Avalanche (AVAX) is a layer-1 smart contract platform developed by Ava Labs of Singapore. It’s a proof-of-stake blockchain compatible with Ethereum. The platform allows developers to create and deploy decentralized apps.
The Avalanche network is governed by three subnets:
- Exchange Chain (X-Chain), an Avalanche Virtual Machine instance used to create and exchange tokens (AVM)
- In the P-Chain, validators work together to construct and track subnets
- The Contract Chain (C-Chain), an EVM instance that creates and distributes smart contracts
Avalanche: Function and Speed
Because each subnet only needs to conduct a single set of activities, the Avalanche network can offer a large range of functionality without sacrificing speed. Developers wishing to deploy custom blockchains atop the P-Chain will be attracted by its speed and variety.
AVAX is the network’s principal token, though developers can create their own on its specialized blockchains. One hundred and twenty million AVAX tokens were produced in the genesis block.
But, like the Ethereum network, Avalanche fees are burned, reducing the token supply.
Avalanche is a proof-of-stake platform that relies on validators to gain block rewards. Validators can earn up to 11% APY on staked AVAX, with an average annual return of 9.75%.
KEY PROJ
The Avalanche network is led by Ava Labs and the Avalanche Foundation. Ava Labs is in charge of internal research and development, particularly the Avalanche network.
Assisting third-party innovation on the Avalanche network, the Avalanche Foundation’s Blizzard Fund.
The foundation also runs Avalanche-X, a startup accelerator that funds decentralized finance (DeFi) and community projects.
To be faster and cheaper than competing layer-1 smart contract technologies. Some anticipate achieving this aim will give it an advantage against the slower Ethereum network, which has been known to suffer from gas fees upwards of $100 per transaction.
Team HQ
Avalanche’s Ava Labs has headquarters in New York and Miami and an international core team of developers, economists, and lawyers. Microsoft, Google, NASA, and other notable institutions have employees on the Avalanche team.
Avalanche held a token sale in September 2021 to generate $230 million for development, with help from Polychain and Three Arrows Capital.
Layer-2
Avalanche is a Web3 protocol hoster that can host Ethereum-compatible layer-1 smart contracts.
Popular layer-2 projects using Avalanche for diverse use cases:
NFT marketplaces — Topps NFTs, Curate, Niftyx Protocol
- Aave, Curve, Nexo
- Yield, Snowball, Yield Yak
- DeBank, Ape Board, Markr
Explore Avalanche’s home page for a complete list of layer-2 platforms.
Investing in AVAX
- Buying AVAX tokens is the easiest way to invest in Avalanche. You can’t hold Avalanche or its layer-2s until you find a DeFi index fund that does.
- Buy AVAX on centralized exchanges like Coinbase, Kraken, and Gemini, or decentralized exchanges like Pangolin and Rubic.
Select a use case
After buying AVAX, you can keep it and wait for a rise in value. You can also use your AVAX to earn yield. The disadvantage is that most, if not all, yield farming solutions need you to wait before returning your tokens, which means you may miss out on a sale if you don’t get them out in time.
You can learn more about yield farming with our quick guide.
Staking
Become an Avalanche validator to earn yield on AVAX. Put your AVAX on the platform. It depends on how many tokens are invested, but currently averages around 9.75 percent annually.
Liquidity
It’s also possible to supply AVAX as liquidity to a cryptocurrency exchange. The Pangolin Exchange is an Avalanche-based layer-2 mechanism. In proportion to their share of the pool, liquidity providers get 0.25 percent of all trades on the deposited token pair.
Be careful that providing liquidity for an exchange may result in temporary loss. Impermanent loss occurs when you supply two-sided liquidity and remove it later, but do not receive an identical percentage back.
Providing liquidity at a decentralized exchange (DEX) is one example. If other users sell their ETH to buy your USDT, you will receive more ETH than USDT when you withdraw your liquidity. This balances liquidity pools against trades. However, if the value of ETH has declined since you first provided liquidity, the value of your withdrawal is less than your initial $2000.
This is a temporary loss because the user can keep their provision in the DEX until the ratio balances.
Invest more than cash
If you’re feeling adventurous, you may invest in Avalanche and set up an exchange. You can construct a dApp, a token protocol, or an exchange on the Avalanche platform alone or with a team.
Final thoughts
Always assess your level of involvement and risk tolerance and keep the following in mind:
There is no such thing as a good investment because all investors and investments are different. But terrible investments exist.
It’s a lot easier to understand a project when it resonates with your personal values, interests, and beliefs. So, on that level it’s a much safer investment.
As with any investment consideration, do your own research, consult with your financial advisor and never risk more money than you can afford to lose.
I write about blockchain, crypto, NFTs and other disruptive technologies and innovations.
