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What Is the Avalanche Blockchain?

Mar 9, 2023
10m
Yavor KaludovMartin Neumann

Avalanche is a proof-of-stake (PoS) blockchain that’s highly focused on scalability, speed, customization, and security. Designed to support decentralization and the creation of decentralized applications (via smart contracts), Avalanche’s goal is to create the fastest and most secure blockchain.

Though it’s considered one of Ethereum's main competitors, Avalanche is fully compatible with the Ethereum network.  

What Is AVAX?

AVAX is the Avalanche cryptocurrency. Designed to be the blockchain’s native asset, a maximum supply of 720 million AVAX has been set. It’s primarily used for four use cases: 

  • Exchanged as a digital asset 

  • Staked to earn staking rewards for validating the blockchain

  • Used to pay fees

  • Used for governance

What Avalanche Offers

Since Ethereum is such a popular option for creating smart contracts and dApps, Avalanche has retained some of its more popular features while working to address its most prominent issues. 

Avalanche has much to offer:

1. Support for Smart Contracts and DeFi Apps

Avalanche supports smart contracts and decentralized applications to create NFTs, digital credentials, decentralized exchanges, lending decentralized projects, and much more. Support for both private and public blockchains could present an attractive offering for many users.

2. Inexpensive Transactions

The network is efficient and its particular architecture allows for inexpensive transactions.

3. Low Energy Consumption

Avalanche’s efficiency allows for low energy consumption, meaning that it’s a more eco-friendly solution for financial and economic systems. 

4. Great Security

As an extremely decentralized network, Avalanche features thousands of validators that work to guarantee its security. 

5. Low Transaction Fees 

Transaction fees are adjusted dynamically and are based on network usage. Generally, AVAX fees remain low compared to competitors.

6. Easy Cross-chain Transfers

Since it’s an EVM compatible chain, users can transfer assets between Ethereum and Avalanche via Avalanche Bridge.

What’s Unique About Avalanche? 

Avalanche aims to create a fast, secure, and inexpensive framework for users and developers. To reach these goals – and set this network apart from competitors – Ava Labs has included certain features:

1. Coin Creation Governance

While Bitcoin halves the number of new coins approximately every four years, Avalanche doesn’t use a fixed rate to create new assets. Instead, it utilizes a system that encourages participants to vote on how new coins are created, adjusting the rate according to market conditions. 

2. Fees Are Burned 

Avalanche transaction fees (paid in AVAX) are burned to decrease the amount of currency available. This method improves scarcity and protects the value of AVAX over time. 

3. Users Vote on Fees

Users can vote on Avalanche transaction fees and change them according to the governance mechanism (chosen by the Avalanche team).

4. Novel Consensus Mechanism 

The Snowman Consensus Protocol is used to reach consensus among Avalanche network participants. It was created to solve issues that might arise when using the two most popular types of consensus mechanism in the crypto space: proof-of-work (PoW) and proof-of-stake (PoS).

Avalanche’s modified version of proof-of-stake means that each validator randomly chooses a small group of validators, asking them to decide on the validity of a specific transaction. The operation is repeated until the network agrees on the same decision. 

This method works to increase efficiency and security. The Snowman Consensus Protocol is designed to maintain the full decentralization of the network and make it less prone to hacking attacks (like the 51% attack). 

5. Rewards for Participation

As stated in the Avalanche token whitepaper, validators are rewarded according to a proof-of-uptime and proof-of-correctness. This means participants are incentivized for being active and working correctly, according to the network rules. 

Since Avalanche uses a modified version of PoS, participants need to stake AVAX to earn rewards. 

6. Scalability 

Avalanche has a unique architecture based on three different blockchains with different tasks: 

  • The X-Chain (Exchange Chain) is used to create and exchange digital assets. 

  • The C-Chain (Contract Chain) is used to create smart contracts and decentralized applications.

  • The P-Chain (Platform Chain) can be used to create customized and scalable public or private blockchains, also known as subnets. 

The Avalanche team claims to have been able to solve the scalability trilemma thanks to the protocol’s use of subnets. 

7. Speed

With its P-Chain, Avalanche allows for the creation of virtually infinite subnets (similar to the Avalanche chain). Transactions can be made on the Avalanche chain and its subnets at a virtually infinite throughput, all while keeping the ecosystem secure. 

This also improves transaction finality (ie. the irreversible time needed to finalize transactions). Avalanche has managed to reach a finality time of under 2 seconds per transaction

How Is Avalanche Different from Ethereum?

Avalanche is compatible with Ethereum and developers can use the same programming language used by Ethereum (ie. Solidity) to create smart contracts and dApps. 

Nevertheless, there are a few key differences between Avalanche and Ethereum: 

Sharding vs. Subnets

In the future, Ethereum aims to support sharding by using side chains to decongest the Ethereum mainnet. Avalanche uses subnets (new blockchains) that can be created on demand. 

Transactions per Second

Ethereum can currently reach a speed of about 15 transactions per second (TPS) and its finality clocks in at around 60 seconds. Thanks to subnets, Avalanche surpases this TPS limit and manages to finalize transactions in less than 2 seconds. 

Both networks rely on proof-of-stake (PoS)-based consensus, but the way it’s implemented can vary quite a bit in practice.

Pros of Avalanche

Avalanche comes with plenty of benefits, from quick consensus protocols to energy efficiency:  

Fast Consensus Protocol

The Snowball Algorithm is one of the fastest consensus protocols out there. Nodes are able to ask randomly selected groups of validators for input regarding specific transactions. This method is more efficient because each node is able to work with small groups in order to reach consensus, rather than communicating with the entire network for each transaction.  

Simply put: The Avalanche consensus mechanism enables the network to reach consensus quickly while decentralizing the way consensus can be reached. 

Design Based on Subnets

Both private and public blockchain solutions can be developed via subnets, allowing anyone to create and customize them. Its intuitive design is especially important, since the possibility of using Solidity lowers entry barriers for those who want to use Avalanche instead of Ethereum. 

Eco-friendly

According to the Crypto Carbon Ratings Institute (CCRI), Avalanche is one of the PoS crypto networks with the lowest CO2 emissions and electricity consumption levels among.

Fun fact: Avalanche uses 0.0005% of the energy consumed by Bitcoin. 

Cons of Avalanche

While there’s a lot to like, Avalanche has a few notable drawbacks: 

1. Competition

Avalanche hopes to solve the scalability trilemma by creating a network that can be decentralized and secure, even at scale. Because this is also the goal of other networks (like the NEAR protocol), Avalanche faces tough competition. 

2. Minimum Validation Amounts

Participants who want to work as validators within the network need to stake at least 2,000 AVAX. This is a considerable amount of coins and could threaten the participation of new validators. 

3. Bad Actors Never Lose Their AVAX

Avalanche doesn’t use slashing (the practice of punishing network participants’ incorrect behavior) which could drain funds from bad actors. The Avalanche network is designed to return all assets to stakers when the staking period ends, despite the behavior of the staker. 

As outlined in the Avalanche platform whitepaper, this decision was made to avoid possible coin loss due to hardware or software failures. 

How to Buy Avalanche Tokens

Users can buy AVAX on both centralized and decentralized crypto exchanges. AVAX finds support on popular centralized exchanges like Kraken and Binance. On decentralized exchanges, the compatibility of Avalanche with Ethereum makes it possible to use popular wallets (like Metamask) to buy Avalanche tokens. 

Who Started Avalanche? 

Launched by Ava Labs by CEO Emin Gün Sirer, Avalanche is not Sirer’s first significant experience in the crypto sector. He was also involved in the creation of more scalable solutions for Bitcoin and in research activities for Ethereum. 

Using the pseudonym “Team Rocket”, the Avalanche team published its first Avalanche-related document on IPFS (a peer-to-peer network) in 2018. The project quickly attracted the interest of investors. In 2019, Avalanche closed a $6 million private seed sale, thanks to investors like Polychain and Initialized Capital. The project went on to raise another $12 million in 2020. 

The strength of its community was made clear when Avalanche launched its public token sale, reaching $42 million in less than 5 hours

Is Avalanche a Good Investment?

No matter the blockchain or cryptocurrency, traders and investors should consider their goals and needs while they’re doing analysis. 

In the case of Avalanche, however, we can assess that certain features are designed to protect the value of the Avalanche crypto: 

  • Finite supply

  • Fee burning

  • Virtually infinite use cases (via subnets)

All markets go through bullish and bearish cycles, and like many other projects, Avalanche was also affected by 2022’s crypto market crash. Avalanche was also potentially affected by the collapse of LUNA and UST because the Luna Foundation Guard bought $100 million worth of AVAX (to back the TerraUSD stablecoin). 

The price of AVAX price dropped by 76% in 2022 but, as Sirer assessed, price isn’t the main concern if crypto projects are reliable and its creators are focused on building. 

What’s Next for Avalanche?

Avalanche is the best performer in terms of finality – and it’s managed to create new experiences, opportunities, and improvements for developers and crypto enthusiasts hoping to enter the decentralized crypto space. 

For example: 

  • Avalanche launched Core in 2022. This browser extension is aimed at bringing decentralized applications, NFTs, and subnets together. 

  • To further support the creation of subnets-based ecosystems, Avalanche launched Multiverse, a $290 million incentive program. 

  • The project has also recently partnered with Amazon in order to provide decentralized solutions for its products.


Sonar is deploying our own Avalanche node to source blockchain data and feed it directly into Sonar Studio’s tools and apps. Visit to discover projects from the Avalanche ecosystem and subscribe to our newsletter for future updates. 

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