What is AVAX and what are its use cases?
If you click on this article, chances are that you are probably wondering what AVAX is and what Avalanche can be used for. So, let’s find out at Bitkub Academy!
What is Avalanche (AVAX)?
Avalanche (AVAX) is a blockchain network that aims to be the platform for decentralized application development through smart contracts. It has a main currency called AVAX that has many functionalities on the platform other than being a store of value.
The Avalanche network was created by Ava Labs led by Emin Gün Sirer, Kevin Sekniqi, and Maofan “Ted” Yin in 2018. They later issued an ICO (Initial Coin Offering) in 2020. The creators wanted Avalanche to be a fast network that has low fees and scales efficiently, while also maintaining the benefits of blockchain technology like decentralization and security.
How the Avalanche Network Works
The Avalanche network has 3 blockchains that can cooperate with one another. These 3 blockchains are X-Chain, C-Chain, and P-Chain. Each was designed to have a different structure and mechanism so that it can serve a more specific function in the most efficient way.
X-Chain (Exchange Chain) is created to be a means to transfer value in the forms of the network’s main currency or other tokens. It has its own consensus algorithm called “Avalanche Consensus.”
C-Chain (Contract Chain) is the blockchain where developers can create smart contracts for decentralized applications (dApps) on the Avalanche network. Its consensus algorithm is called the “Snowman Consensus.” This blockchain is also compatible with the Ethereum network, which means developers can use Ethereum’s programming languages to create dApps on Avalanche.
P-Chain (Platform Chain) is the blockchain that connects subnetworks to the Avalanche networks so that validators can confirm transactions and maintain the network’s security. The P-Chain also uses the Snowman consensus algorithm.
With the 3 blockchains working together, Avalanche can process transactions faster without sacrificing decentralization, while validators can connect to the subnets to keep the whole network secure.
Avalanche’s smart contract function can be used to create many forms of dApps in the network. This includes fungible and non-fungible token creations. Fungible tokens are tokens that are created to be exactly the same, like bitcoin or ether, while non-fungible tokens are created to be unique and are not interchangeable.
As for the network’s consensus algorithm, Avalanche has its own consensus algorithms that work similarly to the Proof-of-Stake consensus algorithm. Users can help secure the network by staking their coins to validate transactions, take part in a decentralized network and solve high electricity consumption problems of older blockchains.
However, its consensus algorithms are not exactly the same as the traditional Proof-of-Stake consensus algorithm. The Avalanche Consensus uses Directed Acyclic Graph (DAG) to randomly choose validators to validate transactions in parallel. This means that multiple transactions can be confirmed at the same time without having to wait for one transaction to be confirmed before another.
The Snowman Consensus works similarly to the Avalanche Consensus. Its main difference is that it orders transactions linearly, which is more beneficial when it comes to the execution of smart contracts.
Moreover, the network is also set to burn the fees on a regular basis. This strengthens the networks and helps control inflation. This is different from the networks that do not have a fixed supply of their coins since those kinds of networks are at risk of having an oversupply of coins, which will reduce their price eventually.
Avalanche is an open-sourced network where developers can share their codes for creating smart contracts and dApps. This encourages development on the network and makes it more accessible. Furthermore, it is also Ethereum Virtual Machine compatible, which means it supports the same programming languages as the Ethereum network.
The benefit of being EVM compatible is that it can also attract more developers to the network. Since many are already familiar with the Ethereum network, they can start creating dApps on Avalanche right away with minimal changes, while harnessing the benefits of Avalanche like higher speed and lower fees.
X-Chain, C-Chain, and P-Chain were created to solve the problem called “Blockchain Trilemma” that many blockchains are facing. This means that Avalanche can achieve scalability, while still maintaining security and decentralization at the same time. This is achieved with the help of subnets that can support more transactions and more validators.
In reference to statistics from Coinmarketcap on December 19, 2021, AVAX is ranked as the 10th highest in terms of market capitalization, with around 27.1 billion U.S. dollars or around 909 billion Thai baht. AVAX’s maximum supply is fixed at 395,327,536 with a current 243,188,662 AVAX in circulation.
Additionally, AVAX once made an all-time high at 4,751 baht and is hovering around the price of 3,745.11 baht at the time of writing.
When did Avalanche raise funds?
Avalanche first issued an Initial Coin Offering (ICO) in 2020, where it set its target fund at around 9.5 million dollars. Around 19 million AVAX coins were sold during the ICO. At the time, the price was at 0.5 dollars or around 16 baht. Comparing that to the current price, AVAX has grown quite significantly.
Avalanche is one of the smart contract blockchain networks that are quite remarkable. At the time of writing, it is ranked as the 10th largest cryptocurrency in terms of market capitalization.
However, every investment involves risks. Investors are encouraged to do their research before investing. Bitkub Academy hopes that you have learned something new with us today. See you again in the next post.