Securing Avalanche (AVAX) On ZERO

Overview of Avalanche

Avalanche is a scalable open source blockchain platform that natively supports decentralised applications and unique digital assets as well as enabling the deployment of custom blockchains with their own rules and permissions. 

Avalanche takes a unique approach to supporting these functions across three distinct chains secured by a Primary Network of validators reaching consensus through the Avalanche Protocol.

The Avalanche Protocol is designed for fast and cheap transactions, energy efficiency, censorship resistance and low technical barrier to entry for Validators. These characteristics put Avalanche in the category of Ethereum challengers.

Who founded Avalanche?

The original concept for Avalanche came from a pseudonymous group of developers called ‘Team Rocket’ who shared a report on the InterPlanetary File System - a distributed storage network - in May 2018.

The idea was further developed by computer scientists at Cornell University in the USA led by Emin Gün Sirer, a Turkish-American associate professor with a history of experimentation with peer-to-peer virtual currencies, and two doctoral students Maofan "Ted" Yin and Kevin Sekniqi.

Ava Labs was created to formalise the trio’s research and develop a working version of Avalanche. The initial code was published in March 2020 and the first block of the Avalanche chain was confirmed in September of the same year.

Avalanche’s Secret Sauce

Avalanche derives its security from a traditional Proof of Stake approach with lightweight validators staking at least 2,000 AVAX each but the process for approving transactions is unique to the Avalanche Protocol. 

Validators listen for new transactions and vote acceptance or rejection via a repeat random sampling method where the odds of an error less likely than earth being destroyed by an Asteroid in the next 100 years.

Avalanche validators don’t secure a single blockchain but form a Primary Network supporting three separate chains that combine to provide the functions of a single comparable blockchain.

Platform Chain (P-Chain): The base staking platform coordinating validators and tracking Subnets - dynamic sets of validators - which allows for custom blockchain creation.

Contract Chain (C-Chain): An EVM compliant chain that handles Smart Contracts, using an Ethereum compatible address structure, supporting DEFI and NFT applications.

Exchange Chain (X-Chain): Handles transfer of tokens across the ecosystem and the creation of new digital assets.

Avalanche Use Cases

Given the speed and low cost of transactions, Avalanche supports a growing number of DEFI and NFT applications. According to Defillama, the two most popular native applications on Avalanche are Benqi, a non-custodial liquidity market protocol and Trader Joe, a decentralised exchange.

Given the Platform Chain can support custom blockchains, with their own Subnet of validators, Avalanche is equally applicable to open finance as well as more traditional models that require KYC, permissioned access or Validators with specific hardware requirements.

In addition to targeting financial services, Avalanche aims to provide an effective medium of exchange for everyday transactions like buying a coffee or groceries. Ava Labs' partnership with Mastercard demonstrates this ambition.

In 2021, Deloitte, one of the ‘big four’ accounting firms, announced that they would be leveraging Avalanche to create a new cloud-based platform to improve the security, speed and accuracy of Federal Emergency Management Agency (FEMA) reimbursements in disaster situations.

Avalanche Tokenomics

Avalanche has a fixed maximum supply of 720 million AVAX tokens, half of which were Premined at launch in September 2020 and 16% sold in public and private sales. The remainder of the initial distribution funds project development, partnerships and airdrops.

360 million AVAX are being issued over time as rewards for Validators. Just under 60% of the supply of AVAX is currently staked earning an average return of just under 9% according to StakingRewards. 

Avalanche burns all fees for contract execution and transfers to act as a counterweight to inflation caused by block rewards. Taking into consideration its supply schedule and circulating supply, Messari estimates Avalanche’s annual inflation rate to be 25%.

Buying & Storing AVAX

Buying AVAX is easy as it is widely available on centralised exchanges such as Coinbase, Binance, Crypto.com and Kucoin. Read NGRAVE’s guide to how exchanges work to understand the process, costs and risks of buying AVAX.

Wherever you choose to buy AVAX, the safest place to store it is on an NGRAVE ZERO cold wallet protected from online threats but conveniently accessible for transactions and trading.

Avalanche Facts

• The Avalanche ecosystem includes 17 independent blockchains with over 3 million wallets.

• Avalanche has processed over 185 million transactions at an average cost of 1 cent.

• Emin Gun Sirer co-founded a peer-to-peer digital currency called Karma five years before Bitcoin.

• All AVAX fees for Smart Contract execution and transactions are burned.

• The smallest denomination of AVAX is 1 nAVAX is equal to 0.000000001 AVAX.

Reality Check

Despite claiming the potential to process 4,500 transactions per second, Avalanche’s current TPS is just over seven.

In February 2021, the volume of cross-chain transactions from a new decentralised money market called Pangolin reduced the Avalanche blockchain to a crawl.