Blockchain platforms have evolved in a drastic way, primarily due to the effect of Bitcoin. Many of them would be quick to point out that Bitcoin was probably the first use case of blockchain technology. The design of the Bitcoin blockchain has been a benchmark for many cryptocurrencies which came after it.

However, the Bitcoin blockchain has some prominent problems which are becoming formidable points of concern. Therefore, alternatives like Avalanche or AVAX have evolved in the crypto space for resolving the common setbacks with existing crypto blockchain networks. 

Even if the big crypto players such as Bitcoin and Ethereum have huge market share, new competitors bring a spark of innovation and new value advantages. The following discussion helps you learn more about Avalanche crypto and how it works in detail. You can also find a comprehensive overview of the functionalities of the AVAX token alongside key features of the blockchain platform.

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Underlying Rationale for Building Avalanche Blockchain

Before diving into the introduction to Avalanche blockchain, it is important to identify the underlying motivation for the platform. What exactly drove the developers to come up with the new blockchain platform? First of all, the conventional Proof of Work consensus mechanisms in blockchain networks results in slow and costly transactions. Furthermore, the validation process in Proof of Work blockchain networks is highly resource-intensive, thereby inhibiting decentralization

Changing Times Need Solutions Which Can Adapt 

At the same time, all these setbacks affect blockchain adoption, primarily drawing attention to the need for scalable solutions. Following the launch of Bitcoin in 2009, the technical limitations did not matter, especially with the limited user base. Fast forward to today, we have a thriving blockchain and crypto landscape with the introduction of many crypto assets. The growth of NFTs and DeFi is a clear example of how the blockchain landscape would only expand further with access to a diverse range of opportunities. 

You need to understand the problems in conventional blockchain platforms before trying to reflect on “what is avalanche” and how it works. For instance, almost 100 million people worldwide were reportedly using cryptocurrencies at the beginning of 2022. DeFi applications have garnered mainstream popularity and have almost $100 billion worth of assets locked in various DeFi protocols and services. 

Such levels of exponential growth have been responsible for driving network congestion issues for smart contract-based blockchain networks. For example, Ethereum and Solana. Many Ethereum-based DeFi applications utilize layer 2 scaling solutions for resolving the concerns of network congestion and outages. While layer 2 scaling solutions reduce the burden on Ethereum mainnet, they increase the complexities which can compromise security. 

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The best solution for all these problems – Avalanche Blockchain!

Yes, you have heard it right! Avalanche emerged as a plausible layer 1 protocol with desired levels of decentralization, security, and scalability. It is basically a blockchain platform with smart contract functionalities, which can enable improved transaction speeds alongside reduced costs. Most important of all, the Avalanche crypto platform aims to offer an eco-friendly alternative to the traditional Proof of Work-based blockchain networks. It arrived on the crypto landscape in 2020 and has climbed up the ranks of cryptocurrencies with ease. 

The most prominent highlight of the smart contract-enabled blockchain platform is the TVL or Total Value Locked with the protocol. With a TVL of almost $3 billion spread throughout different dApps, the Avalanche blockchain marks a strong influence in the blockchain market. The developers, Ava Labs, determined to create the world’s fastest blockchain, have been able to garner the support of a passionate community, dedicated supporters, and investors alongside a competent team. How is Avalanche special from other blockchain networks? You can find the answer to this question by reflecting on its history.

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Background of Avalanche Blockchain  

The origins of Avalanche or AVAX blockchain go back to 2019 when the platform found its roots. The founder of AVAX, Dr. Emin Gun Sirer, had the aim to achieve the best possible “time to finality” in the case of blockchain transactions since the first day. 

You need to note that the “time to finality” is basically the time required for processing a crypto transaction and its verification as irreversible and permanent. After achieving finality, a crypto transaction becomes “final,” and it is practically impossible to alter or roll back the transaction. Therefore, one could conclude that finality is a prominently valuable blockchain feature, particularly for financial applications. 

On the other hand, “time to finality” is not always the same for all blockchain networks. For example, Ethereum can achieve finality in around one minute. Avalanche, on the contrary, can help in achieving finality within one second, thereby facilitating almost near-instant transactions. 

The founders and developers behind AVAX claim that they have developed one of the fastest blockchain platforms with smart contract functionalities. Even if the vision for such a platform seemed impossible a few years ago, Avalanche blockchain has achieved the ambitious vision. 

Today, the live AVAX mainnet hosts a diverse, expanding community with the backing of an ecosystem fund valued at $230 million. The AVAX blockchain is a clear favorite for almost near-instant finality. However, it is important to wonder how it achieves the same. You can find the answers to your doubts by reflecting on how it works. 

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Working of Avalanche

If you want to understand how Avalanche is a better alternative in the crypto space now, you have to reflect on its working. You need to dive deeper into the technological foundations of AVAX before exploring its functionalities. The core innovation supporting the Avalanche crypto platform is the combination of three different blockchains in comparison to usual picks. Such a unique design choice offers the desired advantages in terms of finality for the AVAX blockchain. 

Every blockchain in the AVAX ecosystem serves a distinct specialized task rather than burdening one blockchain with all tasks. The effective distribution of tasks across different chains helps in maintaining agility of the Avalanche blockchain platform. At the same time, the AVAX blockchain network can also achieve the desired levels of scalability, decentralization, and security. Let us learn more about the functionalities of each blockchain in the innovative three-blockchain model of Avalanche

  • Exchange Chain 

Exchange Chain, also known as X-Chain, is the distributed ledger technology used for developing assets on the AVAX blockchain. It also facilitates transactions of the assets. Presently, the native token of the platform, i.e., AVAX coin, is the most popular cryptocurrency on the blockchain platform. 

On the contrary, other decentralized exchange tokens such as PNG and JOE are also in the race for popularity. All the transactions on X-chain require fees that users must pay in the form of AVAX tokens. This is basically similar to the method of paying gas fees on Ethereum with ETH. 

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  • Contract Chain

The next crucial highlight in the working of the Avalanche crypto platform is the contract chain. Smart contracts serve as a key functionality in the AVAX blockchain platform as they help developers in creating dApps on the platform. At the same time, developers could also capitalize on the scalability and security benefits associated with the platform. The contract chain or C-chain executes smart contracts for the Avalanche blockchain while also providing compatibility with Ethereum Virtual Machine. 

The EVM compatibility in C-chain offers the flexibility for deploying Ethereum smart contacts on the AVAX blockchain. As a result, developers could access Avalanche features through familiar Ethereum developer tools they use regularly. How does this matter in the crypto space? Many popular Ethereum-based apps, especially in the DeFi sector, like Aave, could find better prospects for deploying a specific variant of their product on AVAX blockchain. 

  • Platform Chain

The final element in the core innovation of Avalanche or AVAX is the platform chain or P-chain. The primary function of the P-chain focuses on enabling anyone to develop layer 1 or layer 2 blockchain solutions. It can also allow users to create groups of L1 or L2 blockchain solutions

In the world of Avalanche, you can term such blockchains as subnets, where the P-chain serves as a default subnet. Furthermore, the P-chain also helps in managing the landscape of different Avalanche subnets through monitoring of validators. Interestingly, subnets also take on the responsibility for the validation of the P-chain.

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Key Functionalities of Avalanche Blockchain

The growth of the Avalanche crypto platform relies considerably on its core innovation, i.e., the three-blockchain model. However, the working of AVAX only defines how it has been designed. You might be wondering about the possible ways in which it delivers value to users. This is where you need to take note of the key functionalities of Avalanche, such as the following.

  • Subnets

One of the significant aspects in any introductory guide on “what is avalanche” would be subnets. They are basically similar in function to sharding on Ethereum 2.0. You can think of subnets as the clone of a default blockchain, which stays connected to the platform at the time of launch. 

Users can create subnets on-demand and according to their requirements. Therefore, a subnet could launch another subnet upon temporary exhaustion of its scaling limits. As a result, it could fulfill the desired traffic demands alongside freeing up transactions effectively. 

The unlimited scope for subnet creation on Avalanche clearly points out how it can resolve scalability issues of conventional blockchains. For example, the P-chain offers a limit of almost 4500 transactions per second, which surpasses that of Visa by two times. All the subnets must validate the Primary Network chain as well as their own blockchain. Each subnet must be a Primary Network member for validating the Primary Network. Users can become a Primary Network members by staking more than 2000 AVAX coin on the platform. 

  • Avalanche Rush Program

Another significant highlight in the functionalities of AVAX is the Avalanche Rush program. The high transaction per second alongside EVM compatibility with Avalanche has been attracting many top names from the DeFi landscape. Recently, the platform launched the Avalanche Rush program, tailored as an incentives program for fuelling liquidity in the AVAX ecosystem of DeFi apps. 

The program has a fund valued at almost $180 million, which offers rewards to liquidity providers with AVAX coin incentives. It has served as a prolific initiative for notable DeFi projects like Aave and Curve. They have launched Avalanche markets, and many other DeFi players such as Kyber Network and Sushi have joined recently. 

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  • Avalanche Bridge

The most striking functionality in the AVAX blockchain is the Avalanche Bridge to facilitate ERC-20 token swaps. It is an important functionality for ensuring interoperability in the AVAX blockchain. The bridge ensures that users can try out the AVAX blockchain with the existing ERC-20 tokens in their possession. As a result, the bridge opens up the Avalanche blockchain to the opportunity of billions of dollars in terms of token liquidity. The bridge can work seamlessly with platforms like Metamask for efficient use of ERC-20 tokens on the AVAX blockchain. 

  • AVAX Token

The final and one of the integral components in answers to “what is avalanche” refers to the native token of the platform. The native token of the blockchain platform, i.e., AVAX coin, is basically a utility token working as the common medium of exchange. It also serves many other significant purposes other than serving as currency in the Avalanche ecosystem. 

For example, AVAX staking offers significant support for securing the network while incentivizing the stakes with more AVAX tokens. The AVAX deflationary token mechanism relies on compounding the value obtained from staking on the platform. Simultaneously, the AVAX coin used for paying transaction fees goes away from the supply, thereby reducing the circulating supply of AVAX tokens permanently. 

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Bottom Line

The detailed overview of the Avalanche blockchain provides vital insights into the promises it holds for the future of crypto. As a new-generation blockchain network with smart contract functionalities, Avalanche or AVAX brings an innovative model to the table. It utilizes three different blockchains for addressing different specialized tasks pertaining to crypto transactions.

At the same time, the AVAX blockchain also facilitates the assurance of scalability and interoperability without compromising on fundamental blockchain traits. Furthermore, the support of functionalities such as subnets, the Avalanche Rush program, and the ERC-20 token bridge empowers the blockchain network. Learn more about the AVAX blockchain in detail right now and identify the possibilities for its growth in the future.

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!