The problem with decentralization in cryptocurrency is that it slows down transaction speed and makes fees expensive. This has been a common complaint among crypto users. Fortunately, many new networks (e.g. Solana, Terra) have been developed to solve this problem and Avalanche is one of them.
What is Avalanche?
Avalanche’s technology is revolutionary because it has 3 separate blockchains instead of 1, making the function of a blockchain network modular. And it doesn’t lose these features because one can combine 2 or more chains to achieve its objectives without clogging the entire network. This speeds things up pretty fast and makes it seem better than other solutions, like Layer 2, sharding, or side chains.
As a result, Avalanche can process about 4,500 transactions per second – compared to Bitcoin and Ethereum which can process only 7 and 14 transactions per second respectively. Plus, Avalanche boasts that their platform can finalize transactions in under 2 seconds (Bitcoin at 60 mins and Ethereum at 6 mins).
How does Avalanche work?
Avalanche has 3 interoperable blockchains: the X-Chain, C-Chain, and P-Chain.
- Exchange Chain (X-Chain)
This is used for the creation and exchange of AVAX tokens and other digital assets like those found on Ethereum. It uses token standards that allow for customizable rules regarding how they behave. Transactions made via this chain are paid with AVAX.
- Platform Chain (P-Chain)
This coordinates among the network validators, tracks active subnets, and allows the creation of new ones. A subnet is a group of validators that provides consensus for custom blockchains. The chain can validate or track multiple blockchains, but each blockchain can only be validated by one subnet and create as many as they would like. The chain also uses the Snowman consensus protocol to ensure all data introduced to any specific network is accounted for and consistent across every node on the said network.
- Contract Chain (C-Chain)
This allows anyone to create a user-defined smart contract in a matter of minutes without any programming knowledge. It enables the creation of smart contracts using a point-and-click interface. These smart contracts can also be distributed on a global scale rather than being confined to one specific computer program, making it stand out from other previously built platforms.
Proof-of-Stake
Avalanche uses a Proof-of-Stake (PoS) consensus where you validate a transaction by staking AVAX in the network. It is different from Bitcoin, which has a Proof-of-Work (PoW) consensus and to validate transactions, solving cryptography is done.
To become a transaction validator, users need to lock up at least 2,000 AVAX and delegate their stake to someone else. And to participate in the consensus by delegating tokens, one needs to delegate at least 25 AVAX tokens.
Avalanche use cases
Below is a chart that shows the applications on Avalanche. Notice a myriad of use cases in areas like DeFi, NFT, and gaming.
Use Case #1: Pangolin Exchange
Pangolin is a decentralized exchange (DEX) that uses automated market-making (AMM), where you can buy, swap or stake tokens. Although it is a DEX, it clears transactions as fast as a centralized exchange because it is built on Avalanche’s high-speed network.
Use Case #2: Trader Joe
Trader Joe is a one-stop trading shop on Avalanche which combines DEX and DeFi lending to offer leveraged trading.
Use Case #3: NFTrade
NFTrade aggregates all NFT marketplaces and anyone can create, buy, sell, swap, farm, and leverage NFTs across different blockchains.
Since Avalanche is a very young network that was only launched on the main net on 21 Sep 2020, it will definitely have more use cases in the future.
AVAX Token
AVAX is Avalanche’s native token and it has a maximum cap of 720 million tokens. It is similar to BTC and is even more scarce than other low-inflation blockchain currencies. Moreover, AVAX tokens are burned whenever the fees are paid, ensuring that their value won’t decrease over time.
AVAX can be traded on major crypto exchanges such as Binance, Coinbase, and FTX.
Conclusion
Avalanche is one of the contenders for “Ethereum killer” as it can perform many Ethereum functions but at a much faster rate.
The key would be for Avalanche to attract enough developers to build applications on top of it. On this aspect, Ethereum still is the one leading and all the other “Ethereum killers” have a lot of catching up to do. If they are not able to live up to user expectations, they will just fade into obscurity.
Avalanche is pretty unique in its design as it has 3 chains instead of 1, yielding a lot of speed advantages and low fees.
Additionally, the limited supply of AVAX and the deflationary burning of the tokens would provide the token with good price support.
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