchains, which serve different purposes within the network:
Avalanche has built-in protection: 60-80% of the network’s nodes would need to be compromised for its security to be considered breached.
Unlike other blockchains such as Bitcoin, which require a lot of energy and specialized mining equipment, the AVAX token is considered eco-friendly, and thanks to its unique consensus algorithm, it operates entirely on a processor.
How the Avalanche Network Works
The Avalanche network is based on a Proof-of-Stake (PoS) consensus algorithm. Multiple blockchains, called subnets, form the Avalanche ecosystem, where transactions are “exchanged” between different nodes until all of them receive the necessary information. This exchange function is the secret behind the network’s impressive transaction speed. The infrastructure also allows the launch of PoW and PoS subnets without compromising the network’s speed and security.
Avalanche subnets consist of validators who collaborate to reach consensus on the state of the managed blockchain. Each subnet can create its own incentives and reward structure for validators. As a result, validators decide which subnets they want to participate in and which to avoid.
Avalanche’s Primary Network consists of three distinct blockchains.
Exchange Chain (X-Chain)
This blockchain handles all transactions involving AVAX tokens and the issuance of new coins. The network allows developers to create new digital assets and exchange them between subnets. AVAX is used to pay transaction fees, similar to how ETH is required for transferring ERC-20 tokens on the Ethereum blockchain. To combat inflation, all transaction fees are burned.
Platform Chain (P-Chain)
The P-Chain manages network validation, staking, and delegation. To become a validator, one must stake a minimum of 2,000 AVAX. To participate in token delegation, a minimum of 25 AVAX is required. Unlike some other blockchains, validators on Avalanche are not penalized by having their stake reduced for violating consensus rules.
Contract Chain (C-Chain)
As the name suggests, this blockchain is responsible for smart contract operations. Developers use it to write new applications compatible with the Ethereum Virtual Machine (EVM). Decentralized applications created on Ethereum can be imported through the C-Chain to utilize Avalanche’s more robust network infrastructure. The transaction speed for smart contracts on this chain is around 1,500 transactions per second.
Advantages of Avalanche
First and foremost, Avalanche boasts a high transaction speed. The Avalanche network can process over 4,500 transactions per second (TPS), significantly surpassing other blockchains like Bitcoin (7 TPS) and Ethereum (30 TPS). With such a high throughput, transactions are nearly instantaneous, which is particularly important for decentralized applications and financial platforms.
Another key advantage of Avalanche is its low transaction fees. On average, the fee is about $0.08, which is significantly lower than the $3.54 average fee on Ethereum. This makes it attractive to developers and users looking to minimize costs when interacting with the blockchain.
Avalanche’s modular structure supports high scalability, easily increasing throughput as the number of users and applications grows. Each of the three chains (X-Chain, C-Chain, and P-Chain) performs its own function, allowing the system to distribute the load and improve overall performance.
Finally, Avalanche consumes significantly less energy to confirm transactions. Its consensus algorithm, based on a combination of PoS and Directed Acyclic Graph (DAG) technologies, makes it more energy-efficient, environmentally sustainable, and economical — an important consideration given modern environmental standards.
Investing in AVAX
The Avalanche project draws investors’ attention with its innovative technology and growth potential.
You can buy AVAX on Bitbanker. In the “Buy and Sell” section, the coin is available in pairs with USDT or RUB.
Before investing in AVAX, it’s crucial to consider the risks associated with price volatility and competition from other projects.
Where and How Avalanche Is Used
Avalanche is actively utilized in the DeFi sector thanks to its high transaction speed and low fees. Popular examples of DeFi projects on the platform include decentralized exchanges like Pangolin and Trader Joe, as well as the lending and borrowing platform Benqi.
In addition, Avalanche supports token creation and management through smart contracts on the C-Chain. A notable example of this functionality is Avalaunch, a platform for conducting Initial DEX Offerings (IDO) on Avalanche. Here, startups launch their tokens and attract funding, while the platform ensures fair token distribution and provides a user-friendly interface for participating in IDOs, enabling new projects to quickly and easily enter the market.
Another mention-worthy project is Penguin Finance — a DeFi platform on Avalanche that offers farming, staking, and token management alongside play-to-earn games.
Games and NFTs also play a significant role in the Avalanche ecosystem. For example, Kalao is a platform for creating, managing, and trading NFTs, and DeFi Kingdoms is a gaming platform that combines DeFi and NFTs, allowing participants to engage in a game economy and trade in-game assets.
The Avalanche Ecosystem
Avalanche is continuously evolving, attracting new projects, users, and developers. Below are some key projects and partnerships that make the Avalanche ecosystem a powerful and multifunctional platform for dApps and financial solutions.
Aave
In addition to Pangolin and Benqi, Aave is a significant component of the Avalanche ecosystem. This lending and borrowing platform integrates with Avalanche to improve scalability, speed, and lower transaction costs. Aave allows users to earn interest on deposits and take out loans backed by their assets.
Curve Finance
This decentralized exchange offers low-fee and highly liquid coin swaps. Avalanche helps Curve Finance process transactions faster and with lower costs. In addition to exchange services, Curve also offers integration and lending options.
Sushi
One of the most well-known decentralized exchanges, Sushi continually implements new features and improvements. Avalanche integration ensures lower fees and faster transactions on the platform.
Avalanche also actively collaborates with Chainlink, Circle, and Amazon Web Services through various partnerships. Additionally, the ecosystem supports an active community of developers and users. Programs such as Avalanche-X and Avalanche Hub provide grants, education, and support for project development and innovation within the ecosystem.
The Future of AVAX
Avalanche has ambitious plans for the future. One of its key goals is to enhance the consensus algorithm to reduce transaction confirmation time to under 250 milliseconds. Another planned development is the implementation of “optimistic fast confirmations,” which would finalize transactions within one or two rounds of voting.
Additionally, expanding subnets and improving their capabilities is a major focus, enabling users to launch their own blockchains with unique rules and parameters. This gives developers more flexibility and opportunities to create specialized applications.
One of the main risks for Avalanche lies in regulatory changes, which could potentially impact the entire crypto industry. Another challenge is ensuring security and protection against attacks. Although Avalanche employs advanced consensus methods and encryption, there is always a risk of hacking and cyberattacks.
Despite these potential risks, the network continues to attract new users and developers. By 2024, the goal is to increase the network’s throughput to 100,000 TPS, which would make it one of the fastest in the world.
Moreover, Avalanche is expanding its ecosystem rapidly, attracting new projects and partnerships. By 2023, the number of projects in the Avalanche ecosystem surpassed 500, and this figure continues to grow.