Some users call Avalanche the “Internet of Finance”. In essence, the platform serves as the meeting point of the traditional market and the decentralized applications.
With a number of new crypto terms, new tokens, new digital platforms appearing, it is hard for newbies to immediately catch the whole idea about the crypto world. And it is even much more challenging to choose currencies worth investing in, for every token has its own virtues and shortcomings. This guide deal with Avalanche (AVAX) token that is now gaining mass adoption.
What is Avalanche (AVAX)?
Avalanche (AVAX) is a Decentralized Finance (DeFi) platform that allows interoperability between third-party tokens. Essentially, Avalanche is a blockchain-based platform where issuers can transact their tokens and at a low cost. Thus, the AVAX network has greatly improved the DeFi environment with a permissionless system where users can create their customized blockchains, both private or public.
Team and Investors
The headquarters of Ava Labs are located in New York City and Ithaca. Founded by a team of pioneering technologists and supported by finance experts, Avalanche is the perfect mix of innovation and experience to execute its visions and build the project into a truly global and permissionless smart contracts platform. The team behind Ava Labs is a group of leading experts in computing science, programming, economics, finance, and laws. Its leadership includes:
Emin Gün Sirer – American-Turkish computer science, the founder and CEO of Ava Labs;
Chris Lavery – a financial strategist in technology-driven environments, currently the Chief Financial Officer at Ava Labs;
Maofan “Ted” Yin – co-founder and researcher of Ava Labs, at present the Avalanche Chief Protocol Architect;
John Wu – a venture investor, the president of Ava Labs.
How Does Avalanche Work?
The platform allows the creation of decentralized applications (dApps). Users can create several dApps or their smart assets with a fast, permissionless, and secure system with interoperability. In addition, Avalanche works like a marketplace for DeFi users who want to swap, create, trade, and store their assets and products.
With Avalanche, users can create fully customizable blockchains. Specifically, they will create subnets with defined core logics and functions. They can be either permissioned or permissionless. Further, users can trade customized assets or digital representations of assets. They can also build highly-scalable smart contracts or decentralized applications.
By now, Avalanche has become popular among users in the DeFi ecosystem because it provides one of the most scalable blockchains in the industry. In addition, its platform offers highly-customizable products. Users can create smart contracts and dApps that are confirmed almost instantly with millions of validators in the network. Due to this feature, Avalanche is an attractive option for DeFi users.
Above all, with Avalanche, users can set the core system behind the blockchain they launch and define its own set of validators and functions. Programmers can build and dictate how their network works – this is how Avalanche provides users with total control and privacy of their creations.
The peer-to-peer payment system of Avalanche has proved to be one of the fastest, secured, and scalable networks in the DeFi space. Assets can be traded almost instantly with millions of validators online, which is an outstanding feature, considering that Avalanche processes over 5,000 transactions per second.
The protocol has grown to be one of the most valuable DeFi platforms, with currently over $3,200,000,000 in market capitalization.
What is AVAX Token?
The AVAX token is the native asset of Avalanche. Currently, its total supply makes up 720,000,000 tokens, and over 70,000,000 are in circulation. When a user transacts with AVAX, the amount is burned, which means the scarcity increases.
AVAX holders can stake their tokens in the Avalanche network. To do this, users have to create an Avalanche Wallet next to a Key Phrase. After the account verification, users can transfer their funds from the X chain, where custom assets are created and traded, to the P chain, where all the data is managed.
Once transferring tokens, users will receive a Transaction Identification (TXID) so they can delegate their tokens and choose a validator that best fits their preferences. In addition, users can set the timeframes for staking their tokens. Although, they can not withdraw tokens until the period is finished. And after that period has ended, users will not receive any additional rewards. AVAX holders are required to stake again.
Pros/Cons of Avalanche
An interesting feature of Avalanche is the variety of options presented to users who can set their own rules and preference with their products. In particular, the advantages of the platform are as follows:
Secure, powerful, and reliable applications and customizable private or public blockchains.
Ability to create assets on existing ecosystems or build a new network with defined parameters for validators.
High speed and scalability for dApps.
High trading volume – Avalanche can manage over 4,500 per second every day, making it one of the fastest and reliable P2P payment system.
Proof-of-stake instead of Proof-of-work algorithm. Usually, with proof-of-work, you have to resolve complicated sums and use extreme energy-consuming hardware that ultimately ends up being a higher amount than what you have earned mining. But Avalanche handles this issue.
Sub-sampled consensus protocol. A community of validators in the network has immense influence in deciding whether transactions are valid or not. For instance, a single validator receives a transaction but is unsure about its validity. To solve this, he will ask a small group of random validators if the transaction looks valid. If the number of validators votes in favor of the transaction, the validator accepts it. Likewise, the validator could discuss if a transaction looks invalid, despite what the community thinks.
High throughput and efficiency without risking decentralization.
The pros of the platform look attractive and encouraging. However, there are some disadvantages to consider:
Some transactions could delay if validators do not agree on their current status.
There is no liveness guarantee for conflicting transactions. For example, if a node decides to double-spend conflicting transactions, the protocol can not achieve a consensus on any of them. The lack of consensus will end, inevitably, in the loss of money.
The Future of Avalanche
Some users call Avalanche the “Internet of Finance”. In essence, it is the meeting point of the traditional market and the decentralized applications. Currently, the team behind Avalanche is working on its Avalance-X – an accelerator that provides great benefits for developers and their dApps, including derivatives, stablecoins, and several products that will greatly improve the future of decentralized finances.
Conclusion
Avalanche is currently a leading platform in the DeFi industry, as it provides users with several options for their projects. The protocol is revolutionizing the DeFi spaces with the support for several assets with its consensus engine. Besides, the interoperable ecosystem of Avalanche allows a solid groundwork for developers looking to customize and issue their smart assets, contracts, and personal blockchains.
