Avalanche (AVAX) Crypto: What It Is, What It’s Worth and Should You Be Investing?

Bangkok, Thailand - 1 July 2021: Cryptocurrency on Binance trading app, Bitcoin BTC with altcoin digital coin crypto currency, BNB, Ethereum, Dogecoin, Cardano, defi p2p decentralized fintech market.
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Cryptocurrencies as a whole are not new. Bitcoin, the first cryptocurrency, has been around since 2009. It was created as a decentralized currency without any government influence. Inspired by Bitcoin, close to 10,000 cryptocurrencies have been created, as of January 2022. Though, since cryptocurrencies are easy to make and anyone can do it, it is estimated that nearly 90% of the crypto market is made up of the top 20 cryptocurrencies. This doesn’t include non-fungible tokens. Those add another layer to an already intricate world of digital currency.

One of those cryptocurrencies is Avalanche and its coin, AVAX. Even though Avalanche has been around just over a year, it seems that this platform and coin may have what it takes to become part of the top 20 cryptocurrencies. Read on to find out more and make your own opinion.

What Is Avalanche Crypto?

The Avalanche platform and AVAX coin were launched in 2020 by Ava Labs. Avalanche is a smart-contract platform that uses a proof of stake protocol. Claiming to have the fastest most secure cryptocurrency platform available, and having compatibility with Ethereum‘s blockchain and its blockchain as well, Avalanche will be tough competition for Ethereum. In addition to that, anyone can use the Avalanche platform to create their cryptocurrency. 

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Avalanche is designed to be a network of thousands of subnets to support a very stable coin. The idea is to have a diversified, decentralized interconnected network of blockchains made from many different people and places.

Quick Overview of Avalanche

Ava Labs stated on the second page of their whitepaper on the Avalanche platform, that they intended to have Avalanche be an inclusive platform where anyone could connect to the network, while also being scalable, flexible, decentralized, and, most importantly, secure. There are currently 220,286,577 AVAX coins in circulation, with a cap of 720 million.

Avalanche is recognized as having one of the fastest transaction rates and stiff competition for the Ethereum platform. It is a smart-contract platform, which means that developers can create self-executable programs that process the buy and sell agreements. 

How Avalanche Is Different From Other Crypto Platforms

AVAX is designed to compete directly with Ethereum. The latter was designed and released when much fewer people were using cryptocurrencies, so there were fewer transactions. It wasn’t an issue for the protocol to keep up with the transactions, but now Ethereum needs two layers to handle all the transactions on the platform.

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Avalanche can operate at an internet scale because it has three blockchains operating under one layer protocol. This significantly increases the amount of transactions Avalanche can handle at one time compared to Ethereum and, since it’s on one layer, it increases security as well.

Avalanche can achieve time to finality — the time it takes one transaction to process from beginning to being irreversible — in one second. This is compared to transactions on Ethereum’s platform taking one minute per transaction. This also reduces the fees per transaction, since fewer resources are used.

Avalanche’s team, Ava Labs, has even partnered with consulting firm Deloitte to improve Federal Emergency Management Agency funding. Deloitte will use the Avalanche blockchain to support disaster relief programs.

How Do the Avalanche Platform and AVAX Coins Work? 

Avalanche’s claim to fame is its three blockchains. Each blockchain has a job, rather than one blockchain to do everything.

How Does the Avalanche Platform Work?

The three blockchains are:

  • Exchange Chain (X-chain): The X-chain is responsible for transactions and creation on the blockchain. This is where assets are exchanged and trades occur. Because of the proof of stake protocol, this is also where AVAX coins are created.
  • Contract Chain (C-chain): The C-chain is where the smart contract happens. This is where developers can set up their decentralized apps. Ethereum contracts are also able to run on the C-chain, so existing Ethereum apps can migrate over. 
  • Platform Chain (P-chain): The P-chain is where subnets exist, which are blockchains that anyone can create. This is also where validation occurs so that AVAX coins can be created on the X-chain.

How Are AVAX Tokens and Coins Created?

AVAX coins are the native tokens for Avalanche. Rather than using a proof of work algorithm to create the coin, as Bitcoin does, Avalanche uses a proof of stake algorithm. Proof of stake is less energy-intensive and potentially a more secure method of creating coins.

Proof of stake requires users to purchase a certain amount of coins, 2,000 AVAX for Avalanche, to participate in a consensus. These owners then become ‘validators’ and are picked at random to receive the coin, rather than the competition-based mining of the proof of work algorithm. This algorithm uses less energy and is more accessible for people new to cryptocurrency.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

Diane Fogle is the owner and sole freelance writer at The Little Green Bird. She received her Masters of Library and Information Science from the University of Denver.  The research skills gained through that program, combined with a love of learning and intellectual freedom, have led her to a passion for helping businesses communicate with their customers. She lives in Colorado where she hikes with her husband, two young daughters and an old greyhound.

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