What Is Avalanche Network (AVAX) And How Does It Work?

May

31

By admin // in Business

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Avalanche’s goal is to increase scalability without sacrificing speed and decentralization. The platform is based on three blockchains: the exchange chain (X-Chain), the contract chain (C-Chain) and the platform chain (P-Chain). The X-Chain is used to create assets and trade. The C-Chain is for creating smart contracts. P-Chain coordinates between validators and subnets.

One of the most important advances in the protocol is Avalanche consensus, which uses repeated validator voting, making consensus building fast and affordable. Avalanche uses subnets for horizontal scaling to create configurable compatible blockchains. There is no limit to the number of possible subnets.

Introduction:

Cryptocurrency exchange script, as blockchain technology evolves, new solutions for scalability, interoperability, and usability emerge. The Avalanche network takes a unique approach, using three separate blockchains on its core platform. Thanks to the AVAX native token features and multiple consensus mechanisms, the Avalanche network calls itself “the fastest smart contract platform in the blockchain industry, as judged by time to completion.” In this article, we take an in-depth look at Avalanche’s solutions that have allowed the network to claim that title.

When was Avalanche launched?

The Avalanche blockchain was launched in September 2020 by the Ava Labs team from New York City. Ava Labs raised $300 million in funding, after which the Avalanche Foundation conducted a public and private token sale totaling $48 million. Avax Labs was founded by Kevin Sekniki, Maofan “Ted” Yin and Emin Kyung-Sirer.

What problems does Avalanche solve?

There are three main problems that the Avalanche network is designed to solve: scalability, transaction fees, and interoperability.

Scalability and decentralization:

Blockchains have always struggled to balance scalability and decentralization. A network with high activity may not be able to handle the load. For example, the Bitcoin (BTC) network took hours or even days to process transactions during periods of high congestion.

One way to increase speed is to increase centralization by giving fewer people the authority to check network activity. But decentralization is an important aspect of blockchain security. New blockchains are trying to solve this problem with advanced technological solutions, and the Avalanche network was able to create a unique approach, which we will look at next.

High fees:

Another common problem with large blockchains like Ethereum is high gas fees, which increase in proportion to the attendance and activity of the network. This hinders the attraction of new users to the blockchain space, but only less established ecosystems compete. Thus, Ethereum’s popularity and lack of alternatives has led to constant increased traffic and high fees. Commissions for simple transfers in it can be more than $10, and complex interactions with smart contracts exceed $100.

Compatibility:

When working with blockchains, different projects and businesses have different needs. Previously, projects were forced to work with Ethereum or other blockchains not tailored to their needs, or to use a private blockchain. However, finding a balance between customizability and compatibility across multiple blockchains is not easy. Avalanche offers its solution with subnets and customizable blockchains, combining security, speed and compatibility.

How does Avalanche work?

Avalanche uses a unique combination of methods that consists of three interoperable blockchains: the X-Chain, C-Chain and P-Chain.

  1. The X-Chain exchange is designed to create and exchange AVAX tokens as well as other digital assets. Transaction fees are paid to AVAX and the blockchain uses the Avalanche consensus protocol.
  2. The Contract Chain (C-Chain) allows developers to create smart contracts for the DApp. It partially implements the Ethereum Virtual Machine (EVM) to enable DApps that are compatible with EVMs. Chane uses a modified version of the Avalanche consensus protocol called Snowman.
  3. Platform Chain (P-Chain) coordinates network validators, keeps track of active subnets, and allows new ones to be created. It also uses Snowman. Because the different functions are distributed on separate blockchains, it allows for higher speed and better scalability. Avalanche developers have adapted consensus mechanisms to the needs of each blockchain. Users use AVAX as a common ecosystem asset for stacking and paying commissions.

How do Avalanche consensus mechanisms work?

The two Avalanche consensus protocols have a lot in common. Such a dual system guarantees improved network scalability and high transaction speeds.

Avalanche:

Unlike Proof of Work (PoW), Proof of Stake (PoS) or Delegated Proof of Stake (DPoS), the Avalanche protocol does not need a leader to achieve consensus. This factor helps increase the decentralization of the Avalanche network without sacrificing scalability. PoW, PoS and DPoS process transactions by a single entity whose work is also verified by a third party.

To optimize the consensus protocol, Avalanche uses a directed acyclic graph (DAG) so that the network can process transactions in parallel. Validators randomly check other validators to determine the validity of new transactions. Statistics show that after a certain number of repeated random checks, a transaction cannot be false.

All transactions are terminated immediately, without additional validation. The hardware requirements to run a validator node and verify a transaction are low and affordable, which improves performance, decentralizes and attracts new users.

Snowman:

The Snowman consensus protocol is based on the Avalanche protocol but arranges transactions in a linear fashion, which is extremely useful when dealing with smart contracts. Unlike the Avalanche consensus protocol, Snowman creates blocks.

AVAX token:

AVAX is an Avalanch native token with a maximum turnover of 720 million. All commissions on the network are burned by the deflation mechanism, which benefits the entire community. AVAX has three main uses:

  1. AVAX can be placed in a steking to become a validator, or delegate the process to another validator. Validators can earn up to 10% APY (annual percentage yield) and set an individual percentage fee for the fees they receive from delegates.
  2. AVAX serves as a common billing unit for all sub-networks, increasing compatibility.
  3. Transaction fees and subscriptions to subnets are paid to AVAX.

How do I add AVAX to Stacking?

AVAX owners can earn rewards by becoming a validator or by adding tokens to staking through another validator. To become a validator, you must add 2,000 AVAX to the stack. The hardware requirements are low: a standard laptop or desktop computer is enough to become a validator. You can also add tokens to the stack via another validator and receive rewards after a successful transaction confirmation.

Decentralization:

One of Avalanche’s main advantages is decentralization. Although the network is quite young, it already has a large number of validators (over 1,300 as of April 2022) due to its minimal requirements. However, AVAX is becoming more and more expensive as the price rises.

Compatible Blockchains:

The number of compatible Avalanche blockchains is unlimited. In this aspect, it directly competes with Polkadot, another project with customizable compatible blockchains. Yet Polkadot uses a limited Parachain Slots auction space, while Avalanche applies simple subscription fees.

Conclusion:

As an alternative to Ethereum for dealing with decentralized finance (DeFi) platforms, blockchains like Avalanche prove very attractive due to their compatibility with EVMs and low commissions. However, DeFi already has a long list of alternative platforms when it comes to scalability and speed.

The Avalanche network has been gaining popularity since its launch and has already caught up with Ethereum in the number of daily transactions. But it remains to be seen whether it can compete with other blockchains like Solana or Polygon.

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