Avalanche is one of the newest blockchain networks today, mainly known as having sub-second transaction times and low fees. The project was created by Ava Labs led by Cornell researcher Emin Gün Sirer. Avalanche launched its mainnet in September of 2020 after raising $18 million from prominent investment firms such as Andreesen Horowitz and Polychain Capital. Ava Labs raised an additional $42 million in under 4.5 hours with the public launch of its AVAX token.
How does Avalanche work?
Basically, Avalanche aims to solve three issues: high fees, interoperability, and scalability/decentralization. To solve these issues, Avalanche uses a combination of approaches that make it distinguished from other blockchain networks.
First of all, Avalanche is made up of three interoperable blockchains: the X-Chain, C-Chain, and P-Chain. The Exchange Chain (X-Chain) creates and exchanges AVAX tokens and other digital assets. The C-Chain is where developers can create smart contracts for DApps. This chain implements an instance of the Ethereum Virtual Machine (EVM), allowing coders to fork over EVM-compatible DApps. Meanwhile, The Platform Chain (P-Chain) coordinates network validators, tracks active subnets, and allows for the creation of new subnets. Subnets are sets of validators providing consensus for custom blockchains.
Because each blockchain takes on separate roles, Avalanche boosts speed and scalability compared to running all processes on just one chain. Its developers have shared this capability with two different consensus mechanisms custom-made to the needs of each blockchain.
What is AVAX token?
AVAX is Avalanche’s native token. It also has a capped supply of 720 million where all fees paid on the network are burned as a deflationary mechanism. The token has several main use cases, including allowing user to stake their AVAX to become a validator or delegate it behind a validator. Validators can then earn up to 11% Annual Percentage Yield (APY) and set a custom percentage fee of the reward they keep from partner delegators. AVAX also serves as the common unit of account for all subnets, which consequently enhances interoperability. Lastly, transaction fees and subnet subscriptions are payable in AVAX.
Is Avalanche Crypto worth buying?
The big objective of AVAX is to tokenize all types of real-world assets. In addition Ava Labs’ team of skilled developers and venture capital partners, all push for several innovative features on the platform.
Of course, Avalanche’s biggest competitor is Ethereum, which is the most used platform for creating DeFi projects. Ethereum has far more transaction volume and daily active users than Avalanche, but Ethereum is a proof of work chain, which makes crypto much more expensive to transact. Avalanche, on the other hand, is aware that it offers many benefits over Ethereum’s network. This opens the possibility for any Ethereum project to upload its blockchain to the Avalanche blockchain. If that happens, AVAX will appreciate in value.
Furthermore, the staking system that AVAX uses is very competitive in terms of returns, and that makes the AVAX token a solid long-term investment because staking encourages locking tokens for a long period of time, which also affects scarcity.