Avalanche (AVAX) is a blockchain network that aims to provide users and developers with a faster and cheaper blockchain network.
Avalanche introduced the Snow protocols as its consensus mechanism which are highly scalable and unlike the Proof of Work (PoW) mechanism, don’t have a very high energy consumption.
AVAX is the native token of Avalanche. AVAX is used for paying fees and acts as a unit of count for blockchain networks developed on Avalanche.
In this article, we will explain the Avalanche blockchain, its features, and the AVAX token.
Avalanche (AVAX) is a blockchain network that was introduced as a faster and cheaper alternative to existing blockchains like Ethereum.
Avalanche tries to address three main aspects of blockchain systems: speed, scalability, and security.
It claims to be the fastest blockchain in terms of Transactional Finality time. Simply put, it finalizes a transaction on the blockchain ledger in less than 2 seconds, which is faster than any other blockchain system.
Just like Ethereum, applications on Avalanche are developed in the Solidity programming language.
This helps with the interoperability of the blockchain ecosystem and makes the platform suitable for all decentralized applications (Dapps) that were built on the Ethereum blockchain.
Assets on both blockchains can be transferred using the Avalanche Bridge.
Here are the key capabilities of the Avalanche blockchain:
Avalanche supports the development of Decentralized Finance (DeFi) applications such as Peer-to-Peer (P2P) payment solutions, stablecoins, decentralized exchanges (DEX) and automated market makers (AMM), and borrowing and lending platforms.
Avalanche provides services to institutional customers to build their own assets and applications with full control over them.
Companies can use Avalanche for use cases such as supply chain, document tracking, intellectual property rights, and digital identity management.
Avalanche also supports the issuance of Non-Fungible Tokens or NFTs, charging a small fee compared to its competitors.
In 2018, Emin Gün Sirer, a prominent computer scientist and former professor at Cornell University, founded Ava Labs, a software development company that is responsible for developing Avalanche.
Back in 2003, Sirer developed Karma, an economic peer-to-peer (P2P) file-sharing system that would incentivize users to contribute their resources to a pool.
Karma was the first cryptocurrency that worked on a PoW system and was proposed 6 years before Bitcoin.
Sirer was also a former IC3 Co-Director. Based at the Jacobs Technion-Cornell Institute at Cornell Tech in NYC, the Initiative for Cryptocurrencies and Contracts (IC3) works with professionals in banking and finance, open-source communities, and regulators to improve blockchain adoption in financial systems.
In July 2020, Avalanche held its first public token sale and managed to raise $42 Million in only 4 hours. This was just one month after raising $12 Million in a private sale.
According to its whitepaper, Avalanche has three main differentiators: the Snow Protocol, the Subnetworks, and the Governance Model.
Avalanche introduced its novel consensus mechanism: the Snow family of protocols.
Built on the basics of the Proof of Stake (PoS) mechanism, Snow is quite scalable and can have millions of members participate directly in the consensus process without diminishing security.
Inspired by the Gossip algorithms, the Snow family tries to scale the classic PoS mechanism. The Snow protocol operates quite simply:
A user publishes its transaction to the network.
A validator receives that transaction and needs to verify its authenticity with other members of the network.
The validator randomly chooses a small set of other validators, sends them the transaction, and awaits their approval.
Validators keep “gossiping” about the validity of the transaction with their neighbors until they all agree on the state of the transaction.
The Snow protocol is believed to be more scalable and decentralized than the delegated proof of stake.
In the delegated proof of stake, validators delegate their voting power to a validator and allow the designated validator to take decisions on their behalf.
This solution makes the network more centralized, increasing the chance of corruption within the system.
A Subnetwork or subnet is a group of validators that work together to reach consensus on a blockchain system.
A validator can join various subnets while each blockchain is managed by one subnet. A single subnet can also be responsible for validating multiple blockchains.
In 2022, the Avalanche Foundation launched Multiverse, a $290 Million incentive program to boost the adoption of its subnets for web 3.0 app development.
Virtual Machines (VMs), on the other hand, are the foundation of a blockchain system.
The VM defines the rules and state of a blockchain. Different blockchain networks can be built using one VM while logically staying independent of one another and keeping their own state.
This feature allows users to build their own public or private blockchain on Avalanche.
Developers can build standard smart contracts on Avalanche through the Ethereum Virtual Machine (EVM).
This feature allows developers to launch Ethereum Dapps with instant and cheap transactions.
The function is quite simple, however, the team plans to extend its functionality in the future.
Avalanche deploys a Decentralized Autonomous Organization (DAO) model where token holders can vote on network decisions such as updates and the network’s economic factors including the minimum staking amount and the minting rate.
AVAX is the native token of the Avalanche blockchain. It has a capped supply of 720 million tokens and is designed in a way to respond to varying economic conditions.
In other words, AVAX holders can decide “whether AVAX is eventually capped, uncapped, or even deflationary.”
The platform’s Monetary Policy tries to keep a balance between users’ interaction with the network and their appetite for staking by tweaking the staking rewards and fees.
Lower staking rewards and fees will incentivize users to interact more with the platform and use its services while an increase in these metrics can promote the staking of AVAX.
AVAX is generally used for:
In addition to offering Avalanche (AVAX) for trading on various cryptocurrency exchanges, including DIFX, they also provide a comprehensive guide on how to buy AVAX for interested users. On DIFX, AVAX is available as an AVAX/USDT pair, enabling users to conveniently trade the cryptocurrency.
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