What is Avalanche Blockchain? AVAX Tokenomics explained

Imagine a blockchain similar to Ethereum, but cheaper and faster to use, allowing for all sorts of decentralized applications to be built on it. This is where Avalanche comes into play!

Avalanche is designed for hosting decentralised applications that claims you can build anything you want, any way you want, on a lightning-fast, scalable blockchain that won’t let you down.

Now, that’s big talk from Avalanche.

And, as their website states, choosing the wrong blockchain can wreck your application before it ever has a chance to succeed, though Avalanche claims it doesn’t have to be this way.

Which leads us to the question, how does Avalanche work?

What is Avalanche?

Avalanche can be thought of as an Ethereum competitor that aims to be more versatile, secure, affordable, and accessible to users than the Ethereum network.

This means it can provide pretty much the same functionality as Ethereum, being a base blockchain with smart contract functionality where developers can deploy their applications.

However, it’s important to note that the key difference between Avalanche and Ethereum is the principle that to achieve mass adoption of crypto technologies, crypto tech needs to be as fast as the services people already use on the current version of the internet.

Meaning transactions need to be quick, they need to be cheap, and they need to process instantly.

As such, Avalanche has been building the technology in an open-source manner to achieve this goal, which also means anyone can verify, and potentially even contribute towards the Avalanche’s network development.

But how does it all work?

How does Avalanche work?

Avalanche is a layer-1 Proof-of-Stake blockchain for running smart contracts and applications.

To quickly recap. A blockchain layer refers to its place in the blockchain hierarchy, with Layer-1 being the base blockchain from which all other blockchain applications are built.

On the other hand, Proof-of-Stake refers to how it confirms transactions on the blockchain.

Avalanche uses a Proof-of-Stake method for verifying transactions which is aided by their unique Avalanche consensus mechanism, which I will come back to shortly.

As I mentioned, Avalanche works as the base foundation for developers to build and deploy applications.

But, as I’m sure you’re asking, what makes this different from Ethereum?

First, by offering the HyperSDK, with SDK standing for Software Development Kit, developers can quickly deploy applications that are guaranteed to be compatible with the Avalanche network.

Second, as mentioned, the Avalanche platform uses the Proof-of-Stake method of verifying transactions, aided by the unique Avalanche consensus.

To explain, Avalanche achieves consensus by effectively turning each node into an independent voting station that decides if each transaction should be accepted or rejected, according to the validation standards set by the network.

Avalanche’s unique consensus uses repeated random subsampling, which is where a validating node arbitrarily selects a small group of other validators to decide if a transaction should be accepted or rejected.

This process is designed to ensure a smaller margin of error while promoting scalability and high-throughput for the network.

As typical for Proof-of-Stake networks, to become a validator on Avalanche users must stake AVAX to the Avalanche network to become eligible to be either a validator or a delegator.

To quickly explain the difference, a validator is an active node that must be online at least 80% of the time and has staked at least 2000 AVAX tokens for at least two weeks but no longer than one year.

Alternatively, there are delegators, which relieves them of the burden of being online and active.

This is because Delegators select another node to take over validation responsibilities.

To become a Delegator a user must stake at least 25 AVAX and pay a small fee to the Validator for doing the work, which will be locked up for at least two weeks and no longer than one year.

As with most Proof-of-Stake blockchains, staking crypto on Avalanche helps secure the network and provides additional opportunities to generate income.

Users staking AVAX can look at roughly a 4.5% Annual Percentage Yield, or APY at the time of this video.

But how exactly does the system support a 4.5% APY?

AVAX Tokenomics

AVAX has a maximum supply of 715 million tokens, of which 400 million or so are currently available to trade.

The rest is vested as per their emission schedule, which is broken down as follows for their initial token distribution:

50% has been allocated to Staking Rewards, which is how the company can support their roughly 4.5% APY.

Of the remaining 50%, 10% was given to the Team, 10% was sold during the public sales, 9% was allocated to the Foundation, 7% towards the Community & Developer Endowment, 6% was sold in the Seed and Private Sales, 5% to Strategic Partners, 2.5% was given away in the Airdrop, and the final 0.5% was allocated to the Testnet Incentive Program.

As is typical for Proof-of-Stake networks, AVAX can be used for the classics of payments, staking, and governance.

In the intro, I stated the Avalanche website claims choosing the wrong blockchain can ruin your app before it has a chance to succeed.

So, were they correct?

In my opinion, yes.

To be clear, this doesn’t mean I’m endorsing Avalanche over Ethereum, or any other competitors such as Solana, etc, but in principle, I do agree with that claim on Avalanche’s website.

To be successful, you need to pick the correct blockchain, and picking a slow, costly blockchain could severely limit the adoption of any new application, regardless of how useful it is overall.

If it is slow to use and slow to send and confirm data such as payments, then it likely has no chance of competing with services we’ve already gotten accustomed to off-chain.

So, is Avalanche the answer?

That ultimately remains to be seen, but in principle, any blockchain that is working towards providing an Ethereum-equivalent service more quickly and cheaply stands a strong chance of performing well as crypto technology sees more mainstream adoption.

Does this all mean it will be Avalanche that comes out on top?

Who knows, but as long as they live up to the claims on their website, they certainly stand a chance.

Though, as always, nothing is ever guaranteed in crypto, of course.

How to create an AVAX wallet

Step 1: Visit https://trustwallet.com If you already have a Trust Wallet, skip to Step 5.

Step 2: Download and install Trust Wallet from your mobile app store or your browser.

Step 3: Open Trust Wallet and create a new wallet or import an existing one.

Step 4: Once your wallet is set up, tap on the “Add Token” button.

Step 5: In the search bar, type “AVAX” to find the token.

Step 6: Tap on the AVAX token and select “Add to Wallet” to add it to your Trust Wallet.

After adding AVAX to your Trust Wallet, you will be able to view your AVAX balance and perform transactions with the token.

If you want to support the blog, please donate $AVAX to this address: 0x926f05Cafd858CA824152dAe62d359cC60e804c5

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