TL;DR: With a new update or project being released almost every day, it’s clear the crypto ecosystem is constantly evolving. Avalanche has gone through a lot of ups and downs to reach the level it’s at today — but it’s just the beginning. Knowing what brought it here and why it was created will lead you to make better decisions when investing or simply using Avalanche.
In this article, we’re gonna dive into the Avalanche ecosystem, answer all the $AVAX related questions and even more. Prepare yourself for a history lesson and a journey to the future of Avalanche!
What is Avalanche (AVAX)?
Avalanche is a Layer 1 blockchain created in 2018 by Emin Gun Sirer. It is a smart contract platform that focuses on being highly scalable.
Scalability is defined as the amount of transactions that Avalanche can process per second, or throughput. Research has led to the conclusion that every blockchain has to make a tradeoff between decentralization, security and scalability.
This problem has been coined as the “blockchain trilemma.” Each blockchain that has emerged since then had its architecture influenced more or less by the blockchain trilemma. Some networks traded decentralization to achieve security and scalability, while others traded security to achieve decentralization and scalability. Avalanche claims to have solved the blockchain trillema using its unique implementation.
The consensus mechanism that Avalanche uses is called Proof of Stake. This means that Avalanche gets its security from validators that stake $AVAX to secure the chain. This is different from Proof of Work blockchains, where miners replace the role of validators.
The concept of blockchains is not new, and Avalanche is one of many such networks. The idea started in 2008 with the release of Satoshi Nakamoto’s Bitcoin Whitepaper. This kicked off the subsequent creation of many different types of networks under the same “blockchain” terminology.
Despite being similar in concept blockchains have all different architectures and use cases. What all have in common — including Avalanche — is that they have to be secure. Security is the ability of a blockchain to prevent attacks and penalize malicious actors. This is usually done through their consensus algorithm and the mechanism they use to reach finality.
Finality is achieved when a block has been created and is now immutable, meaning that nobody can change the date inside.
Over time many different mechanism have been designed, ranging from Proof of Work, and Proof of Stake to novel ones called Proof of Spacetime. Each one hopes to achieve the best way of securing the network they are built for. As noted before, Avalanche makes use of a type of consensus mechanism we call “Proof of Stake” — or PoS for short.
Avalanche’s has been created with the goal of being an alternative to Ethereum.
Ethereum has been created in 2014 and introduced the concepts of smart contracts. These are small applications that run inside a virtual machine called the Ethereum Virtual Machine. The EVM allows for a blockchain to process more than simple token transfers. To give more info, it opened up the possibility to run applications in a decentralized manner.
Applications usually run in the cloud or on your computer, so running them on a blockchain was unheard of at the time. This makes them uncensorable (nobody can stop them) and ensures they’re always online — as long as the chain they run on is processing transactions.
Avalanche is based on the same EVM architecture created by and used in Ethereum. While similar to Ethereum, it implements a some new improvements to the protocol.
The first one is splitting the validation and execution of transactions in 2 separate jobs. This offers a higher throughput (more transactions) and faster finality time (faster transactions).
The second one is a concept called Avalanche subnets, released in 2022 by the Ava Labs team. Subnets are sovereign networks that get their security from the main Avalanche (AVAX) chain. Sovereign means they are separate and do not occupy space on the main Avalanche network. Because they are separate, they can have their own rules while also benefiting from shared security.
Subnets are natively interoperable across the broader Avalanche ecosystem, this is how they differ from an entire separate blockchain. This brings advantages to both the subnet as well as the main Avalanche (AVAX) chain, which is relived from extra transactions.
Avalanche is powered by the AVAX token, a central part of the Avalanche ecosystem. AVAX was initially designed as an inflationary token. Recently, the protocol added a burning fee mechanisms that is expected to reduce token inflation. The Avalanche inflation rate sits currently at around 39% and gets lower every year.
The tokenomics of Avalanche also specifies a maximum amount of tokens that will ever be created. The maximum amount that will ever be minted by the protocol is 720,000,000 AVAX.
For more details about how you can earn more Avalanche by running a validator node at home check out our Avalanche Mining & Staking guide. It includes the exact steps and best methods of earning more crypto like $TOKEN in 2024 and beyond.
When was Avalanche (AVAX) created?
Avalanche (AVAX) was created during Emin Gun Sirer’s academic journey at Cornell University.
Work began on the Avalanche chain in 2018, but before that, a couple of important events happened. Most events revolve around the Avalanche CEO and Founder, Emin Gun Sirer.
The first meaningful event is professors Emin Gun Sirer doctoral thesis, titled “Secure, efficient and manageable virtual machine systems.” Released in 2002, it paved Emin’s way for a career in one of the most relevant industries to come — virtual distributed computing aka blockchains.
Another meaningful event was the studies of Maofan "Ted" Yin and Kevin Sekniqi at the Cornell University in 2016. Cornell University is where the 2 students met the future Avalanche CEO, professor Emin Gun Sirer.
At that time, Proof of Work was the standard consensus method of blockchains, but the newly incubated team wanted something better. Driven by a lack of reliable Proof of Stake implementations, they were looking to create an energy efficient system as secure as Proof of Work. This is how Avalanche and the Snow family of consensus protocols was born.
What the Avalanche team created can be categorized as a new consensus protocol. This is due to its internal mechanics, implementing some novel methods of achieving finality. Until that point, 2 main consensus protocols existed, classical consensus and Nakamoto consensus.
An important difference is that Snow protocols are quorum based, same as classical consensus, but allow the existence of errors in the network state. To solve the issues they saw and provide a system that is energy efficient and has instant finality, the Avalanche founder had to come up with a new solution. This solution is known today as the Avalanche chain, powered by the Snowman consensus protocol.
The team’s invention was built to achieve a “Blazingly Fast, Low Cost, & Eco-Friendly” platform where developers can create decentralized apps using existing tools. While Avalanche is the actual blockchain, it is included in the Snow family along with “Slush”, “Snowflake” and “Snowball.” The Snow family represents a group of voting-based, or quorum-based consensus protocols, that utilize Proof of Stake. Parts of these findings were published in 2018 on the InterPlanetary File System by a group under the name of “Team Rocket”.
After validating their idea, Emin Gun Sirer together with the team at Cornell began building today’s Avalanche blockchain and codebase. Later on, the team spun out into AVA Labs and launched the $AVAX token.
The $AVAX token was sold only through a private sale first, and then a public one. The private sale brought in $12M worth of funds to accelerate the growth of AVA Labs. The next sale was a massive success, bringing in $42M from retail investors. Such a huge investment has allowed Avalanche to continue building the vision of a fast and scalable EVM compatible blockchain.
How is the Avalanche (AVAX) token used?
The Avalanche token is the native token for the Avalanche network. Most assets in the Avalanche ecosystem are denominated in AVAX, which makes it the default unit of account.
AVAX is the fuel that powers transactions and block creation on the Avalanche chain. We sometimes refer to it as “gas.” Its primary use case is securing the network and keeping actors aligned to the same principles. Making a transaction on the Avalanche network requires a small fee in AVAX, usually between $0.01 and $0.05. Because Avalanche has a quick time to finality and processes more transactions per second the gas fees quickly add up. This small fee is paid by users and goes to validators for doing their work.
Recently, Avalanche has announced the release of Avalanche “Subnets,” aka smaller chains connected to the Avalanche main chain. Subnets can have their own security and use their own token, or share security with the Avalanche main chain. If a subnet wants to be secured by Avalanche, the users also have to pay AVAX. This ensures an infinitely scalable demand for the AVAX token.
Avalanche is currently listed on multiple exchanges. The major ones are Binance, Coinbase and Kraken.
If you want to skip ahead and learn how to earn more CHAIN by running a validator node at home check out our CHAIN Mining & Staking guide. It includes the exact steps and best methods of earning more crypto like $TOKEN in 2024 and beyond.