What is Avalanche (AVAX) - A Comprehensive Overview

How Does Avalanche Work?

Avalanche is designed to achieve transaction finality in less than a second. Such swift processing speeds are made possible by the platform’s features.

Under the hood of the network is the Primary Network, a heterogeneous network of three interoperable blockchains:

• Contract Chain (C-Chain)

• Exchange Chain (X-Chain)

• Platform Chain (P-Chain).

These blockchains combine with the network’s revamped PoS consensus mechanism and subnets to provide higher throughput.

The Primary Network

This is a special Avalanche Layer 1 that runs three blockchains. Avalanche differs from other blockchains because it can have different blockchains that serve various applications. The Primary Network runs the following:

• C-Chain — This chain implements the Ethereum Virtual Machine (EVM) and supports the deployment and execution of Solidity smart contracts.

• X-Chain — This chain serves as the transaction execution layer, providing a conduit for sending and receiving AVAX and other Avalanche smart assets.

• P-Chain — This chain is the validation layer for all Primary Network-level operations. It handles the creation and tracking processes of subnets and new blockchains and the network’s validation and staking operations.

Avalanche Consensus

The Avalanche consensus is scalable, robust, and decentralized because it combines features of Nakamoto and classical consensus mechanisms. The superior, cherry-picked features of these two mechanisms enable the consensus to offer high throughput, fast finality, and consume considerably less energy in doing so.

The consensus protocol leverages repeated sub-sampled voting. A node that determines a transaction's validity gets the preference of a small, random subset of validator nodes. Each validator then gets to indicate the transaction it deems should be accepted.

If an adequate majority of the sampled majority reach a similar conclusion, their choice becomes the validator’s preferred choice. Therefore, transactions that have no conflict reach fast finalization. However, honest validators quickly converge around conflicting transactions when a transaction with a conflict exists.

They enter a positive feedback loop until all correct validators show preference for the transaction, accepting non-conflicting transactions and rejecting conflicting transactions.

The action flow of this process is summed up by the image below.

Avalanche Layer 1s (L1s)

Avalanche Layer 1s (L1s) are an evolution of Avalanche's multi-chain architecture, enabling the creation of independent, application-specific networks within the ecosystem. These L1s are dynamic subsets of Avalanche validators that achieve consensus on their blockchains, each with its own ruleset, tokenomics, and technical specifications.

L1s can use custom virtual machines, fee structures, and security protocols, allowing developers to tailor their blockchain environments for specific applications. Interoperability between L1s is ensured through Avalanche Warp Messaging (AWM), allowing seamless communication while maintaining independence.

A significant advantage of L1s is their performance isolation—activity spikes in one L1 don't affect others, ensuring consistent performance.

Recent changes from ACP-77 now allow validators to participate in individual L1s without needing to validate the Primary Network, enhancing flexibility and participation.

This makes Avalanche L1s versatile, catering to diverse use cases across gaming, finance, and enterprise applications.

What makes Avalanche Blockchain useful?

Avalanche blockchain employs a fast consensus mechanism that facilitates quick finality and low latency. It is also built to scale, allowing developers to create and deploy application-specific blockchains or leverage existing public or private Avalanche L1s.

The network is energy-efficient and runs effortlessly on consumer-grade hardware. It also provides diverse options because developers can build on the network’s iteration of the EVM or build VMs from the ground up to address their specific needs.

Because of the architecture of its validation process, it is among the most secure blockchain networks for internet scaling systems.

The AVAX Token

What is the AVAX Token?

AVAX is the native token of Avalanche, essential for network operations. It secures the platform through staking, pays for transaction fees, and serves as the main utility for on-chain services.

AVAX holders can stake their tokens to help validate transactions, earning rewards in return, which strengthens the network's decentralization and security. It also acts as the unit of account for dApps built on Avalanche, making it central to the ecosystem.

AVAX Tokenomics

AVAX has a capped supply of 720 million tokens, with a deflationary model that burns a portion of transaction fees, reducing overall supply over time. Tokenomics are designed to reward validators and delegators, encouraging broad network participation.

Transaction fees are dynamic, based on network activity, promoting efficiency and adaptability. This economic model fosters a sustainable, growing ecosystem that benefits users, developers, and validators alike.

How to get started with Avalanche

Follow these steps to get started on Avalanche:

Create a wallet

Users require an AVAX-compatible wallet to store and manage tokens. Various platforms, including self-custody wallets, centralized exchanges, decentralized exchanges, and institutional custodians, support AVAX. Users should research extensively and settle on a suitable wallet. Note that self-custody wallets are ideal for long-term cryptocurrency holding.

Buy AVAX Tokens

Follow the steps below to buy AVAX tokens:

1. Sign up or log into an exchange.

2. Search for AVAX tokens and buy using approved payment methods.

3. Transfer the tokens to an AVAX-compatible wallet.

4. Use appropriately.

Staking AVAX Tokens

Token holders who stake AVAX earn rewards in exchange for facilitating transaction validation, creating platform stability, and securing the Avalanche blockchain, similar to staking mechanisms found on Sui Network and Injective blockchain.

We’ve written a comprehensive guide to the best Avalanche validators to help you.

Lava Labs: the team behinds Avalanche

Avalanche network was created by Ava Labs, a software company founded by Emin Gün Sirer, Maofan “Ted” Yin, and Kevin Sekniqi. Emin is a Computer Science professor at Cornell University and a renowned personality in the blockchain circles. Maofan and Kevin were his mentees and doctoral students during the formation of Avalanche.

Ava Labs has raised more than $350 million since inception. An ICO in 2020 raised $42 million, while a token sale organized by Avalanche Foundation raised $230 million, attracting big hitters such as Polychain Capital with participation from the now-defunct Three Arrows Capital. A seed round led by Andreessen Horowitz raised $6 million.

What is Avalanche: Closing thoughts

Avalanche is an innovative blockchain platform that effectively tackles the challenges of scalability, security, and decentralization faced by earlier networks. Its multi-chain architecture, subnets, and efficient consensus mechanism make it a powerful solution for building decentralized applications and custom blockchains.

With its flexibility and energy efficiency, Avalanche is well-suited to support diverse applications, positioning itself as a foundational pillar for the future of blockchain technology.