Avalanche (AVAX) - is it a profitable asset

There are many innovative and promising projects in the field right now, but Avalanche deserves more attention. Its potential is significant and reaching levels are already impressive. Let’s take a closer look at this project.

Avalanche’s (AVAX) definition

Avalanche is a blockchain platform which is based on the Proof of Stake algorithm. This mechanism provides people with the ability to create decentralized apps and execute them on the platform.AVAX is the native token of this system which was released in 2020. It endeavors to be fast and all-purpose. Of course, another main goal of such a token is to be within affordability and accessibility.Here is the current price of the AVAX token:After all, this is an open-source project which can be available for editing and improving by anyone who wishes to take part in the project.

Historical path of AVAX

At the start, “Team Rocket” group shared a white paper of this project on InterPLanetary FIle System in 2018. Emin Gün Sirer, leading specialist of Cornell University’s research group, reviewed and developed the Avalanche project. After all the preparations this blockchain was released in 2020. It was stated to be a payment platform and a base for developing new decentralized apps.

AVAX was also released as a native token of the system. It has a limit of 720 million tokens.

It is a payment method for the transaction fees. However, the process of their burning is executed by the system which increases the scarcity of AVAX and reduces the quantity of the circulating tokens within the system.Let’s check the current situation with the supply of the token.

Principles of work

First of all, let’s review the network structure. It consists on three built-in blockchains:

1. Exchange Chain, also known as X-Chain. It is used for developing, creating and trading cryptos. This blockchain is decentralized. AVAX is used for paying the transaction fee.
2. Platform Chain, also known as P-Chain. It is a metadata storage which guides validators of the Avalanche’s network. Moreover, it helps to create new subnets which is a huge advantage for those who desire to build their own chains.
3. Contract Chain, also known as C-Chain. This is a platform with abilities to create smart contracts which is based on the Ethereum Virtual Machine.

As it was mentioned before, the proof-of-stake mechanism is used during transactions.Take a look at the table which simplifies the understanding of the structure.

AVAX technological base

Even though it is a very complex system, there are 3 main components of the overall technology:

• Consensus. The mentioned proof-of-stake protocol. The validation process works step by step. The transaction is initiated; a validator who receives this specific transaction randomly checks chosen validators for consensus; the process is repeated until the inarguably confident consensus.

Take a look at the visualisation of the process:

• Subnets. The decentralization of the platform provides people within the Avalanche network to create their own chains. Such chains reach consensus through the subnets by validators. They are obliged to validate the primary network. The ability to create such a subnet is given by staking of AVAX.

Here’s how the subnets look within the system:Currently, there are several working subnets, let’s take a look at the database from the subnet list:

• Ecosystem. X-Chain, C-Chain and P-Chain are three fundamental bases of the ecosystem. The principles of decentralization, security and scalability lie in each of these chains, respectively. And that’s the advantage of this system: each of them states for its own purpose which enhances the network and improves the stability of the promised features.

Avalanche usage

This network has a wide field of use. From creating and releasing decentralized finance applications, assets, and chains up to voting, staking and paying the transaction fees within the platform itself by the native token.

Wallet choice

The choice of the wallet, of course, is based on your own interest. There are plenty of options:

1. Web-based wallet within the Avalanche network itself. Full-custodian.
2. Cold wallets. Hardware storage of your funds. It is an expensive option for more competent people within the crypto system. It is very efficient with a huge amount of tokens to store.
3. Software wallets. One of the simple ways to gather and store your token. It can be used with a smartphone or a desktop app. Such a wallet can be custodial and non-custodial. Custodial is an option for the storing of the private keys by the service provider. Non-custodial wallet is the opposite: these keys are stored on your own device. Software wallets are better to be used with a small amount of tokens because it is less safe to keep the currency than within the cold wallet. However, it is a great choice for the beginners.
4. Web wallets. Free and fast to use, but very insecure. They can be accessed from multiple devices through the browsers. Based on that, it is efficient in case of small holdings which are used for frequent and fast transactions.

The choice is all yours: your preferences and ways to use tokens are important to pick the right wallet.

Avalanche mining or Proof of Stake

The principle of the long chain of validators who can participate is quite simple: as long as a validator stakes 2,000 AVAX coins, he enters the validation group.The proof-of-stake mechanism within the Avalanche network works as a solid helping hand for the creation of new digital assets right on the blockchain. The X-Chain is the operational part of this process.

AVAX or Ethereum (ETH)

At the beginning, the Avalanche project was announced to be significantly faster with transactions than Etherium, but it is still yet to come. Keep in mind that Etherium operates on a much larger scale throughout a long period of time. Avalanche project advantage may lie into a long-term perspective: the individual principles of proof-of-stake consensus possibly can increase the speed of transactions that much to beat Ethereum by a huge value.

Both of them are based on different fee structures. Although, the efficiency depends on the network’s congestion or busyness.

The main difference of the fee structure is about the control: Avalanche is controlled by user governance and Etherium is quite the opposite. In the Etherium case, the network is governed by demand for services, validator supply and traffic.And last, but not the least - the fee’s burning process. Avalanche burns all of it. Etherium burns only a percentage of the whole volume.

Advantages & disadvantages

Now, let’s take a look at both sides of AVAX. Firstly, benefits:

1. It has great potential. The scalability can increase by significant numbers in the future.
2. Compatibility. It is flexible in usage with other apps from different blockchains.
3. Huge transaction speed with small fees.
4. Ability to build new subnetworks and tokens.
5. Scalability doesn’t compromise decentralization.

Secondly, let’s remind ourselves the drawbacks of Avalanche:

1. High price for becoming a validator: 2000 AVAX tokens.
2. Time delays because of disagreement between validators.
3. Fraudulent validators can escape because of no punishment system for such doings.

Q&A

Industry cases of AVAX usage

The Avalanche network is a stable and reliable structure for many projects which started from this platform. There are several government projects, DeFi apps and non-fungible token projects - all of them are based on Avalanche and work pretty efficiently.

Avalanche Bridge

At the start, there was a release of the Avalanche-Etherium Bridge in February 2021. The main point was to create and increase the interoperability with Ethereum.Later on, the Avalanche Bridge replaced the existing version with itself in July of the same year. This version was created to outperform the previous one by many features: higher speed, lower price and more security with an additional better user experience. For now, ERC-20 tokens from Ethereum can be transferred to the Avalanche network, but in the future, theoretically, the process will be improved: tokens which were created on the Avalanche will be able to be sent to the Ethereum network.

Buying AVAX

A lot of exchanges can provide you with the opportunity to buy this token. For example: Coinbase Global, Binance, Crypto.com. Because of the increased popularity you can buy it from many platforms.

Selling AVAX

Same story with the selling. The Avalanche network is a growing platform with a huge potential. It creates the demand which results in a wide choice of exchanges to sell and buy the token.