One of the big winners on the crypto market recently was the cryptocurrency Avalanche. Hardly any coin has undergone such a rapid development in recent months as the Avax token. During the incipient correction on the crypto market, the token also lost significant value, although the slump was much weaker than for other coins. Behind Avax is the blockchain Avalanche, a freely accessible defi data protocol. From mid-October 2021 to the end of November 2021, the price developed from $55 to over $134 and recorded mid-February around $95, which is still more than 70 percent above the October price.
What is behind Avalanche (AVAX)?
Avalanche is a fairly young project, it only started in September 2020, which also affects the complexity of the network. However, less complexity also means more speed: Avalanche is considered the fastest network for smart contracts. This makes it predestined as an ETH competitor, since the Ethereum blockchain also handles smart contracts and shows Avalon-like characteristics. Both cryptocurrencies rely on the proof-of-stake process: Transactions are approved by validators on the network. Whoever holds a certain amount of Avax tokens can become a validator, but the requirements for this are quite low compared to other protocols.
In contrast to the proof-of-stake method, Bitcoin uses the proof-of-work algorithm. This requires more computing power to release transactions. Given the size of the network, this now leads to huge mining farms with corresponding power consumption to mine new Bitcoin and validate transactions. In contrast, the Avalanche protocol is much more energy-efficient and faster. Avalanche manages up to 4500 transactions per second.
Possible applications of Avalanche
The application possibilities of Avalanche are analogous to other proof-of-stake blockchains such as Ethereum or Solana. Potential is given by the tradability of NFTs. But also peer-to-peer lending among private individuals are possible, since low transaction costs of a few cents attract a number of other possible applications. It is also helpful, that Avalanche consists of s several blockchains. Originally, the idea for Avalanche comes from computer scientist Emin Gün Sirer. After the whitepaper in May 2018, the market launch took place in September 2020.
Advantages of AVAX
As with BTC, the sum of Avax tokens is capped – in the case of Avax, a maximum of 720 million tokens can be issued. Unlike Bitcoin, Avalanche regularly removes tokens from circulation (burns them), which should increase scarcity and prevent Avax inflation. The transaction fee is burned in the process. In this way, a total of over 500,000 Avax have already been destroyed, which is equivalent to about $40 million.