In September 2021, Emin Gun Sirer, Kevin Sekniqi, and Ted Yin launched the popular blockchain platform known as Avalanche. This platform is built to solve some challenges that have disturbed the growth of blockchain technology. These challenges are notably: interoperability and scalability.
As a DeFi platform, Avalanche is establishing an infrastructure that supports the launching of DeFi applications while creating financial assets that democratize access to financial services.
This guide examines Avalanche as a blockchain platform, what Avalanche is, how it works, and what its token, AVAX, is all about. Let’s dig in.
What is Avalanche (AVAX)? | Definition of Avalanche
Avalanche is a blockchain platform designed to solve the blockchain trilemma that has plagued the ecosystem since its inception. This blockchain trilemma includes scalability, security, and decentralization. As a blockchain platform, it is geared towards cultivating an infrastructure to launch decentralized applications (dApps).
Avalanche is an open-source, decentralized platform that runs on smart contracts. These smart contracts make it easy to run dApps on the platform. The tools and features available on the platform enable users to launch their dApps built to address and support financial services through the DeFi system.
Avalanche prides itself as a blockchain platform that completes transactions in a fraction of a second. Despite being one of the fastest blockchains in the ecosystem, the network can process more than 4,500 transactions in a second.
Avalanche comes with a whole package that makes it a favorite amongst developers. This is because it has an infrastructure that enables individual and enterprise users to build and launch financial assets and DeFi applications for diverse use cases. Likewise, you can build private and public blockchain networks on Avalanche.
Avalanche’s interoperability is one of what puts it on a different pedestal. It allows users to send messages across other networks. This means that users can interact with networks and applications across other chains on the platform. This makes its native token, AVAX, a hot cake in the crypto market.
AVAX is the native token of the Avalanche blockchain platform. It is a governance token capped at 720,000,000 AVAX tokens, with its smallest unit being nAVAX. Transactions on the platform are executed with AVAX tokens. The AVAX token used as transaction fees are burned, reducing token supply and potentially increasing its price over time.
On the other hand, AVAX allows network participation through staking. But you must have 2,000 AVAX tokens before you can become a validator.
How Does Avalanche Work?
Avalanche is a complex blockchain ecosystem built such that Ethereum developers can launch dApps on Avalanche while using the Ethereum Virtual Machine (EVM) and developers’ toolkit.
The entire network supports three blockchain networks, making scalability easy and providing flexible solutions for individuals and enterprises. It makes use of the Proof-of-Stake consensus mechanism. The three inbuilt networks on Avalanche (Contract Chain, Exchange Chain, and Platform Chain) serve specific functions.
The implementation of EVM into the platform’s smart contract operations happens via the Contract Chain. The Exchange Chain allows you to create different financial assets, and the Platform Chain enables the creation and management of subnets while coordinating validators’ activities.
Use Cases of Avalanche | What is AVAX Used For?
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Interoperability
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Interoperability has been a major challenge in the blockchain industry. Users and developers have sought ways to unite different networks, leverage their infrastructure, and exchange assets. Avalanche solves this problem using its subnets as a medium for cross-chain communication.
This enables users to interact with blockchain networks and exchange assets and information. This feature gives users the advantage of maximizing the creation of dApps that leverage features and tools of multiple blockchains.
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Enterprise Solutions
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Avalanche’s scalability and adaptability is the primary reason big organizations or corporations choose it for enterprise solutions. This allows them to build private and public blockchains without compromising or losing customer data. Avalanche provides enterprises with privacy and security.
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Enhance Scalability
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Avalanche's solution in tackling blockchain scalability challenges is segmenting its main network into subnets. As a result, the platform can carry out transactions and execute smart contracts simultaneously. This improves the platform’s efficiency while providing users with a seamless experience dealing with high-frequency applications like DeFi protocols.
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Asset Tokenization
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Through fractional ownership and unique liquidity, Avalanche enables individuals or businesses to tokenize real-world assets. This allows cross-border transfers and makes traditional assets accessible to a larger audience.
Pros and Cons of Avalanche
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PROS |
CONS |
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Infrastructure that supports many blockchain-based projects. |
It is expensive to be an Avalanche validator. It requires staking 2,000 AVAX tokens. |
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Participants receive rewards based on an incentive structure. |
Malicious validators are not punished for their activities. |
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Transaction processing occurs at a fast speed. |
Transactions may get delayed when validators refuse to agree on the status. |
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Interoperability is one of its key features. That is, it operates across other chains. |
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The cost of transactions is meager. |
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Avalanche allows scalability without compromising decentralization. |
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Where to Buy Avalanche (AVAX)
The contribution of Avalanche to the DeFi ecosystem cannot be understated. It has given a new structure to establishing a financial system that allows autonomy to users. Likewise, its contribution towards creating and launching DeFi applications increases the demand for AVAX.
Thus, you can buy Avalanche (AVAX) on popular cryptocurrency exchanges such as Binance, Gate.io, Crypto.com, KuCoin, Coinbase, and Kraken. You can buy AVAX directly with fiat currencies on centralized exchanges. Otherwise, you can buy via platforms that allow trading pairs against other cryptos, such as BTC and ETH, or against stablecoins like USDT and USDC.
Should You Invest in Avalanche (AVAX)?
Blockchain keeps revolutionizing businesses across different industries. It has changed operations while introducing innovative approaches to conducting business. This includes the financial sector, supply chain and distribution, and internet usage. However, the financial world has been the major beneficiary of blockchain and cryptocurrency since its inception.
Another innovative solution using blockchain technology is DeFi services. This introduced a new way to conduct financial services while ensuring security, anonymity, and control over how funds should be used instead of a central body dictating the rules.
In between all of that, the Avalanche blockchain platform is at the center of it all. As an open-source blockchain platform which focuses on interoperability, its features and tools will revolutionize the DeFi space. This puts its native token, AVAX, in the limelight, as its value and demand will keep increasing in the long run.
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This article is intended for educational purposes and is not financial advice.
