What is AVAX? A Beginner’s Guide

25 Jan 2024 by Syed Asad 7 min read

Curious about what is AVAX? If you've been wondering about the ins and outs of this cryptocurrency, we’ve got your back, as this article explores it in depth, shedding light on its functionality, competitive advantage, risks and future potential for investors. So, without further ado any time, let’s dive in!

TABLE OF CONTENTS

What is AVAX

Understanding AVAX: How does Avalanche Work?

- Other Unique Features of AVAX

Avalanche (AVAX) VS Ethereum: What’s Better?

What the Future Holds: AVAX Future Price Prediction

- AVAX Price Predictions

What is AVAX - Final Thoughts

What is AVAX - FAQ

What is AVAX

Avalanche is a blockchain platform notable for its speed, versatility, and affordability. It serves as an open-source decentralized system, supporting the creation and trading of DeFi applications (DApps) and other financial assets. Notably, it boasts rapid transaction finality, capable of processing over 4,500 transactions per second.

AVAX - the native token - is integral to the ecosystem, utilised for governance, transaction fees, and network security.

Avalanche's unique features include an interoperable ecosystem, customisable blockchain networks, and a proof-of-stake (PoS) consensus mechanism with the innovative Avalanche consensus protocol. Launched in 2020, it competes with Ethereum, providing a decentralized smart contract platform that is fast, eco-friendly, and accessible. More on its comparison with Ethereum coming up later!

Understanding AVAX: How does Avalanche Work?

AVAX operates on a unique three-blockchain structure: the X-Chain manages assets, the C-Chain facilitates smart contracts and ERC-20 tokens, while the P-Chain coordinates validators and supports subnet creation. Users transfer tokens between chains based on their intended actions.

The Avalanche consensus protocol enhances security through random validation checks. The Snowman consensus protocol, used by the X-Chain and P-Chain, processes blocks linearly. Avalanche's architecture addresses scalability and interoperability issues, allowing Ethereum developers to launch DApps on its platform.

The three-blockchain system supports different use cases: X-Chain for financial assets, C-Chain for EVM-based smart contracts, and P-Chain for subnet coordination. Avalanche's Proof of Stake protocol enables scalability, flexibility, speed, and interoperability.

Other Unique Features of AVAX

Rapid Transactions: AVAX stands out with its Avalanche consensus, a variation of the PoS protocol. This unique protocol allows for scaling, enabling the processing of over 4,500 transactions per second—achieving transaction finalization in under a second, surpassing the transaction speeds of Ethereum and Bitcoin.
Coin Creation Rate Control: AVAX users have control over the coin creation rate, determining how fast new coins are minted by adjusting the reward for adding a new block through voting.
Dynamic Transaction Fee Structure: Transaction processing costs on Avalanche vary based on transaction type and network congestion. All fees are burned, making AVAX scarcer over time. AVAX users participate in voting to decide and potentially change the transaction fees.
Consensus Mechanism: The Avalanche blockchain employs a unique consensus mechanism, requiring multiple small, random subsets of network participants to confirm transactions before finalization.
Participation Incentives: Network participants are incentivized with increased AVAX rewards for high uptime and fast response times when processing AVAX transactions.
Scalability: Its unique approach to developers working with the Ethereum Virtual Machine (EVM) provides scalability and flexibility for both public and enterprise-grade applications and blockchains. By tapping into the potential of digital assets, blockchain environments, and decentralized finance, Avalanche offers a uniquely fast network with top-notch security and significant scalability potential.

Avalanche (AVAX) VS Ethereum: What’s Better?

So, what is AVAX and how does it compare to Ethereum? Below is a head-on comparison of the two blockchain platforms:

Adoption: Ethereum holds a first-mover advantage and is the largest blockchain for smart contracts, boasting a significant lead in adoption and hosting popular applications.
Speed: Avalanche outpaces Ethereum in transaction speed, handling up to 6,500 transactions per second compared to Ethereum's current 15 transactions per second.
Transaction Fees: Avalanche offers lower transaction fees, with an estimated average fee of $0.08, in contrast to Ethereum's average fee of around $1.50.
DeFi: Ethereum boasts a more developed and adopted DeFi ecosystem, hosting popular applications like Uniswap, Compound, and Aave, providing a richer DeFi experience compared to Avalanche.
Decentralization: Ethereum demonstrates greater decentralization with over 900,000 node operators, whereas Avalanche has around 1,300 node operators. Ethereum's larger network contributes to a more decentralized ecosystem.
Tokens: Ethereum's ETH token has broader availability and market cap compared to AVAX. While AVAX is popular, it faces limitations in market reach and exchange availability.
NFTs: Ethereum dominates the NFT space with higher trading volume and established projects. Although Avalanche shows potential, Ethereum currently leads in NFT adoption and trading.

In conclusion then, while Ethereum holds a considerable advantage in adoption, boasting a well-established ecosystem with popular applications and NFT dominance, Avalanche excels in speed and transaction cost efficiency.

Avalanche's ability to handle 6,500 transactions per second and lower fees positions it as a compelling option for users valuing quick, cost-effective transactions. Ethereum, however, remains the go-to platform for DeFi, offering a more mature ecosystem with widely-used applications. Therefore, AVAX is unlikely to replace Ethereum.

What the Future Holds: AVAX Future Price Prediction

As Avalanche's user base continues to expand, the platform is proactively addressing scalability challenges and maintaining affordability through the implementation of subnets. They play a crucial role in averting gas fees and transaction speed concerns as the network scales.

In 2022, the developers launched the Avalanche Multiverse initiative. It is backed by a $300 million investment and empowers developers to build fully-customisable networks on the Avalanche blockchain. This notable effort allows the creation of application-specific networks, offering interoperability with external networks like Ethereum or Bitcoin.

The introduction of the Core platform-specific wallet enhances user experience by facilitating efficient transactions and seamless navigation. Looking ahead, John Wu, President of Ava Labs, envisions expanding Core to incorporate all major blockchains, including Ethereum and Bitcoin, further positioning Avalanche for a dynamic and interconnected future.

AVAX Price Predictions

AVAX's future price predictions offer a range of estimates from industry experts. According to Coincodex.com, AVAX is forecasted to reach between $63.40 and $80.24 by 2030.

Changelly experts project a more immediate range of $30.04 to $34.85 by the end of 2025, with a long-term prediction of $185.25 to $221.39 by 2030. Binance follows suit with a price prediction of a modest increase of 5% per year to reach $42.09.

Ambcrypto.com offers a different perspective, estimating a 2030 price range of $28.15 to $42.23 for AVAX. These projections collectively suggest a positive outlook for AVAX, with potential for significant growth driven by ongoing developments and increasing adoption.

What is AVAX - Final Thoughts

That’s about it - we hope now you know what is AVAX and how it compares to other Layer-1s (especially Ethereum).

Avalanche (AVAX) has been showing strong potential as a smart contract platform. With a surge in app development and web3 gaming spheres, the digital token has seen a remarkably bullish trend raising its value to levels not seen since the spring of 2022. While future predictions may vary, it’s clear that AVAX has immense potential for growth in coming years as it gains even more momentum.

What is AVAX - FAQ

What is AVAX used for?

AVAX is mainly a crypto and blockchain platform just like Ethereum. But it focuses more on scalability and processing speed. AVAX token is used for security and transaction fee payment across the Avalanche blockchain.

Is AVAX a good investment in 2024?

According to Changelly the current sentiment around AVAX is highly bullish. The smart contract platform is enjoying a nice surge in app development use cases. Therefore, its price may increase considerably and reach an estimated value of $221.39 by 2030.

Who is the founder of AVAX?

Emin Gun Sirer, a Turkish American computer engineer is the founder of Avalanche Consensus Protocol which forms the basis of Avalanche blockchain. He is currently the CEO and co-founder of Ava Labs with headquarters in New York, USA.

Can AVAX reach $1000?

While AVAX has seen notable pumps, considering the current crypto market it is unlikely to surpass $1000 before 2030. Currently there are almost 366.83 M AVAX coins, if AVAX reaches $1000, it would result in a market value of approximately $396 billion. That said, AVAX can easily break the $500 level before 2027 and surprise us all.

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