Introduction to Avalanche and its ecosystem

It can be argued that Bitcoin is currently the most influential and successful cryptocurrency. However, its blockchain does have its own shortcomings and limitations. As a result, alternatives such as Avalanche have emerged in an attempt to address said shortcomings. Below is a discussion about Avalanche, its functionality and its operation.

Rationales for Avalanche Blockchain

The main motivation for the creation of a new blockchain platform was the standard Proof of Work consensus algorithms. These blockchain networks can slow down and as a result, the cost of transactions can increase. In addition, the validation procedure in Proof-of-Work blockchain networks can also be resource-intensive, which hinders true decentralisation.

At the beginning of 2022, about 100 million individuals utilised cryptocurrencies. Such exponential development and use can cause network congestion difficulties in blockchain networks based on smart contracts. Many Ethereum-based DeFi apps, for instance, use layer 2 scaling techniques to address network congestion and failures. Although layer 2 scaling solutions lessen the load on the Ethereum mainnet, they add complexity that might jeopardise security.

As a result, Avalanche emerged as a layer 1 protocol with the needed degrees of decentralisation, security, and scalability. It is a blockchain platform with smart contract capabilities, allowing faster and cheaper transactions. The Avalanche crypto platform's primary aim is to provide an eco-friendly alternative to Proof of Work-based blockchain networks.

How Avalanche Works

The main innovation behind the Avalanche cryptocurrency platform is the merging of three distinct blockchains, as opposed to the standard choice of two. Such a distinctive design approach provides the AVAX blockchain with the needed benefits in terms of finality.

Each blockchain in the AVAX ecosystem performs a different specialised function, unlike a single blockchain doing all functions. The efficient allocation of work over many chains contributes to the Avalanche blockchain platform's agility. The network can simultaneously achieve the appropriate scalability, decentralisation, and security levels. Let's learn more about the capabilities of each blockchain under Avalanche's three-blockchain architecture.

Exchange Chain

Also known as X-Chain, Exchange Chain is the distributed ledger technology used to develop assets on the AVAX blockchain and to facilitate asset transactions. AVAX coin, the network's native token, is now the most popular cryptocurrency on the blockchain platform.

In contrast, other decentralised exchange tokens such as JOE, compete for widespread adoption. All X-chain transactions demand users to pay transaction fees in AVAX tokens. This is similar to the way of paying Ethereum gas costs when using ETH.

Contract Chain

The Contract Chain or C-chain is the next key aspect of the Avalanche cryptocurrency platform's operation. Smart contracts are a crucial feature of the AVAX blockchain technology since they facilitate the creation of decentralised applications. At the same time, developers also make use of the platform's scalability and security features. The contract chain executes smart contracts on the Avalanche blockchain and is compatible with the Ethereum Virtual Machine.

The EVM compatibility in C-chain enables the deployment of Ethereum smart contracts on the AVAX blockchain. Developers can access Avalanche capabilities using conventional Ethereum development tools. What relevance does this have in the crypto space? Numerous well-known Ethereum-based applications, particularly in the DeFi industry, such as Aave, benefit from deploying a variation of their product on the AVAX network.

Platform Chain

The platform chain or P-chain is the third component of Avalanche or AVAX's primary invention. The P-chain's fundamental goal is to enable anybody to develop layer 1 and layer 2 blockchain solutions. Users also build groups of L1 or L2 blockchain solutions.

In the Avalanche universe, such blockchains are referred to as subnets, with the P-chain serving as the default subnet. The P-chain aids in the landscape management of several Avalanche subnets by monitoring validators. Interestingly, subnets also assume responsibility for the P-validation. chain's

Key Features of the Avalanche Blockchain

The primary innovation of the Avalanche crypto platform, namely the three-blockchain approach, contributes to its expansion. However, the operation of AVAX describes its design.

Subnets

Subnets are functionally comparable to sharding on Ethereum 2.0. Subnets are the clone of the standard blockchain, which remains linked to the platform upon launch.

Users can generate subnets on demand and according to their needs. Consequently, a subnet might temporarily establish a new subnet upon reaching its scaling restrictions. Therefore, it could successfully meet the required traffic needs while also releasing transactions.

Avalanche's unrestricted ability to create subnets demonstrates how it can address the scalability difficulties of traditional blockchains. For instance, the P-chain supports about 4,500 transactions per second, twice as many as Visa. All subnets must verify the Primary Network's chain and their own. To validate the Primary Network, each subnet must be a member of the Primary Network to validate the Primary Network. Users become members of the Primary Network by staking over 2,000 AVAX coins on their site.

Avalanche Rush Program

An essential feature of AVAX's functions is the Avalanche Rush programme. The high transaction per second and EVM compatibility of Avalanche have attracted several of the most prominent names in the DeFi industry. Recently, the platform introduced the Avalanche Rush campaign as an incentive programme designed to increase liquidity in the AVAX ecosystem of DeFi applications.

The program's over $180 million funds provide liquidity providers with AVAX coin incentives as compensation. It has functioned as a productive initiative for significant DeFi initiatives such as Aave and Curve. They have also created Avalanche marketplaces.

Avalanche Bridge

The most notable feature of the AVAX blockchain is the Avalanche Bridge, which enables ERC-20 token trades. It is a crucial feature for maintaining interoperability inside the AVAX network. The bridge allows users to experiment with the AVAX blockchain using their current ERC-20 tokens. Consequently, the bridge provides the Avalanche blockchain with the potential for token liquidity worth billions of dollars. The bridge is compatible with many third party wallets, exchanges, and other systems for practically using ERC-20 tokens on the AVAX network.

AVAX Token

The native token of the blockchain platform, AVAX, is a utility token that functions as a medium of exchange. In addition to operating as a currency in the Avalanche ecosystem, it plays several other essential functions.

For instance, AVAX staking provides considerable assistance for network security. The AVAX deflationary token method focuses on the multiplication of staked platform values. Concurrently, the AVAX tokens used to pay transaction fees are permanently removed from circulation, thus lowering the total amount of AVAX tokens in circulation.

The Bottom Line

As a blockchain network with smart contract capabilities, Avalanche or AVAX presents a novel paradigm. It employs three blockchains to do various specialised activities.

The AVAX blockchain aims to ensure scalability and interoperability without sacrificing core blockchain characteristics. Moreover, the blockchain network is strengthened by providing capabilities such as subnets, the Avalanche Rush programme, and the ERC-20 token bridge.