What is Avalanche Network and How Does AVAX Blockchain Work?

What is Avalanche Network (AVAX)?

Avalanche was launched in 2020 by Ava Labs as a blockchain-based smart contract platform. In addition to scalability, Avalanche focuses on lower costs, fast transaction times, and eco-friendliness.

The Avalanche decentralized applications (DApps), valued at $8.41 billion, became popular in the cryptocurrency space quickly. In Avalanche, the native token is Avalanche (AVAX) and there are multiple consensus mechanisms.

Using Avalanche, you can customize and interoperate an unlimited number of blockchains. One must pay a subscription fee to use the Avalanche coin, AVAX.

What is Avalanche crypto used for?

AVAX’s native token is a utility token. Avax is the currency of the Avalanche ecosystem. As a result, it’s used as currency in the network, for fees in transactions, incentives, etc.

Staking AVAX also secures the network. You get more AVAX when you stake. A lot of users stake to earn passive income on the network.

History of Avalanche

Blockchains like Ethereum were created based on the Bitcoin blockchain, which was launched in 2009. Due to the widespread use of nonfungible tokens (NFTs) and decentralized finance (DeFi), however, the original blockchain design’s limitations became more obvious.

Because of its resource-intensive validation process, Bitcoin‘s proof-of-work consensus, for example, inhibits decentralization to some extent. Plus, transactions are slow. To solve these problems, Ethereum apps use layer-2 scaling solutions. That way, transactions aren’t happening on the main chain. After that, they’re rolled up in neat “bundles,” which are sent back to Ethereum, easing the strain.

Despite being effective, this solution adds extra layers of complexity, making the network more vulnerable to security threats. What’s the best way to keep everything running within a layer-1 protocol that’s both decentralized and scalable but also secure?

Introducing Ava Labs, the makers of Avalanche, who developed a three-blockchain solution that deals with the top blockchain problems. After raising $6 million in funding, Ava Labs US launched the Avalanche blockchain in September 2020. Afterward, they sold 48 million tokens – private and public.

Who is behind Avalanche (AVAX)?

Kevin Sekniqi, Maofan “Ted” Yin and Emin Gün Sirer are behind Avalanche. Team Rocket, a pseudonymous group, first published basic info about the protocol on InterPlanetary File System in May 2018.

Eventually a Cornell University team developed the tech, led by Emin Gün Sirer, professor of computer science and software engineer. Two of his doctoral students helped him: Maofan “Ted” Yin and Kevin Sekniqi.

The Avalanche consensus protocol codebase became open-source in March 2020. Avalanche’s ICO ended in July of 2020, followed by their launch in September of the same year.

What problems does Avalanche (AVAX) solve?

Avalanche is designed to solve a lot of problems most blockchains have. With platforms like Avalanche, you can fight centralization in the crypto space by providing an alternative to networks like Ethereum.

Avalanche tackles two big issues:

Congestion

Scalability is at the core of Avalanche. Avalanche has sub-second transaction times, like PayPal and VISA.

Besides its power and efficiency, Avalanche can handle up to 6,500 transactions per second with sub-second finality. The number of transactions that can be processed per second is vastly improved over Ethereum’s limitations.

Low fees

Many consider Avalanche to be an Ethereum competitor, and it also outperforms Ethereum in terms of gas fees. By a wide margin, fees on Avalanche are lower than those on Ethereum.

The network uses these fees to mint assets, pay transaction fees, create blockchains, create assets, and then burn the fees to permanently reduce the number of AVAX within the platform.

Avalanche shared on Twitter that “$AVAX is a hard-capped, scarce asset that is used to pay fees and secure the network.” Used fees are burned. You can check burnedavax.com for burned AVAX.

How does Avalanche (AVAX) work?

Avalanche’s creators wanted to solve some of the common problems of older blockchains like Bitcoin in an effort to make blockchain technology better. Interoperability, scalability, and usability are a few of them.

Using three different blockchains, Avalanche takes on all the problems mentioned above. According to Avalanche, its smart contracts platform is the fastest in the blockchain space.

Avalanche’s mainnet has three blockchains:

  • X-chain: This blockchain is used to manage assets. It uses Avalanche consensus.
  • C-Chain: This blockchain lets you make smart contracts. The Snowman consensus protocol is used.
  • P-Chain: Used to coordinate validators. Also uses Snowman.

By having all nodes work in parallel, Avalanche checks validators’ confirmations randomly. Random checks make it more likely that a transaction will be true or valid. It’s pretty much the same except it uses blocks in a linear way.

Benefits of Avalanche (AVAX)

Avalanche’s main strength is how it was built. As a result of its unique structure, Avalanche addresses the common problems of blockchains.

Interoperability

There are only a few blockchains that let you trade cryptocurrency and data with other platforms. With Avalanche, different blockchains can share data and “interoperate.”

Scalability

Bitcoin (BTC) mining, for example, requires a lot of power and energy. An Ethereum transaction can only be processed once every 15 seconds. Despite their power and value, these blockchains are difficult to scale due to these limitations. On the other hand, Avalanche is designed to be scalable and has amazing performance and transaction times of less than a second.

Usability

Adoption of any technology is influenced by its usability, or how easily it can be used and implemented in various applications and use cases. Despite its usefulness in a variety of cases, Avalanche is gaining traction in the crypto community at a pace that rivals Ethereum.

Uphold

AVAX is one of the most popular cryptocurrencies on Uphold, one of the top crypto exchanges in the United States. Furthermore, the platform offers easy-to-use features that make it easy to buy AVAX.

Users can customize their trading view to highlight the assets they trade the most with Uphold’s desktop and mobile apps. Uphold’s simple, modern interface makes it easy for new traders to use on desktop and mobile.

Binance

As one of the most trusted cryptocurrency exchanges, Binance makes it easy to buy AVAX. AVAX buyers on Binance can enjoy lower exchange fees, as well as increased liquidity that makes buying and selling easier. AVAX is available in Australia, Canada, the UK, Singapore, and other international locations. U.S. residents can’t buy AVAX on the platform yet.

BitPanda

Europeans know BitPanda as a reputable place to buy and sell bitcoins. In addition to trading cryptocurrencies, the platform lets you buy precious metals and buy cryptocurrencies. BitPanda makes it easy to buy AVAX, although it’s only open to European Union residents.

Gate.io

A reputable trading platform like Gate.io provides an easy-to-use interface that even newbies can use. Advanced charts are also available for more technical traders.

AVAX is one of the altcoins that the platform supports. In particular, Gate.io is known for its anti-market manipulation stance. You can enter, except if you live in New York or Washington state.

Subnets are Key to Scaling Avalanche

Avalanche subnets were briefly mentioned in the P-Chain section above. They deserve more explanation.

Avalanche subnets are similar to sharding. A subnet is simply a clone of the default blockchain that connects to a platform at launch (for Avalanche, this is the Primary Network).

Furthermore, subnets can be created by users on-demand. When a subnet reaches its scaling limits, it can launch another subnet to meet or exceed network traffic demands and free up transactions.

A subnet can create infinitely many subnets (subnets can create subnets at any time). The Avalanche P-Chain has a transaction limit of 4,500 transactions per second, roughly 2x that of Visa. Avalanche does not have a practical TPS limit due to its unlimited capacity for creating subnets.

In comparison to subnet-like networks, how does Avalanche perform? Let’s see.

Subnets can define how their particular blockchains operate, but each subnet must validate its own blockchain and the Primary Network chain.

Those who stake 2,000+ AVAX tokens become Primary Network members in order to validate the Primary Network.

Bringing DeFi to Avalanche Rush Program

With Avalanche, you get high TPS and EVM compatibility. Avalanche’s $2B+ TVL shows the network is gaining a following, even though Ethereum’s still dominating with $158 billion total value locked in.

Avalanche launched Avalanche Rush, an incentive program aimed at drawing liquidity into its network of DeFi apps. With AVAX token incentives, Avalanche Rush rewards liquidity providers with $180 million.

Thus far, Avalanche Rush is doing well since Curve and Aave, TVL’s biggest DeFi protocols, have launched Avalanche markets. Some other DeFi giants that have recently launched on Avalanche include Sushi and Kyber Network.

Avalanche Bridge for ERC-20 Token Swaps

The Avalanche Bridge makes it easy to move your ERC-20 tokens over to Avalanche, which is an Ethereum-compatible blockchain platform. An Avalanche Bridge from a team that knows most tokens are ERC-20 is a smart move.

Users can use Avalanche with their Ethereum tokens, giving Avalanche access to billions of dollars of token liquidity. Like Ethereum, Fantom, and Binance Smart Chain, Avalanche Bridge works with Metamask.

There are a few simple steps and a bit of AVAX to pay transaction fees for using the Avalanche Bridge from Metamask. You can learn all about it in the Avalanche Bridge tutorials.

AVAX Staking Rewards

Validators are required for all subnets, including the Primary Network, to own and stake AVAX tokens. You don’t have to be a validator to stake AVAX. Validators earn a percentage of the stake rewards if you delegate your stake to them.

Currently, 64% of AVAX tokens are staked. Delegators are making 9.53% staking rewards and validaters are earning just short of 11% APY.

Pay Transaction Fees with AVAX

The avalanche is the common unit of account in the ecosystem. Simply put, AVAX is the network’s default currency. AVAX is the common currency between subnets, and it’s used for all transaction fees.

It’s important to use AVAX between subnets because it aids interoperability between subnets that otherwise might use their own cryptocurrencies.

Create Tokens and Subnets Using AVAX

Avalanche creates custom tokens and blockchain networks (called subnetworks). The platform lets developers deploy NFTs, DeFi protocols, and games, among others.

You need AVAX to create custom tokens, launch smart contracts on the C-Chain, or generate subnets. AVAX payments are recurring for subnets.