What is Avalanche AVAX cryptocurrency and how does it work? | OWNR Wallet
What is Avalanche AVAX cryptocurrency and how does it work?
Today, DeFi is becoming more and more integrated into our lives. It’s gaining momentum in the financial sector at tremendous speed. One of the most notable projects in DeFi is the Avalanche project. Avalanche allows you to create DeFi applications and launch digital assets, and the Avalanche blockchain provides transactions and other financial services.
Without a doubt, this is one of the most promising projects in today's decentralized finance. To understand what the Avalanche project is, how it works, and what advantages it has, continue reading this article.
What is Avalanche AVAX?
Avalanche crypto is a groundbreaking platform crafted by Ava Labs, enabling individuals to craft their own personalized and feature-rich blockchains and decentralized applications (dApps). This platform has been meticulously designed to overcome the limitations that have hindered older platforms, including sluggish transaction speeds, centralization concerns, and scalability issues. To surmount these challenges, the project leverages its own array of innovations.
Foremost among these innovations is the unique Avalanche consensus protocol, offering low latency, impressive throughput, and fortified resistance against potential attacks. This protocol forms the bedrock of the platform, ensuring swift and secure transactions while mitigating the risk of network vulnerabilities.
What sets Avalanche apart is its commitment to compliance with government regulations. The platform welcomes the development of transparent systems that accommodate regulatory oversight. This means that supervisory authorities will have access to pertinent information, such as the availability of licenses or specific user data when necessary. By doing so, Avalanche bridges the gap between decentralized innovation and regulatory requirements, fostering an environment where blockchain technology can flourish within established legal frameworks.
How does Avalanche work?
The network's exceptional throughput is a result of its groundbreaking Proof-of-Stake (PoS) consensus protocol known as the Avalanche Consensus Protocol. This innovative approach not only offers decentralization but also brings scalability and security to the forefront. In a departure from Ethereum's architecture, each Avalanche application operates within its own dedicated subnet.
The core of the Avalanche consensus mechanism lies in a collective of validator nodes working in harmony to establish consensus regarding the state of a cluster of blockchains. To further enhance flexibility and performance, developers have the liberty to forge their own Avalanche subnets using specialized tools. This ingenious design ensures that applications no longer contend for network resources, guaranteeing swift transactions and keeping fees at a minimum on the network. This way, the Avalanche ecosystem sets a new standard for blockchain scalability and efficiency, offering users a seamless experience in the world of decentralized applications.
What problems does Avalanche AVAX solve?
The Avalanche mainnet stands out with its myriad advantages and unique features, and it has been purposefully crafted to tackle some pressing challenges within the cryptocurrency industry. Among the paramount issues that Avalanche effectively addresses are:
Congestion
This groundbreaking platform boasts the remarkable ability to execute operations in under one second. It excels at handling substantial data volumes while keeping transaction fees at a minimum. Developers affirm that the system can process a staggering 4,500 transactions per second (TPS), a significant leap from the 7 TPS of the Bitcoin blockchain and the 14 TPS of Ethereum. This impressive throughput positions Avalanche as an ideal choice for robustly scaling decentralized applications, providing an efficient solution to congestion challenges.
Low fees
Another common problem with large blockchains like Ethereum is high gas fees, which increase in proportion to traffic and network activity.
Avalanche leverages transaction fees to support different functions, including asset creation, minting, staking, transaction fees, and blockchain creation. Once these fees are collected, they are permanently removed from circulation by burning AVAX. This mechanism results in a reduction in the total supply of AVAX tokens on the platform.
Used fees are burned because “$AVAX is a hard-capped, scarce asset used to pay fees and secure the network,” according to a post Avalanche shared on Twitter.
Background and history
The Avalanche foundation started in 2018, and Ava Labs was founded in New York by a team of accomplished professionals spanning computer science, economics, finance, and law:
Emin Gün Sirer, the project's founder, is an Assistant Professor of Computer Science at Cornell University. He's renowned for pioneering the creation of a cryptocurrency utilizing the Proof-of-Work (PoW) algorithm for mining.
Kevin Seknicki serves as the Chief Operating Officer, with previous experience as a researcher and software engineer at NASA's Jet Propulsion Laboratory and Microsoft.
Maofang Yin, the chief architect of the protocols, holds a PhD in computer science from Cornell University, with Sirer as one of his advisors during graduate studies.
Ava Labs has successfully garnered support from institutional investors. In February 2019, the project secured $6 million in Series A funding. Just four months later, developers raised an additional $12 million in a private token sale led by prominent entities like Bitmain, Dragonfly Capital Partners, Galaxy Digital, Initialized Capital, and NGC Ventures. Notably, Ava Labs' public offering (ICO) in July 2020 generated a staggering $42 million in just 4.5 hours, featuring participation from distinguished firms such as venture capital giant Andreessen Horowitz. Avalanche launched in September of 2020.
Partnerships
Ava Labs, the force behind the Avalanche ecosystem, has partnered with notable companies in finance and crypto. Highlights include partnership with Mastercard for its Start Path Crypto program, Deloitte partnering with Ava Labs to enhance its Close As You Go platform, and AVAX support integrated in BitGo.
Avalanche also boasts over 150 projects in DeFi, including 1 inch, Aave, DappRadar, and Wyre. Plus, Ava Labs has launched the ambitious "Avalanche Multiverse" initiative with a budget of over $290 million to foster the development of new blockchains using Avalanche's subnet feature. The future looks bright for Ava Labs and the Avalanche network.
Unique risks
Although Avalanche stands strong without any conspicuous imperfections, it finds itself navigating the treacherous waters of a fiercely competitive landscape as a relatively nascent project. Several prominent smart contract blockchains took shape years before Avalanche, affording them a head start in establishing their dominance. Furthermore, the ever-evolving ecosystem is witnessing the emergence of fresh initiatives aspiring to surpass the reigning market champions, much like Avalanche did during its meteoric ascent.
However, Avalanche is not immune to fervent debates surrounding its purported decentralization. In this dynamic milieu, Avalanche surges forth, cognizant of the challenges it faces, while relentlessly pursuing the vision that set it apart from the crowd.
Benefits of Avalanche AVAX
It is worth separately considering the advantages of Avalanche, which we have already mentioned. If you plan to work with this project (create your own DeFi apps or invest), you need to understand what distinguishes Avalanche from its competitors.
Interoperability
There is no limit to the number of Avalanche bridges to other blockchains. In this aspect, it is in direct competition with Polkadot, another project with custom interoperable blockchains. Still, Polkadot uses limited space to sell on Parachain Slots auctions, while Avalanche supports other blockchains by using simple subscription fees.
Scalability
Mining Bitcoin demands an immense wellspring of energy and computational prowess. Meanwhile, Ethereum is restricted to accommodating a mere 15 transactions per second, the shackles of its own limitations hindering its grandeur. In stark contrast, Avalanche emerges as a beacon of scalability, meticulously architected to surmount these obstacles and seek triumphant heights. Harnessing its intrinsic prowess, Avalanche boasts the ability to conduct transactions in the blink of an eye, while harboring astounding processing capacities that transcend the realms of possibility.
Usability
One of the concerns in adopting any technology is usability, or the extent to which the software or technology is easy to use and implement in various applications and use cases. Avalanche has proven useful in various cases and is picking up speed in the crypto community at a pace that can rival Ethereum.
Is Avalanche a good investment?
We do not give investment recommendations; investments in Avalanche, like any other project, require careful study. Although it is unlikely that Avalanche will be able to return to its maximum, it is well suited for long-term investing.
Actively trading a token on a crypto exchange can bring significant income to the owner of the coin. However, you need to make decisions about transactions carefully and with restraint, since trading can also bring losses. Fundamental and technical analysis, review of expert opinions, and well-developed intuition give good results in trading.
Can I make passive income with Avalanche?
You can also stake AVAX to become a validator or delegate your volume to a validator. Staking AVAX can bring you up to 10% annual percentage yield, and they set a custom percentage fee for the rewards they keep for the delegates who support them.
Owners of coins can borrow coins at interest. This is a passive way to earn money with minimal risk. This can be compared to a deposit in a bank, only digital funds are used, not fiat. The owner of the coins lends the coins to a regulated crypto exchange at interest. The latter, in turn, gives leverage to traders at an even higher rate. You can make money on the AVAX landing page, for example, on the KuCoin exchange.
What can you do with Avalanche?
The platform allows both individuals and companies to easily create their own blockchains for both private (permissioned) use and public use.
Avalanche is a powerful decentralized platform for developers. It uses a combination of several specially created chains, as well as a powerful Proof-of-Stake consensus mechanism.
Thanks to compatibility with Ethereum tools, developers can easily migrate their Ethereum dApps to Avalanche and run various decentralized applications on the platform. These applications can run on Avalanche's own independent blockchains, allowing full control over their security and functionality.
During its existence, Avalanche has attracted a lot of interest from developers. There are many serious applications on the platform that use this technology:
- Securitize, related to private securities;
- Prosper, which works in prediction markets;
- Bilira, associated with the release of stablecoins.
Where and how to buy AVAX
You can find AVAX Avalanche on several top crypto platforms. The best of them is the Binance exchange, which supports six exchange pairs:
- AVAX/USDT;
- AVAX/TRY;
- AVAX/BTC;
- AVAX/BUSD;
- AVAX/EUR;
- AVAX/BNB.
This coin is traded on the OKEx, Huobi Global, and Bitfinex platforms.
You can also buy AVAX Avalanche on OWNRwallet. To do this, you need to create a new wallet or restore an existing one, select the assets in the order form, sign up, enter your card details, and fill out your billing information. Then you will be asked to enter the Descriptor ID and submit a set of documents to verify your identity. When the Descriptor ID is verified, upload the documents for KYC verification. Documents must be provided within 2 business days since the moment the payment is accepted. After these simple steps, you will be able to buy, sell and trade AVAX.
How many Avalanche AVAX coins are there in circulation?
There are currently 354,413,679 AVAX in circulation out of a total of 720,000,000 Avalanche coins. There is a limited supply of coins, which is supposed to counteract inflation. As transaction fees decrease, token scarcity increases further.
The AVAX capitalization is equal to the number of coins in circulation multiplied by their value. Currently, there are about 431,000,000 coins in circulation out of 720,000,000 (approximately 60% of coins in circulation).
How is the Avalanche network secured?
Avalanche is a platform with three main components: two blockchains (C-Chain and P-Chain) and a new type of data structure: directed acyclic graph (DAG) or X-Chain. DAG links transactions together, improving the speed and efficiency of the network.
P-Chain is responsible for token locking and consensus, while C-Chain provides Ethereum application transfer with high throughput and low fees.
X-Chain is a decentralized platform for creating new digital assets and transferring tokens between subnets. It supports stablecoins, utility tokens and NFTs. X-Chain is based on UTXO technology.
All Avalanche network components are protected by primary network validators. Subnets are configured to suit different requirements. The Snow protocol group provides 51% attack protection.
Conclusion
For those looking to access decentralized finance without the hassle of scalability, Avalanche is a potential solution. As stated by the founder of the project, the platform does not pretend to be an “Ethereum killer”, but Avalanche claims to protect the Ethereum network during the transition to ETH 2.0.
This is a very young project, but it is developing quickly. There are a lot of developments and product releases related to new features. All the Avalanche aims are reflected in the roadmap and published on the project website.
FAQ:
What is AVAX used for?
AVAX cryptocurrency is used for storage, trading, investing and staking. The Avalanche platform can be used to create new projects in decentralized finance.
Is AVAX a risky investment?
Like any other cryptocurrency, Avalanche assets are risky. However, with a proper strategy, careful study of the project and its prospects, you can make good money speculating with this cryptocurrency.
Can AVAX hit $1,000?
It is unlikely that the price of Avalanche token will reach $1,000. The last maximum was in November 2021, when the AVAX token was $134. The price has been declining for the last two years.
What is so good about AVAX?
AVAX has extremely fast transaction speeds, low fees, and interoperability with other blockchain networks. These are the most basic, but not the only advantages of AVAX.
Is AVAX better than Ethereum?
AVAX and Ethereum have their own advantages and disadvantages. For example, the transaction processing speed of AVAX is higher than that of Ethereum. However, it is impossible to say unequivocally which cryptocurrency is better.
DISCLAIMER:None of the authors, contributors, administrators, or editors connected to OWNR Wallet encourage readers to invest in AVAX or other cryptocurrency without doing proper research on their own. This article is purely for educational purposes only.