What is Avalanche?

In this article we are going to learn about the Avalanche project and its AVAX token. Discover with us the full potential of this blockchain and its main features.

LThe Avalanche blockchain (AVAX) is a 3rd generation blockchain project created by the company Ava Labs and which was designed to offer a highly scalable blockchain, with economic commissions, low energy and computational consumption, added to the ability to process powerful smart contracts. of the Turing Complete type. All this with the aim of offering a real solution to the problems that users have been experiencing on other platforms such as Ethereum, whose bottleneck has been amplified to the point of making any interaction on it more and more expensive.

With this intention, Avalanche quickly made a place for itself within the crypto community, not only by fulfilling its promises of being a fast, efficient and secure blockchain, but also by offering tools that facilitate its adoption and interaction with other existing blockchains.

After two years of hard work and development, the Avalanche Network became a reality with the launch of the testnet in April 2020. After making sure that the entire network was working as it should, in July 2020 Ava Labs developed the ICO for the project. With the ICO, Ava Labs initially sought to finance all the infrastructure and development necessary for the completion of the network. This is how Ava Labs was able to raise more than 42 million dollars in less than 24 hours, with payments made in BTC, ETH, USDC, and USDT.

After the success of the ICO, Ava Labs began working on polishing all the remaining points of the project and by September 2020 it announced the launch of the mainnet, and began the release of AVAX tokens to all those who participated in the ICO. However, Avalanche's success was just beginning.

During its ICO each AVAX token was sold for a value of $0,5 but for the launch of the mainnet each AVAX token started at a value of $4,1, being one of the projects with the highest revaluation within the ecosystem. In fact, Avalanche is one of the few current projects in which its market launch price has not been repeated, staying above it at all times and making clear the enormous value and trust that its users have deposited in the project. .

How does Avalanche (AVAX) work?

Avalanche is a platform blockchain which seeks to offer the following:

1. Building a blockchain for decentralized applications spanning permissioned and permissionless (public) deployments.
2. Build arbitrarily complex digital assets with custom rules and on-chain programs.
3. Provide a unified platform for the creation, transfer and trading of digital assets.

Achieving these three goals is a task that Avalanche achieves thanks to the development of its protocol, governance system, and tokenomics.

Snowflake, the network consensus protocol

The cornerstone of how Avalanche works is its consensus protocol known as Snowflake. Snowflake has been designed to be a protocol with some curious capabilities that combine the best of traditional consensus protocols, along with the Nakamoto consensus protocol (the one applied to Bitcoin). Snowflake is built on top of a DAG (like the one we see in projects like IOTA), on which all network information is recorded using a UTXO scheme (the same scheme used in Bitcoin). The union of both schemes offers great flexibility when working with parallelism without sacrificing security at any time. 

In addition, among the improvements proposed by Snowflake, the design of a very low latency communication architecture should be highlighted. This first point has as a priority to allow the nodes to communicate with each other quickly. Thus, the information generated within the network can spread through it in a very short time and allow the nodes to quickly reach high levels of consensus.

A second improvement is directed to the mapping or recognition of the structure of the network. This is important because by knowing how the network is structured, the nodes are able to receive and send information more efficiently. This reduces the need to know 100% the real structure of the network. Instead, the system trusts that each node will send the information to other connected nodes, eliminating redundancy in such an operation.

Optimizing the use of resources

Basically, this process makes the communication and structure of the network more efficient, by sending/receiving the data necessary for its correct operation, optimizing communications and computing power within the network to the maximum. The latter is possible because each node polls a small, randomly chosen, constant-sized set of neighboring nodes, and changes its proposal if a supermajority supports a different value. Sampling is repeated until convergence is reached, which occurs rapidly in normal operations.

In fact, consensus within Avalanche using Snow is reached on average in just 2 seconds. Another point in favor of this type of operation is that Snow is capable of working asynchronously. This means that its nodes are capable of performing different tasks in parallel, obtaining as a final result a consent Tested in a fraction of the time and no crashes of any kind. All this allows Snow to achieve high scalability that can comfortably reach 10.000 TPS, if the connection between its nodes is low latency (<25 ms). Although in real use (with much higher latencies and low power equipment), the Avalanche's TPS reaches peaks of up to 2000 TPS.

Additionally, Snow has been created to work based on a Proof of Stake protocol, with a consequent reduction in the need for computation and energy for its operation. All this, without sacrificing system security to prevent attacks that could put the network at risk (Sybil Attack or 51% Attacks, to give examples).

Subnets in Avalanche

Another great curiosity of Avalanche is its operation divided into subnets. These subnetworks are called X-Chain, P-Chain and C-Chain. 

The X-Chain or Exchange Chain is the chain where all the payment operations that generally take place on Avalanche take place. For example, if we send some AVAX tokens from our wallet to an Exchange or service, that operation will be carried out on the X-Chain. 

The P-Chain or Platform Chain is the chain on which the secondary networks are coordinated, each with its own properties and characteristics. This subnet is used for the deployment of secondary services that maintain complete accounting separate from the network, but still use Avalanche to record the final-state of their operations and account for Avalanche's security. This subnet is perfect for implementing private networks or L2 scalability solutions. 

Finally we have the C-Chain or Contract Chain, which is where the AVM or Avalanche Virtual Machine is executed, and where the Avalanche Smart contracts and dApps are deployed. 

Avalanche VM (AVM), the network virtual machine

Avalanche's smart contract capabilities are made possible by the Avalanche VM (AVM), a virtual machine derived from the Ethereum Virtual Machine (EVM). Initially, the support of the AVM was equivalent to that of the EVM. However, the Avalanche development team plans to improve it in order to accommodate Avalanche's unique capabilities. Among these improvements we can highlight:

1. Smart contracts with off-chain execution and on-chain verification.
2. Smart contracts with parallel execution. Any smart contract that is not operating in the same state on any subnet in Avalanche will be able to run in parallel.
3. An improved Solidity, called Solidity++. This new language will support versioning, safe math and fixed point arithmetic, an improved type system, LLVM compilation (part of the clang project) and JIT (Just-In-Time).

For now, these improvements have not yet been realized, but AVM has full Solidity support, so any smart contracts built for Ethereum will work on Avalanche, with a few changes to their on-chain addresses. A curious point about AVM is that it works within a subnet within Avalanche, which separates the smart contract layer from the rest of the network's operations. This subnet is called Athereum.

Finally, if a developer requires a different execution environment than the Ethereum virtual machine, they can choose to deploy their smart contract through a subnet that implements a different execution environment, such as DAML or WASM. Subnets can support additional features beyond the behavior of the VM. For example, subnets can impose performance requirements for larger validator nodes that maintain smart contracts longer, or validators that maintain contract state privately.

Connecting to Avalanche Web3

The existence of AVM allows Avalanche to transform into a blockchain project with Web3 capabilities, which means that we can find dApps of all kinds in its ecosystem. From DEXs, DeFi applications, Play2Earn games, all of this is possible to be built on top of Avalanche. To interact with such applications, you can use a wallet like MetaMask, using these network parameters:

• Network Name: Avalanche Network
• RPC URL: https://api.avax.network/ext/bc/C/rpc
• Chain ID: 43114
• Symbol: AVAX
• Explorer: https://snowtrace.io/

In any case, you can know how to add this data in our article on MetaMask.

Additionally, the KILT tokenomics states that:

• 100 million of these coins are earmarked for the community.
• An amount of 4,5 million of these coins is reserved for participants in crowdloan voting.
• Fifty million coins are allocated to BOTLabs with a 60-month linear vesting.
• After the initial issuance, the newly minted tokens will be used to pay collators, delegates and the Treasury.
• The rate of newly minted tokens will decrease over time.
• Therefore, the distribution converges to an asymptotic maximum of about 290 million KILT coins (290.560.000).

Project Tokenomics

The native token is AVAX, a limited supply token whose maximum issuance is 720.000.000 AVAX tokens. During the launch of the network, 360.000.000 AVAX tokens were issued. However, unlike other limited supply tokens, which keep minting in perpetuity, AVAX is designed to react to changing economic conditions. In particular, the objective of AVAX's monetary policy is to balance the incentives of users to stake against their use to interact with the variety of services available on the platform.

The participants in the platform collectively act as a decentralized reserve bank. This means that generally only staking rewards, commissions and airdrops are available in Avalanche, all of which are influenced by governable parameters. Staking rewards are set by on-chain governance, and governed by a feature designed to never exceed the supply limit.

Among the uses of the AVAX token we can mention payments within the network, staking and access to dApps within the blockchain. But additionally, it also serves as a bridge for on-chain and cross-chain atomic exchanges.

Project governance

Governance in Avalanche is decentralized and is capable of altering 315 adjustable network parameters. To participate in the governance of the protocol you must have AVAX tokens in your possession. With them, you can exercise your right to vote within the network. Governance allows participants to vote on changes to the network and make network upgrade decisions. This includes factors such as the minimum staking amount, the token generation rate, as well as other economic parameters.

This allows the platform to efficiently perform dynamic parameter optimization through a crowd oracle. However, unlike other governance platforms, Avalanche does not allow unlimited changes to arbitrary aspects of the system. Instead, only a predetermined number of parameters can be modified through governance. In this way, the system maintains its predictability and increases its security. Additionally, all governable parameters are subject to limits within specific timeframes that must be adhered to.

Advantages of Avalanche (AVAX)

1. Avalanche is a highly scalable network. Thanks to this, Avalanche can solve the scalability problem that affects many 1st and 2nd Generation blockchains. The Snow consensus is intended to support a global network of potentially hundreds of millions of connected devices. This in addition to offering low latency and operating with tens of thousands of transactions per second. Additionally, Avalanche can be extended via Layer2, which can further extend its native capabilities.
2. Designed for security. Another point in favor of the project is that its construction is focused on being robust and maintaining high security. Its PoS system is designed to prevent Sybil attacks and 51% attacks. In addition to its asynchronous capacity, it guarantees that the operations are always carried out correctly.
3. Offers a high degree of decentralization. Avalanche is designed to provide a decentralization unprecedented, both in network structure and governance
4. Interoperable and flexible. Avalanche is designed to be a universal and flexible infrastructure for a multitude of blockchains/assets. In all those cases, AVAX is used as security and as a unit of account for exchange. In addition, the system is intended to support, in a value-neutral way, many blockchains that are built or operated on it.

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