Is Just Amazing - What is Avalanche

What is Avalanche ?

Avalanche (AVAX) is a smart contract-capable blockchain platform focused on transaction speed, low costs, and eco-friendliness. Ultimately, what Avalanche hopes to deliver is a highly scalable blockchain that doesn’t sacrifice decentralization or security.

Launched in 2020 by the Ava Labs team, Avalanche quickly ascended the cryptocurrency rankings and sits just outside the top ten. Similarly, Avalanche TVL (Total Value Locked in the protocol) is skyrocketing and is now worth $3 billion across Avalanche dapps.

In a heated arms race to produce the world’s fastest blockchain, Avalanche is a serious contender with a stellar team, passionate community, and dedicated backers.

Ava Labs, the founders and developers of Avalanche, believe they’ve built the fastest smart contract blockchain platform to date. Utilizing a whopping three different blockchains under the hood, Avalanche performs at internet-scale for a future wherein crypto is a global backbone technology.

Founded in 2019 by Dr. Emin Gun Sirer, Avalanche has aimed to achieve the fastest time to finality for blockchain transactions since day one. Time to finality is how long it takes for a crypto transaction to process and be considered permanent and irreversible. Once a transaction has achieved finality, it’s literally final — it can’t ever be rolled back or altered.

Avalanche’s core innovation is it’s composed of three blockchains rather than the usual one. The reason behind this design choice is quite brilliant: Each blockchain specializes in a task within the broader Avalanche ecosystem instead of having one chain do them all.

Distributing tasks amongst different chains helps keep the Avalanche platform agile, allowing it to achieve the golden trinity of blockchain traits — decentralization, security, and scalability.

Exchange Chain (X-Chain)

The Exchange Chain (X-Chain) is the blockchain responsible for creating and transacting Avalanche assets. Avalanche’s native token AVAX is the current most popular cryptocurrency on the platform, but decentralized exchange tokens JOE and PNG aren’t far behind.

Transactions on the X-Chain generate fees paid in AVAX. That’s similar to how gas fees on Ethereum are paid in ETH. So, even if you’re transacting JOE tokens, fees are always settled in AVAX.

Contract Chain (C-Chain)

Smart contracts are Avalanche’s key feature. This feature enables developers to build decentralized applications on Avalanche while leveraging the platform’s security and scalability benefits.

The C-Chain runs smart contracts for the Avalanche platform and is EVM (Ethereum Virtual Machine) compatible. Being EVM compatible means anyone can deploy Ethereum smart contracts on Avalanche. Why is that a big deal? Because existing Ethereum apps, such as DeFi titans Aave, can easily deploy a version of their product on Avalanche.

Deploying Ethereum smart contracts on Avalanche gives developers access to the latter’s features using the same Ethereum developer tools as always.

Platform Chain (P-Chain)

Avalanche’s P-Chain allows anyone to create an L1 or L2 blockchain. You can even go as far as creating a group of them. In Avalanche terms, these blockchains are called subnets, with the P-Chain being the default subnet common to all.

The P-Chain manages the landscape of Avalanche subnets by keeping track of validators, but subnets are also responsible for validating the P-Chain.

Subnets are Key to Scaling Avalanche

In the P-Chain section above, we briefly touched on Avalanche subnets. However, their importance is worth explaining in detail.

The way Avalanche subnets work is similar to Ethereum 2.0 sharding. In a strict sense, a subnet is simply a clone of the default blockchain (for Avalanche, this is the Primary Network) that’s connected to the platform at launch.

More importantly, subnets can be created by users on-demand and as needed. In practice, this means a subnet, once its scaling limits are temporarily exhausted, can launch another subnet to meet or exceed network traffic demands and free up transactions.

In a nutshell, subnet creation is unlimited (subnets can infinitely create subnets). Avalanche’s P-Chain has a roughly 4,500 transaction per second limit, about 2x higher than Visa. But owing to its unlimited capacity for generating subnets, Avalanche does not have a practical TPS limit.

Even though subnets can create their own sets of rules for how their particular blockchain operates, all subnets are required to validate their own blockchain and the Primary Network chain.

Validating the Primary Network requires each subnet to be a Primary Network member — a status conferred to those staking 2,000+ AVAX tokens.

Avalanche and DEFI

Avalanche’s high TPS performance and EVM compatibility are winning over some of the biggest names in DeFi. Even though Ethereum is still the DeFi king with $158 billion total value locked, Avalanche’s quickly growing $2B+ TVL shows the network is gaining a following.

To capitalize on its growing reputation, Avalanche launched Avalanche Rush, an incentives program aimed at drawing liquidity into Avalanche’s network of DeFi apps. Avalanche Rush’s $180 million fund rewards liquidity providers with AVAX token incentives.

So far, Avalanche Rush has proven highly successful as Curve and Aave, the largest DeFi protocols by TVL, have launched Avalanche markets. Other DeFi giants to recently launch on Avalanche include Sushi and Kyber Network.

AVAX Token

The Avalanche token, or AVAX, is a utility token that serves as the ecosystem’s common medium of exchange. Besides its use as currency in the Avalanche world, AVAX staking secures the network and rewards stakers with more AVAX.

Compounding the value derived from staking is the AVAX deflationary token mechanism. AVAX tokens used to pay transaction fees are burned from the supply, permanently lowering the amount of AVAX in circulation.

AVAX Staking Rewards

All subnets, including the Primary Network, require validators who own and stake AVAX tokens as collateral. That isn’t to say you have to be a validator to get rewarded for staking AVAX. If you want AVAX staking rewards, you can delegate your stake to a validator to earn a percentage of the staking rewards.

Right now, roughly 64% of AVAX tokens are staked. Validators are earning just shy of 11% APY and delegators are earning 9.53% staking rewards.

Transaction Fees with AVAX Token

Avalanche is called the common unit of account within the ecosystem. In plain speaking, that means AVAX is the network’s default currency. All transaction fees are paid using AVAX, and it’s also the common currency between subnets.

Using AVAX between subnets is important because it helps interoperability between subnets that would otherwise use their own internal cryptocurrencies.

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