What is Avalanche(AVAX)? The Avalanche guide for dummies

Avalanche is a blockchain platform with smart contract functionality similar to Ethereum. It seeks to address the problems of scalability, decentralization, and security faced by blockchain platforms.

What makes Avalanche unique is that it is a rival of Ethereum that is also compatible with Ethereum. It uses the Solidity language for its smart contracts(the same as Ethereum) which can help achieve greater blockchain interoperability.

AVAX is the native currency of Avalanche which is used to pay for transactions on the network.

Who is Behind Avalanche?

Avalanche’s story begins with a pseudonymous group name “Team Rocket.” In May 2018, this group shared the fundamentals of Avalanche on the InterPlanetary File System(IPFS) in its white paper about a novel metastable consensus protocol family for cryptocurrencies.

The white paper introduced new leaderless Byzantine fault tolerance protocols. Further research was conducted on it by researchers from Cornell University. After the research stage, Avalanche was launched in 2020 by Emin Gün Sirer, a computer science professor and CEO-co-founder of Ava Labs, and doctoral students Maofan “Ted” Yin and Kevin Sekniqi.

The start-up raised $42 million during the first public sale of its digital currency AVAX held on July 15, 2020. In addition, Avalanche is the first occupant of the Praxis Center for Venture Development. 

Since then, it has been steadily growing and in December 2022, Avalanche announced its partnership with Alibaba Cloud to power the company’s Node-as-a-Service initiatives.

How Avalanche Works

How Avalanche Works

Avalanche deploys some new and unique technologies to deliver on its promise of being a fast, low-cost, secure, and eco-friendly dApp platform without diluting its decentralized nature. It is a multi-chain platform with three in-built blockchains.

The Primary Network, composed of all Avalanche validators, validates all three blockchains.

The Exchange Chain(X-Chain)

This is the default chain where digital smart assets are created and traded. Transactions on the X-Chain are always paid in AVAX, Avalanche’s native cryptocurrency.

The Contract Chain(C-Chain)

C-Chain is based on Ethereum Virtual Machine(EVM) and is used for the creation and execution of smart contracts. Due to its similarity to EVM, smart contracts on Avalanche can take advantage of cross-chain interoperability.

The Platform Chain(P-Chain)

P-Chain is crucial for the establishment and management of Subnets on Avalanche. In addition to that, it coordinates validators and also implements the Snowman Consensus Protocol.


On Avalanche, users can build specialized individual chains that are connected to the Mainnet but don’t take up space on it. They generally operate according to their own rules and help Avalanche avoid ballooning transaction fees and network congestion.

The term subnets(or subnetworks) refers to a set of validators that validate a particular set of blockchains. A validator can be a member of many subnets but each blockchain is validated by exactly one subnet. Avalanche’s 3 main blockchains are validated by a special subnet consisting of all the Avalanche validators and are called Primary Network.

Subnets have their own token economics and rules about membership. They may require a potential validator to fulfill certain conditions before joining. Some examples include domicile in a particular country and KYC verification. This makes regulatory compliance on the platform manageable.

In return for joining a subnet and helping in creating consensus, validators are provided with incentives by subnet owners. These incentives are customizable and differ from subnet to subnet.

Avalanche Consensus Protocol

Blockchain platforms depend on a peer-to-peer network to certify transactions. Participating nodes have to create a consensus to validate a transaction. Proof-of-Work(PoW) and Proof-of-Stake(PoS) are the two leading consensus mechanisms. Bitcoin is known for using PoW while Ethereum shifted to PoS in 2022.

Avalanche’s consensus protocol is a bit different. It builds its foundation on the PoS system but includes a system of repeated sub-sampled voting. Before accepting or rejecting a transaction, the validator asks a small, random subset of validators about the transaction. If the querying validator’s opinion is in conflict with the other validators, the transaction would not be immediately accepted.

This sampling process continues till a consensus is reached. If a sufficient number of validators think the transaction should be approved, the particular transaction is accepted. Vice versa, if several validators disapprove of the transaction, then the transaction is rejected.

Snowman Consensus Protocol

Snowman is a completely ordered consensus mechanism that is optimized for smart contracts and boasts of high throughput. Accordingly, it is mainly implemented by the P-Chain and the C-Chain. It can confirm transactions in less than a second and can process 4,500 transactions per second.

It is also more eco-friendly as it is based on a more efficient proof-of-stake system rather than proof-of-work. Snowman also guarantees better security than the usual 51% standard of other networks.

AVAX- Avalanche’s Cryptocurrency

AVAX- Avalanche’s Cryptocurrency

AVAX is the native cryptocurrency token of Avalanche. Often called the “red coin”, its supply is fixed with a maximum limit of 720 million tokens. Out of this, 311 million tokens are estimated to be in circulation in 2022.

Serving as a medium of exchange on the Avalanche network, AVAX tokens are burned after the transaction fee has been paid. It’s similar to how the gas fee is paid on Ethereum with ETH. The difference is that the gas fee on Ethereum is only partly burned while Avalanche fully burns AVAX.

Though it is a relatively new currency that debuted only in 2020, AVAX has steadily climbed the charts. Avalanche, which is now considered a promising rival to Ethereum, has announced a series of partnerships over two years. This has helped raise the value of AVAX.

The most significant example of this is AVAX’s price nearly reaching $145 in November 2021 after Avalanche announced its partnership with Deloitte. Though since then, AVAX prices have been plummeting and in December 2022, its price was hovering between $11-$13.

What does Avalanche Crypto Do?

Avalanche’s cryptocurrency token AVAX comes with multiple use cases. Some of them are:

1. Medium of Exchange

AVAX is the principal medium of exchange on Avalanche. Users use it to pay for transactions on the network after which the tokens are burned.

2. Staking

For Proof-of-Stake based networks like Avalanche, some amount of crypto has to be “locked” or staked to validate transactions. On Avalanche, users have to stake 2,000 AVAX to be able to become validator nodes.

3. Unit of Account

Avalanche has something called subnets. A subnet is an independent network with its own membership rules and token economics. Multiple subnets use AVAX as a basic unit of account.

4. Investment

Like other cryptocurrencies, AVAX is also seen as an investment option by people looking to take advantage of the price volatility of cryptocurrencies.

Avalanche Wallet

Avalanche Wallet

Just like you keep a wallet to store your cash, you need a wallet to store your AVAX. Avalanche has its own wallet to store Avalanche assets. It is a simple, secure, and non-custodial wallet. Avalanche wallet also has cross-chain capabilities for staking within the wallet.

However, third-party wallets are also available for safely storing AVAX. Such wallets are mostly of two types-hot or cold.

Hot “online” wallets are those that remain connected to the internet all the time. They are like software that keeps your crypto in it. Hot wallets are quite convenient to use as the tokens can be easily accessed anytime you want to make a transaction.

On the other hand, cold “offline” wallets are not always connected to the internet. They are in hardware form often resembling a USB stick. Cold wallets are considered to be more secure than hot wallets because they are not 24/7 connected to the internet. This reduces their vulnerability to hacking attempts.

Also, based on the custody of the wallet’s private key, a crypto wallet can be either custodial or non-custodial. In the case of custodial wallets, the private key to the wallet is managed by the service provider. 

Whereas in non-custodial wallets, the users have complete control over the funds and the private key. They are also known as self-custodial wallets that let users be their own bank. Freewallet, Binance, and BitMex are examples of custodial wallets while Electrum, Exodus, and Trezor One are in the category of non-custodial wallets.

Avalanche Core

In June 2022, Ava Labs launched its newest offering- Avalanche Core. It is a non-custodial Web3 browser extension that brings together Avalanche dApps, subnets, and bridges in one integrated browser experience.

As per Ava Labs, Core’s main features are simplicity, convenience, practicality, and security. Along with a seamless experience of Avalanche apps, users can deploy Bitcoin across Avalanche’s decentralized finance ecosystem with Core.

A major advantage of Core is that it is compatible with not only Avalanche, Bitcoin, and Ethereum but also all other Ethereum Virtual Machine(EVM)-compatible blockchains.

In December 2022, the second phase of Core wallet development was initiated with the launch of Core Mobile for Android. Now, users have the option to use Core either from the web or as a browser extension, or from their mobile.

How to Buy AVAX

How to Buy AVAX

Buying AVAX is quite an easy process. You just need to follow some simple steps to get your hands on the ‘red coin.’

1. Selecting an Exchange

First, you need to find an exchange that sells AVAX. Most top exchanges like Coinbase, Kraken, and Crypto.com carry AVAX. Different exchanges have different trading fee structures, security infrastructure, and minimum token thresholds.

Make your choice after carefully considering all the factors and whether centralized or decentralized exchanges are better for you.

Centralized Exchanges(CEXs)

CEXs are like traditional stock exchanges except that they deal in cryptocurrencies. They act as a broker between crypto buyers and sellers and charge a transaction fee for the same. CEXs are mostly KYC-compliant and require ID verification before they allow trading. Kraken, Binance, and Coinbase are some examples of centralized exchanges.

Decentralized Exchanges(DEXs)

DEXs are like a marketplace where crypto buyers and sellers directly interact with each other. There is no middleman and there is a high level of privacy and anonymity. DEXs are probably better for experienced traders since they can be difficult to navigate for novices. Bisq is a good example of a decentralized exchange.

2. Making an Account

You can easily create an account on your selected crypto exchange by going to their website or by downloading their app(if they have one). Remember that most centralized exchanges are KYC-compliant and would require some form of ID verification before you can start trading. This is often not the case in decentralized exchanges.

3. Transferring Funds to Your Account

You need to connect your account to a funding source. It could be either your bank account or you can use your debit or credit card. Find out the transaction fee associated with each method before choosing one.

4. Placing an Order

Now, you are all ready to trade in AVAX. All you have to do now is place an order, make the payment and confirm the transaction. Note that certain exchanges might have minimum or maximum thresholds of tokens that can be purchased at once.

5. Storing AVAX

Next, you have to make sure that your AVAX coins are safely stored. You can choose between hot and cold wallets depending on your requirements. Avalanche itself also has a native Avalanche wallet for storing AVAX.

Is Avalanche Better than Ethereum?

Is Avalanche Better than Ethereum?

Avalanche belongs to a category of Web3 platforms that are colloquially called “Ethereum Killers”. This includes platforms like Cardano, Solana, and now Avalanche too.

Though Ethereum is a pioneer in the smart contract and decentralized apps(dApps) domain, it suffers from certain drawbacks that platforms like Avalanche hope to improve upon.

Avalanche, for example, is based on the idea of solving the trilemma of scalability, decentralization, and security faced by other platforms like Ethereum.

For instance, Avalanche can process around 4,500 transactions per second while Ethereum could originally process only around 15 transactions per second. This is expected to increase now that Ethereum has successfully implemented its Merge Upgrade in 2022.

Another difference between the two is that while the entire processing fee is burned on Avalanche, Ethereum only burns a part of the gas fee. The transaction fee on Avalanche is overall much lower than that of Ethereum.

Avalanche’s defining feature of having a multi-chain design gives it incredible scalability possibilities. This certainly gives it an edge over Ethereum which has always struggled with scalability problems. These properties make many supporters term Avalanche a truly viable alternative to Ethereum.

However, it should be remembered that while Avalanche offers many new things, Ethereum is still the biggest and most popular smart contract platform. It has a first-mover advantage and it currently dominates the decentralized finance(Defi) space.

Further, Ethereum’s native token Ether(ETH) is the second-largest cryptocurrency by market cap. Avalanche’s AVAX token has a lot of catching up to do in this regard.

Also, while Avalanche is a competitor to Ethereum, it should be remembered that it is also compatible with Ethereum.

Avalanche’s smart contracts, like Ethereum, are written in the Solidity programming language which facilitates greater blockchain interoperability. Well-established DeFi projects like Aave and Curve were originally built on the Ethereum blockchain. But now, they have also been integrated with the Avalanche ecosystem. The Avalanche Bridge is also used to transfer tokens from Ethereum to Avalanche.

Whether Avalanche would be able to overtake Ethereum or not depends on a number of factors. While Avalanche has new features and technologies that make it a more attractive option, the DeFi and dApp ecosystems are firmly entrenched with Ethereum. Changing that is not going to be an easy task.

Avalanche vs. Solana

Avalanche vs. Solana

Both Solana and Avalanche are platforms that are known as “Ethereum killers.” They are both new-generation blockchain networks with fast transaction processing and low fees.

When it comes to speed, Solana is the clear winner. It has the theoretical capacity to process as many as 50,000 transactions per second at a negligible cost of $0.00025 per transaction. Whereas Avalanche can process only around 4,500 transactions per second.

Solana uses the proof-of-stake consensus mechanism along with the more novel proof-of-history to validate transactions. Avalanche, though it builds on the proof-of-stake protocol, its consensus mechanism is rather different with repeated sub-sampled voting. 

Both Solana and Avalanche have attracted funding and developers since their debut but while Avalanche has been relatively stable, Solana has been embroiled in a myriad of issues.

Solana has been suffering from multiple security breaches; three being in 2022 itself. It has also struggled with frequent network outages. A major outage in September 2021 caused the network to go offline for nearly 18 hours.

The FTX crisis has also spelt trouble for Solana as FTX CEO Sam Bankman-Fried was a major backer of Solana. Its native token SOL was also known as a “Sam Coin”- a term for cryptocurrencies in which Bankman-Fried either invested in or were majorly backed by him.

However, both Solana and Avalanche have a lot to offer to investors and users. While it is difficult to say whether any of them would be able to effectively “kill” Ethereum or not, they do present interesting options for developers to build their dApps.


Avalanche is a new-generation open-source platform for building decentralized apps. It has some unique features like a multi-chain system and user consensus-governed transaction fees.

Described as a “blazingly fast, low cost and eco-friendly” platform, Avalanche assures developers that they can easily create fast, low cost and Solidity-compatible dApps.

Billed as a leading rival to Ethereum, Avalanche looks to support a thriving DeFi ecosystem with safety guarantees and quick finality without compromising on the decentralized aspect.

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