What is Avalanche (AVAX)?

Introduction

Its founder is Emin Gün Sirer and it is a Layer-1 blockchain project developed by Ava Labs in 2020.

Avalanche strives to improve scalability without sacrificing speed or centralization. Three blockchains make up its core platform: Exchange Chain (X-Chain), Contract Chain (C-Chain) and Platform Chain (P-Chain). The X-Chain is used to create and trade assets. The C-Chain is used to create smart contracts. The P-Chain is for coordinating validators and subnets.

One of the key breakthroughs of the protocol is Avalanche Consensus, a method that uses repeated subsampled voting by validators to make consensus fast and affordable. Avalanche also uses subnets as a new horizontal scaling method that allows the creation of customizable, interoperable blockchains. There is no limit to the number of possible subnets.

How does Avalanche work?

Avalanche uses a combination of methods that make it unique and consists of three main blockchains that can work together. These are the X-Chain, C-Chain and P-Chain.

1.  The Exchange Chain (X-Chain) is used to create and exchange AVAX tokens and other digital assets. Transaction fees are paid in AVAX and the blockchain uses the Avalanche Consensus protocol.
2.  The Contract Chain (C-Chain) is where developers can create smart contracts for DApps. This chain implements an instance of the Ethereum Virtual Machine (EVM) that enables EVM-compliant DApps. It uses a modified version of the Avalanche Consensus protocol called Snowman.
3. The Platform Chain (P-Chain) coordinates network validators, monitors active subnets and enables the creation of new subnets. P-Chain also uses Snowman. The Snowman consensus protocol is based on the Avalanche consensus protocol but sequences transactions linearly. This feature is useful when dealing with smart contracts. Unlike the Avalanche consensus protocol, Snowman creates blocks.

With each blockchain taking on different roles, Avalanche increases speed and scalability compared to running all processes on a single chain. Avalanche developers tailored the consensus mechanisms to the needs of each blockchain. Users need AVAX to stake and pay network fees, providing the ecosystem with a common usable asset.

Avalanche Technological Structure

Consensus Mechanism

Avalanche Consensus is a scalable and decentralized consensus protocol. It combines features of both classical and Nakamoto consensus mechanisms to achieve fast results and high energy efficiency.

Processing Speed and Finalization

One of its key features is Avalanche’s finalization time of less than 1 second. Avalanche claims to have the fastest time to finalization in the cryptocurrency ecosystem.

Decentralization

One of Avalanche’s biggest claims is decentralization. It is one of the layer-1 blockchains with the highest number of validators (more than 1,500 as of August 2024).
Interoperable blockchains:
The number of Avalanche’s interoperable blockchains is also unlimited. This puts it in direct competition with Polkadot, another project that offers customized and interoperable blockchains. While Polkadot has a limited slot auctioned in Parachain slot auctions, Avalanche can only work with a subscription fee.

Where to Use Avalanche?

Avalanche (AVAX) has a wide range of uses. Here are the main areas where AVAX is used

Use as Collateral Asset: AVAX can be used as a collateral asset within its own ecosystem and other ecosystems it supports. For example, AVAX can be used as collateral to obtain loans or provide liquidity on decentralized finance (DeFi) platforms.

Transaction Fees: Transaction fees for transactions on the Avalanche blockchain are paid in AVAX. This provides fast and low-cost transactions to all users on the network.
Staking and Network Security: AVAX is staked to secure the network. By staking their AVAX, users can become one of the validators in the Avalanche network. In this way, they earn rewards by contributing to the functioning of the network.

DApps (Decentralized Applications): Many decentralized applications (DApps) have been developed on Avalanche and AVAX can be used to trade, make payments and provide liquidity in these applications.

NFT Marketplaces: Avalanche also hosts decentralized platforms where NFTs are created, sold and traded. AVAX can be used to trade digital assets on these platforms.
Bridging and Cross-Chain Migration: Avalanche has bridge solutions that enable interaction with other blockchains. AVAX is used as liquidity and collateral when transferring between different networks.

AVAX offers a powerful ecosystem, making it versatile both within its own network and in other ecosystems.

Conclusion

Avalanche (AVAX) stands out as a highly efficient Layer-1 blockchain solution that combines speed, scalability, and decentralization through its innovative architecture and consensus mechanisms. With its three interconnected chains—X-Chain, C-Chain, and P-Chain—Avalanche facilitates a wide range of applications, from decentralized finance (DeFi) to NFT marketplaces, while maintaining low transaction fees and rapid finalization times. As a versatile asset, AVAX not only powers transactions and staking within its ecosystem but also enables interoperability across various platforms, positioning Avalanche as a formidable player in the evolving landscape of blockchain technology.