What is Avalanche Coin (AVAX)?

What is Avalanche Coin (AVAX)?

In 2021, the blockchain industry expanded dramatically, attracting a large influx of capital. In the field of infrastructure, public chains such as Ethereum, BSC, and Polygon provide powerful support for the growth of the industry. Avalanche, as a next-generation public chain, aims to create a decentralized financial platform. Taking advantage of the high-speed growth of the public chain, AVAX, the native token of Avalanche, has ushered in a wave of substantial growth, and its ecosystem users have also accumulated and grown rapidly in a short period of time.

Basic concepts and applications of AVAX

Basic Concepts

Basic Concepts of AVAX

As a token deployed on the Chain, AVAX is used to secure the network through staking, conduct transactions between different tokens, pay transaction fees, and provide the basic unit of account cross-subnets of Avalanche.

AVAX was released in July 2020. The public sale adopts three modes, and the issue price is $0.5~$0.85. The total amount of AVAX is 720 million, of which 360 million AVAX tokens will be generated in the genesis block, and the remaining 360 million tokens will be minted according to the token issuance formula. Up to now, the total circulating supply of AVAX is 296 million, and the market circulation value is $4.987 billion.

Caption: AVAX Token Supply Schedule

The supply of AVAX is capped at 720 million and will never have an additional issue. Meanwhile, a burning mechanism is introduced to burn all gas fees generated by on-chain operations. If the amount of AVAX burned exceeds the amount minted to reward validators, the total number of tokens will decrease, resulting in deflation.

Basic Concepts of Avalanche Chain

Avalanche is a public chain developed by Ava Labs and officially launched in 2020. The founding members of Avalanche are all from Cornell University. They are Emin Gün Sirer, the Cornell University professor and IC3 co-founder, Kevin Sekniqi, a computer scholar, and Ted Yin, the first author of Facebook Libra protocol HotStuff consensus.

Avalanche aims to provide a highly scalable, yet decentralized, network-secure blockchain, aiming for lower fees, faster transaction speeds, and lower energy consumption. In short, Avalanche is a decentralized smart contract platform that is open-sourced and programmable.

The three-chain architecture

Avalanche is characterized by a three-chain architecture, namely the transaction chain (X-Chain, DAG), the contract chain (C-Chain), and the platform chain (P-Chain), that is, the X + C + P parallel architecture. Avalanche allows the three to exist as its subnets at the same time, and each performs its own duties and is interoperable. Next, let’s go to the uses of the three chains.

Caption: the three-chain architecture of Avalanche

Source: https://medium.com/avalanchetw

AVAX X Chain: Mainly used to handle the transaction and creation of assets in Avalanche, such as users’ deposit and withdrawal of assets from exchanges. Cross-chaining with other blockchains also requires an X chain.

AVAX P Chain: Its main function is to store data, files, and verification on the chain. P chain is the core of Avalanche, responsible for node pledge and network verification, and is the basis of the contract chain and transaction chain. All users can become an Avalanche node by staking 2000 AVAX. At the same time, the P chain allows Avalanche users to create subnets.

AVAX C Chain: Equipped with smart contract functions, AVAX C Chain can be used for the development, deployment, and interaction of smart contracts. The C chain can be compatible with multiple virtual machines, including EVM. Therefore, it can interact with most smart contracts and becomes the main gathering place for users, allowing users to get easy access by adding an RPC network through Metamask.

It is the parallel and non-interfering architecture of these three chains that enables Avalanche to achieve richer functions than other public chains.

POS mechanism

Avalanche applies the Proof of Stake (POS) consensus mechanism. In this way, the system economically incentivizes the nodes participating in the network to take benign actions and avoid malicious behavior that could disrupt the operation of the network. Nodes can freely enter the network by staking a certain amount of tokens that cannot be moved for a time period determined by the token holder, with a minimum staking period of 2 weeks. The network has validators and delegators. Validators are responsible for securing the network, creating new blocks, and processing transactions. The delegator is the owner of the AVAX token, who wants to participate in the pledge but chooses to trust the existing verification node through delegation.

Application cases

There are three main applications of AVAX:

Paying handling fees: Operating on the Avalanche chain requires AVAX as a fee, just like operations on Ethereum require ETH as a fee. AVAX is the common token of the Avalanche network and between Avalanche subnets, which ensures interoperability between subnets.

Staking tokens to get rewards: AVAX holders can get staking rewards by becoming a validator or entrusting a validator to stake tokens. The amount of the reward distributed depends on the amount and the time of staking. If you want to become a validator, you need to stake at least 2000 AVAX. The minimum staking time is 2 weeks and the longest is 1 year.

Creating subnets and deploying contracts: AVAX can be used to pay for the creation of Avalanche subnets and subsequent renewals. AVAX is required as a fee to create custom tokens using the X chain and launch smart contracts on the C chain.

Investment Value of AVAX

Caption: AVAX historical price curve

Source: https://www.gate.io/zh/price/avalanche-avax/cny

The ICO price of the AVAX token was $0.5, and it took less than half a year for the token price to peaked at $50. In November 2021, the price of AVAX hit a record high, breaking through $120. On May 12, 2022, the LUNA crash caused by the decoupling of UST created a plunge in the price of the cryptocurrency market as a whole. The price of AVAX also fell all the way. Even if the currency price was affected by the bear market, it was still over 30 times higher than the ICO issue price.

Caption: AVAX lock-up volume Source: https://defillama.com/chains

Caption: AVAX lock-up volume ranking Source: https://defillama.com/chains

Caption: Active addresses on the chain

The ecosystem on the Avalanche chain is relatively complete. The total value of locked assets (TVL) on the chain topped at $12 billion in December 2021. At the time of writing this article, the TVL on the chain is $1.61 billion, ranking fourth among all ecosystems. The number of active addresses on the chain is 40,315. Although it is much less than the nearly 120,000 active addresses in the peak period, it is still a huge user base.

With a strong technical team, rich on-chain ecology, and huge on-chain funds and user support, what kind of market AVAX will witness in the next bull market cycle deserves further attention from investors.

AVAX Ecosystem Overview

Avalanche has attracted a large number of users and developers with its low fees, high transaction speed, and EVM compatibility, and has established a strong on-chain ecosystem centered on DeFi. There are currently 269 applications deployed on the chain, including native projects and projects compatible with other chains, covering many categories such as Defi, Gamefi, wallets, exchanges, and cross-chain bridges.

To expand the C chain, the Avalanche Foundation also announced the launch of an incentive plan worth $290 million in March 2022. The Foundation will provide 4 million AVAX tokens as a grant to encourage the growth of subnets on the Avalanche chain. Currently, Crabada, DeFi Kingdoms, Shrapnel, and other projects have deployed subnets on Avalanche’s P chain. The parallel running of the subnet and the C chain improves the performance of the Avalanche chain and further promotes the sustainable development of the AVAX ecosystem.

Caption: Ecological Statistics on Avalanche Chain

Trader Joe’s

Launched in July 2021, Trader Joe’s is the main decentralized exchange on Avalanche. It is similar to PancakeSwap on the BNB chain, UniSwap, and SushiSwap on Ethereum. Trader Joe’s aims to make Avalanche a one-stop DeFi stop for every user. As Trader Joe’s keeps growing, new products emerge one after another. Trader Joe’s currently supports a variety of functions including trading, liquidity mining, lending, staking, and income farming.

Rocket Joe is a token financing platform launched by Trader Joe’s. Users can obtain rJOE by staking JOE tokens to participate in Rocket Joe’s token issuance. By holding 100 rJOE, users can get a subscription share of 1 AVAX, a new project on Rocket Joe.

Caption: Trader Joe’s Official Website

BENQI

BENQI is the first liquidity market built on the Avalanche C chain. Users can lend their idle assets to earn interest, and can also stake their assets on BENQI to borrow other assets, such as staking ETH, borrowing AVAX, and paying the corresponding interest.

On August 10, 2021, BENQI announced a $3 million liquidity mining incentive plan. Users can provide liquidity on BENQI and earn QI or AVAX token rewards. This plan was subsequently incorporated into the $180 million liquidity mining reward plan launched by the Avalanche Foundation on August 18. Avalanche has subsequently become the most popular public chain for users and funds. SBF even joined this feast with $140 million in funds, of which $87.433 million was placed in the BENQI lending protocol for liquidity mining.

Caption: BENQI’s Official Website

Compared with the liquid market on Ethereum, BENQI deployed on the Avalanche chain offers faster transactions and lower transaction fees. As of now, BENQI ranks second on the Avalanche chain in terms of its total lockup amount of up to $272 million.

Platypus Finance

Platypus Finance is a stablecoin swap protocol designed to reduce the slippage of stablecoin swaps and improve efficiency. Supporting the provision of unilateral liquidity is one of its features. That’s, it allows users to deposit only one stable currency and become a liquidity provider, which reduces the risk of impermanent loss and the risk of other stable currencies borne by users. Moreover, Platypus Finance is characterized by an open liquidity design, which allows users to easily add new currencies without adding a bunch of trading pairs and classifications.

Caption: Platypus Finance Offical Website

Crabada

As a battle game with the theme of undersea crabs, Crabada is one of the most trending games on Avalanche. Players can buy and breed sea crabs. Seabed crabs can mine and earn CRA and TUS. Users can also “rob” other players on the platform to steal their mining rewards. Many believe that Crabada is essentially the “Axie” on the AVAX chain.

Caption: Crabada’s Official Website

Crabada remains the overlord of Gamefi on Avalanche, with users far exceeding the project in the second place. Crabada accounts for 64% of Avalanche’s trading volume within a week. However, with the overall decline in the popularity of chain games, Crabada is no longer as brave as it used to be.

GMX

GMX was formerly known as Gambit, a project on the BSC chain, and later migrated to Arbitrum and supports the Avalanche chain. Derivatives trading is GMX’s main business. Investors can trade assets such as BTC, ETH, LINK, UNI, and AVAX with up to 30x leverage on GMX, as well as spot trades on these assets. GMX exchange provides real-time prices via Chainlink oracles.

Caption: GMX’s Offical Website

GMX adopts a global liquidity model and provides liquidity with GLP tokens as the carrier of assets. The way for users to participate in GMX market making is to directly purchase and stake the liquidity token GLP launched by the GMX exchange, and the staking income obtained is ETH, USDC, and esGMX. When the user makes a profit, he earns GLP, and if he loses, the deposit is included in the GLP pool and distributed to the staking user.

How to buy AVAX?

Caption: Trading Entrance of AVAX on the Gate.io exchange

The circulation of AVAX is mainly concentrated in the secondary market. Users can go to the homepage of the Gate.io exchange and click “Prices” at the top bar. Then, find AVAX, and click “Trade” on the right to enter the transaction page. You can also go directly to the trading page through this link.

Caption: AVAX trading page on Gate.io Exchange

On the trading page, you can set an ideal buying price and enter the amount of AVAX you want to buy. The website will automatically convert the amount of USDT to be paid. After clicking “Buy”, the entrusted order will be released to the order pool. When the minimum pending order price of AVAX is within the buying price of our entrusted order, the order will be filled, and the corresponding amount of USDT will be converted into AVAX.

Recent AVAX Turmoils

On August 26, 2022, Crypto Leaks, a currency news site, disclosed a shocking story about Ava Labs (the development company of Avalanche). Crypto Leaks said that Ava Labs had secretly launched malicious lawsuits against competitors such as Binance, Solana Labs, and the DFINITY Foundation through a U.S. law firm called Roche Freedman. The lawsuit allowed Ava Labs to profit from it. In return, Ava Labs paid Roche Freedman a substantial amount of Ava Labs equity and AVAX tokens.

The revealed content includes videos of Kyle Roche, a partner lawyer of multiple law firms, and related documents. However, these documents have never been confirmed.

Caption: The revealed file

Source: https://abmedia.io/20220829-crypto-leaks-claim-ava-labs-in-evil-conspiracy

This disclosed incident has aroused widespread concern in the crypto market. Emin Gün Sirer, the founder of Ava Labs, has denied all allegations, saying “we would never engage in these illegal, unethical, and totally wrong actions and our technology and team speak for themselves”. An article was subsequently published to refute what the Crypto Leaks revealed. Check for the details here.

Caption: Emin Gün Sirer’s tweet

CZ, the founder of Binance, also tweeted that he is not sure if what the Crypto Leaks disclosed is true, adding that Binance is not even a competitor of Ava Labs.

Caption: AVAX Price Curve

Source: https://coinmarketcap.com/zh/currencies/avalanche/

The news caused a brief panic in the market, but Crypto Leaks did not produce further evidence. The clarification of Ava Labs founder, Emin Gün Sirer, made the AVAX currency price rebound. As users, we should not be disturbed by these trivial revelations, but we also hope that the project party can select a more positive competition route, thus bringing innovation and changes to Web3.

Links related to AVAX

Twitter: https://twitter.com/avalancheavax

Medium: https://medium.com/avalancheavax

Telegram: https://t.me/avalancheavax

Website: https://www.avax.network/

Conlusion

As a token native to Avalanche public chain, AVAX plays a very important role in the Avalanche chain. With the unique three-chain mechanism and the fast-developing on-chain ecology, Avalanche quickly raced to control the market share and ranked among the top public chains. The price of AVAX has also brought early supporters a lot of money.

Defi and Gamefi are the main ecologies on the Avalanche chain. Although it started late, Avalanche ecology has developed rapidly. Both the number of active users and the number of developers are growing at a high speed. The launch of a series of incentive measures such as the $180 million mining reward and the $290 million sub-network incentive plan has played a remarkable role in promoting the ecological growth of the chain.

Although the price of AVAX tokens has gradually declined, as Gamefi is becoming less popular and Defi funds have fled during the bear market, the Avalanche team has been working hard to actively explore new areas, including NFT markets, government cooperation, etc. It is foreseeable that Avalanche’s subnet technology will play an increasingly crucial role in the future. How to seamlessly connect between subnets, and which ecological applications will be attracted by the privacy, security and high performance of the subnets are worthy of our attention to AVAX.