Simply Explained: Avalanche (AVAX)

Avalanche (token AVAX) is a Proof-of-Stake Layer-1 blockchain. Its two main use cases are:

1. The creation of decentralised applications.
2. The creation of Subnets.

In their own words, Avalanche is: “Blazingly fast, Low cost, and Eco-friendly.” What evidence is there to support this?

Blazingly fast: Not only does Avalanche have an impressive TPS of 4,500. But it also has the fastest transaction finality, at 2 seconds. Compare this to Bitcoin‘s 1 hour, and Ethereum‘s 6 minutes!

Low cost: Average fees of anywhere between $0.05 – $10 depending on the transaction. Compare this to Ethereum’s average fees of $20 for simple transfers, up to hundreds of $ for a smart contract interaction.

Eco-friendly: At the COP26 Conference in Glasgow 2021, Avalanche announced that they had become a net-zero carbon output blockchain.

AVAX

The token AVAX is the currency used on the Avalanche platform. There are 720 million AVAX tokens in total. 360 million were issued at its launch. The next 360 million scheduled to be rewarded to stakers. AVAX is deflationary, meaning the supply is set to go down over time. This is because transaction fees are burned instead of being redistributed to validators.

How does it work?

Avalanche utilises three separate blockchains in addition to the primary network. The primary network validates all transactions on the sub-chains. Here is a breakdown of each chain:

• X Chain – the Exchange Chain API is used for setting the conditions and rules for the creation and trading of digital assets on the Avalanche ecosystem. Parameters such as time or location restrictions on an asset are set from this chain. The X Chain runs as an instance of the Avalanche Virtual Machine (AVM).
• P Chain – the Platform Chain API is used for setting the conditions and parameters for the creation of new blockchains/protocols to be built on Avalanche. Clients can select various options for their protocol and blockchains.
• C Chain – the Contract Chain runs as an instance of the Ethereum Virtual Machine (EVM). To find out more about the EVM, click here. The C Chain handles smart contract executions. It is compatible with both native Avalanche and ERC-20 contracts.

The P and C chains both utilise the Snowman Consensus Protocol. Snowman is basically a more efficient, linear version of the Avalanche consensus. It’s optimised for smart contract functionality as well as speed and security and cross-compatibility with Ethereum.

Solutions

Avalanche solves many of the problems we have with existing blockchains.

1. It was designed with scaling in mind. We see the problems blockchains like Bitcoin and Ethereum are now facing as more and more users regularly interact with crypto. This means adding more traffic to already congested networks. Avalanche tackles the scalability problems through innovations such as the Snowman Consensus Protocol, increasing transaction capacity.
2. The affordable fees discussed above have also attracted users. We all know how daunting it can be to pay extortionate Ethereum gas fees.
3. The environmental implications often called out by crypto sceptics don’t apply to Avalanche due to their carbon neutral status.

Subnets

Avalanche allows developers to build other networks called subnets. In short, these subnets are designed by anyone who wishes to create a blockchain with different characteristics to that of the Avalanche Primary Network. This is done by changing the properties of validators to be specific to that Subnet. In addition to their own validators, each Subnet is also validated by the Primary Network. To create a Subnet, AVAX must be staked by the creator.

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Disclaimer: THIS IS NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.