What Is Avalanche (AVAX)?

Aᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚvalanche (AVAX) is a network of blockchains that uses a proof-of-stake consensus algorithm called the Snowman Consensus Protocol. The blockchain allows developers to create third-party decentralized applications and deploy them. AVAX is the native token of the Avalanche blockchain.

Launched in 2020, Avalanche aims to be fast, versatile, secure, affordable, and accessible. In addition, Avalanche is an open-source project, meaning anyone can view and contribute to the platform's code.

History of Avalanche

Avalanche was created by a team of developerꦦs in 2020, including Stephen Buttolph, Amani Moin, Kevin Sekniqi, and Emin Gün Sirer. Avalanche is intended to serve as a payment system and as a platform for creating decentralized applications.

Avalanche's native token, AVAX, is capped at a maximum of 720 million and is used to pay transaction fees. These fees are not given to any user but are burned to reduce the number of circulating tokens and increase their scarcity.

On Sept. 19, 2024, the total circulating supply of AVAX was 405.93 million. Its market cap was $10.67 billion, and its 24-hour trading volume was $478.71 million.

How Avalanche (AVAX) Works

Avalanche uses the phrase "network of networks" to describe its network and its capabilities. It has three blockchains that manage different functions:

• The Platform Chain (P-Chain): The chain that coordinates validators, manages the network's staking mechanism, and allows users to create new L1s, which are groups of validators that work to achieve consensus.
• The Contract Chain (C-Chain): The chain that runs smart contracts.
• The Exchange Chain (X-Chain): The chain that allows users to create new assets and facilitates asset exchanges and cross-chain transfers.

Avalanche's smart contracts platform supports both decentralized applications (dApps) and autonomous blockchains. Here are some of the features that make Avalanche unique:

• Coin creation rate: The maximum supply of AVAX is capped at 720 million tokens, but AVAX users govern how fast new coins are minted. AVAX holders can control the rate of new coin creation by voting to adjust the amount of AVAX paid as a reward for adding a new block to the Avalanche blockchain.
• Transaction fee structure: Transaction processing costs vary depending on the type of transaction and Avalanche's network congestion. All fees are burned—removed from circulation—to enable AVAX to become scarcer over time. Avalanche users vote to decide the Avalanche transaction fee, making AVAX fees subject to change.
• Consensus mechanism: Transactions on the Avalanche blockchain are confirmed using a unique method requiring many small, random subsets of network participants to confirm transactions before the transactions are finalized.
• Participation incentives: High uptime and fast response times can boost the amount of AVAX rewards a network participant can earn for processing AVAX transactions.
  

Avalanche is generally governed by the 澳洲幸运5开奖号码历史查询:proof-of-stake mechanism. AVAX holders are required to stake—agree not to trade or sell—AVAX in exchange for the right to validate AVAX transactions. AVAX holders with the most staked and actively participating as validators are the most likely to be chosen for Avalanche blocks. Additionally, holding AVAX tokens is also required to vote on Avalanche governance proposals.

Advantages and Disadvantages of Avalanche

Let's dig into what's to like and dislike about Avalanche:

Avalanche vs. Ethereum

Originally, Avalanche claimed a much faster transaction processing time than it has demonstrated in the past—4,500 transactions per second vs. Ethereum's limit of about 14. But the Avalanche network has yet to reach that speed. For the week of Sept. 8, 2024, to Sept. 14, 2024, the network averaged more than 8.12 million transactions, or about 13.43 transactions per second. On its fastest day that week, Avalanche♋ reached about 405 tps—much more than the Ethereum netw🐎ork manages.

The parallel nature of Avalanche's consensus protocol is what is claimed to enable the Avalanche network to theoretically validate transactions significantly faster than Ethereum.

While Ethereum currently operates at a much larger scale, supporting many more projects and transactions, Avalanche's superior ability to scale may give it a long-term advantage over Ethereum—at least until Ethereum delivers on its speed and scaling promises.

Avalanche and Ethereum have different fee structures, but fees on both platforms vary based on the network's congestion or busyness. However, the fee structure for the Avalanche platform is entirely controlled by user governance, whereas Ethereum's is governed by demand for services, validator supply, and traffic.

Both networks burn processing fees, but Avalanche burns them all, while Ethereum burns only a percentage.

The Bottom Line

Avalanche (AVAX) is a cryptocurrency and blockchain platform that rivals Ethereum and is known for its speed and scalability. Avalanche's smart contracts platform supports both decentralized applications and autonomous blockchains.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our  for more info. As of the date this article was written, the author does not own cryptocurrency.