What Is Avalanche (AVAX)? – Cryptocurrency – Investopedia
Avalanche (AVAX) is a cryptocurrency and blockchain platform that rivals Ethereum. AVAX is the native token of the Avalanche blockchain, which—like Ethereum—uses smart contracts to support a variety of blockchain projects.
The Avalanche blockchain can provide near-instant transaction finality. AVAX is used to pay transaction processing fees and secure the Avalanche network and acts as a basic unit of account among blockchains in the Avalanche network.
The Avalanche blockchain reportedly can process 4,500 transactions per second. Launched in 2020, Avalanche aims to be fast, versatile, secure, affordable, and accessible. Avalanche is an open-source project, meaning that anyone can view and contribute to the platform’s code.
Avalanche’s smart contracts platform supports both decentralized applications (dapps) and autonomous blockchains. Here are some of the features that make Avalanche unique:
Avalanche is generally governed by the proof-of-stake mechanism. AVAX holders are required to stake—agree to not trade or sell—AVAX in exchange for the right to validate AVAX transactions. AVAX holders with the most staked, and who actively participate as validators, are the most likely to be chosen as validators for new Avalanche blocks. Holding AVAX tokens is also required to vote on Avalanche governance proposals.
Let's dig into what's to like and dislike about Avalanche:
Fast transaction processing times
Reward structure incentivizes participation
Capable of supporting many blockchain-based projects
Stiff competition from platforms like Ethereum
Avalanche validators must stake 2,000 AVAX tokens
Malicious or careless validators are never penalized by losing their AVAX
You may be wondering how Avalanche differs from Ethereum. Avalanche claims a faster transaction processing time—4,500 transactions per second versus Ethereum's limit of 15. The parallel nature of Avalanche's consensus protocol is what enables the Avalanche network to validate transactions significantly faster than Ethereum.
While Ethereum currently operates at a much larger scale, supporting many more projects and transactions, Avalanche's superior ability to scale may give the Avalanche platform a long-term advantage over Ethereum. Avalanche can support a large number of transactions without requiring more time to process those transactions.
Avalanche uses a proof-of-stake consensus mechanism, while Ethereum uses proof of work. The Ethereum platform is gradually transitioning to using proof of stake.
Avalanche and Ethereum also have different fee structures. All processing fees for Avalanche transactions are burned, while only a percentage of transaction processing fees are burned by the Ethereum network. Fees on both the Avalanche and Ethereum platforms vary based on the congestion or busyness of the network. The fee structure for the Avalanche platform is entirely controlled by user governance.
The easiest way to buy AVAX tokens is through a major cryptocurrency exchange like Coinbase or Kraken. The Avalanche platform also supports decentralized, peer-to-peer trading between AVAX and Ethereum-based tokens.
Avalanche can be considered secure because of the randomized nature of its consensus mechanism. Avalanche claims that its platform supports stronger safety measures that make the blockchain less vulnerable than other blockchains to 51% attacks.
AVAX is a cryptocurrency, which is considered a risky asset class. You can choose to invest in AVAX, but make sure to first understand the risks and limitations. It's smart to not invest more than you can afford to lose.
Avalanche (AVAX) is a cryptocurrency and blockchain platform that rivals Ethereum and is known for its speed and scalability. Avalanche's smart contracts platform supports both decentralized applications and autonomous blockchains.
Avalanche. "Blazingly Fast, Low Cost, & Eco-Friendly."
Avalanche. "Whitepaper: Avalanche Native Token ($AVAX) Dynamics 2020/06/25," Page 1.
Avalanche. "Whitepaper: Avalanche Native Token ($AVAX) Dynamics2020/06/25," Pages 6-7.
Avalanche. "What is Avalanche?"
Avalanche. "Keep Avalanche Secure. Earn AVAX."
Coinbase. "Scaling Ethereum & Crypto for a Billion Users."
Ethereum. "Proof-of-Stake (PoS)."
Ethereum. "Gas and Fees."
Pangolin. "Scale Your DeFi Trading with Pangolin."
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