Avalanche (AVAX): Is it a good investment?

Aside from Bitcoin, crypto users have also grown massively interested in other promising altcoins that function similarly yet come with a lower cost. Among these is Avalanche, an emerging blockchain platform that focuses on fast, low cost, and eco-friendly transactions. 

Technology has continuously propelled the rise of people’s interest in crypto and what it has to offer. Despite the fact that Bitcoin and Ethereum are the most popular options for blockchain technology, many people opt for newer coins. That way, they can enjoy a different set of functions that may be more fitted for what they need. 

Among the rising contenders of the renowned blockchain technologies is Avalanche which also uses smart contracts to support various projects. With its rise in the crypto industry, many people grew more interested to learn more about what is Avalanche crypto and if it’s a worthy investment. 

For those who wish to learn more about it, here is a quick Avalanche crypto review that can be used for reference: 

How it started 

Avalanche is the brainchild of Ava Labs which has three co-founders who all have backgrounds in economics, computer science, and cryptocurrency. One of them is Emin Gün Sirer, a professor and computer scientist who is an authority on Bitcoin scaling. He is one of the reasons why Avalanche's own consensus can be comparable to that of BTC's.

Aside from Sirer, the other two founders are Cornell University professors Maofan ‘Ted’ Yin and Kevin Sekniqi. Together, these three were able to lead a team that focuses on the various facets of what makes Avalanche outstanding.

Ava Labs was able to raise an additional $42 million a few hours after its public launch in July 2020. This happened after they previously collected $18 million with the help of significant investment firms. They established themselves as an all-encompassing platform for decentralised finance (DeFi) applications, trading, and other services during that event.

AVAX - The native coin 

Quite similar to other blockchains, Avalanche also has its own native coin called AVAX. It is an open-source platform that uses a proof-of-stake instead of a proof-of-work consensus mechanism. This means that it uses smart contracts quite similarly to Ethereum. AVAX also digitises its assets while aiming to be a unified market for several financial assets. 

The maximum cap for this token for this currency is 720 million. According to its whitepaper, half of these can be used on the mainnet. By being the network’s main coin, it can provide its users with base security, utility services, and operation payments. 

This cryptocurrency's tokens tend to be more distinctive than those of other coins. This is due to the fact that their transaction fees are less. Still, the transaction fees could change depending on the AVAX transactions being used on the network. 

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How it differs from Ethereum 

Some people prefer both Avalanche and Ethereum since both of them are blockchains that function with a proof-of stake-consensus. Learning these is important, especially for people who often ask ‘Should I buy avalanche crypto?’. Despite that, users are also aware that these two differ greatly when it comes to their specific capacities namely…

• Avalanche can process 4,500 transactions per second (TPS) unlike Ethereum which can only do 15 TPS. This is because Avalanche’s consensus protocol is much faster than Ethereum. 
• Ethereum operates at a larger scale which means it can support more projects and transactions. Given that Avalanche can also support a lot of transactions but is less known than Ethereum. 
• They have different fee structures. In contrast to the Ethereum network, which only burns a portion of transaction processing costs, Avalanche transactions incur no processing fees at all. Still, both of their fees are based on how busy their networks are. 
   

The Avalanche consensus 

Cryptocurrencies can smoothly operate when a group of validators reach a consensus that is governed by the protocol. Their main objective would be to reduce the number of violations occurring on the network.

There are three major consensus approaches on the blockchain. These are: 

• Classical protocols: Known for being fast, green, and low-maintenance; aren’t decentralized or scalable
• Nakamoto protocols: decentralized, robust, and scalable; can be expensive and slow 
• Avalanche protocols: combines the advantages of the two aforementioned protocols. Among the three, this was the one to be published the latest. 

Avalanche consensus differs from the earlier ones in a number of ways that make it more appealing. They have the following qualities when the Classical and Nakamoto consensus are combined including:

• Scalability
• Highly decentralised
• Low latency
• Robust
• Green, sustainable
• High throughput
• Lightweight
• Resilient to 51% attacks

By using a repeating random subsampling technique, the validators of this consensus would have to vote on the nodes in order for it to function.

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How it works 

The network has several blockchains, and it is predicted that it can handle up to 4,500 transactions per second. The network also uses an original mode which people should know more about when learning how to invest in Avalanche. Upon inspecting what the network is made out of, one will see that there are subnets on it.

These subnets are the virtual machines that are being installed on the blockchain network. A dynamic group of validators is present in these subnets, and they cooperate to reach blockchain consensus.

Subnets 

Avalanche's ability to let users create their own subnets and blockchains is another great feature. Users are given the option to choose their preferred features, privacy settings, smart contracts, and conditions through subnets. Users can launch these subnets to the worldwide market once the factors have been established. 

Despite being linked to the well-known cryptocurrency, the two are not direct rivals. In fact, subnets are seen as Ethereum-friendly forks. Technically speaking, subnets benefit both the Ethereum ecosystem and the Avalanche consensus protocols. 

Blockchains 

Avalanche is built with three different blockchains rather than the usual one. The reason behind this is that the creators prefer having each blockchain specialize in a certain area rather than having just one chain handle all tasks.

The Avalanche platform achieves the ‘golden trinity’ of blockchain characteristics, namely decentralisation, security, and scalability, by distributing jobs among various chains. With that, here are the three blockchains they use: 

• Exchange Chain (X-Chain): This is the blockchain responsible for creating and transacting with Avalanche assets. AVAX is the most popular crypto on this platform. In this blockchain, all transactions generate fees that are paid in AVAX in a way that’s similar to how gas fees are paid in ETH. 
• Contract Chain (C-Chain): This is one of Avalanche’s key features that enable developers to build their own dApps. C-Chains run on smart contracts for the Avalanche platform. These are also compatible with Ethereum Virtual Machines (EVMs). 
• Platform Chain (P-Chain): This manages the Avalanche subnets by keeping track of validators. Still, subnets are also responsible for validating this type of blockchain.  
   

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Pros and cons of using Avalanche 

Before investing in this crypto, people should learn more about various Avalanche crypto pros and cons. With that, here are some facts that people should learn about this promising blockchain: 

Pros 

• Avalanche uses a unique and innovative technology that addresses the usual problems that are being encountered by other blockchains. 
• It is infinitely scalable. By using three blockchains, the potential to be interoperable with other blockchains are unlimited. 
• Avalanche transactions are fast and cheaper compared to other blockchains

Cons

• Unlike other cryptocurrencies, Avalanche doesn’t have a slashing protocol which can be used to punish malicious validator activities.
• Avalanche can be more expensive to buy for starters since each token can be traded at around $80 each. This is unlike other renowned coins that cost cheaper when bought. 
• Becoming an Avalanche validator is also hard since you need to stake a minimum of 2,000 AVAX tokens before becoming one. You need to stake your AVAX from a minimum of two weeks and a maximum of one year. You should also be online 60% of the time. 
   

Is it a worthy investment?

So, is avalanche a good investment? It depends on what you need and how you wish to use it. Though it can be said that crypto has massive potential, it can’t be denied that it’s still not as popular as other blockchains. This may somehow have an impact on how long it can last in the industry regardless of how great it works. It is also important to know how volatile it is before investing to avoid losing a huge amount of money in the long run. 

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Words: Kyra Jimenez