What is Avalanche?
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AAG Marketing
Mar 30, 2023 7 mins read

What is Avalanche?

Avalanche is an open-source blockchain platform built for hosting smart contracts. It launched in 2020 as a competitor to Ethereum, and it promises faster, more affordable transactions without compromising on security. Avalanche has its own cryptocurrency, AVAX, and thanks to its rapid growth over the past few years, the project currently has a market value of more than $6 billion.

In this AAG Academy guide, we’ll look at Avalanche in more detail, explain how it works, and find out what makes it unique. We’ll also cover Avalanche’s pros and cons, and answer some of the most frequently asked questions about the project.

What is Avalanche in crypto?

Ethereum has become the world’s second-most valuable cryptocurrency project since its launch in 2015, and it is now the number one blockchain for hosting decentralized applications (DApps) powered by smart contracts. However, thanks in large part to its sheer size, Ethereum has its downsides, including lengthy transaction times and expensive processing fees.

This has encouraged other developers to build Ethereum alternatives that don’t suffer the same issues — one of the most popular of which is Avalanche. Much like Ethereum, Avalanche is an open-source blockchain network, powered by thousands of nodes, that is primarily used to host DApps written in Solidarity. It also uses the same proof-of-stake (PoS) consensus mechanism.

As you may have noticed, Avalanche and Ethereum share a lot of similarities, however, Avalanche works a little differently under the surface, which helps set it apart from other open-source blockchain networks. These differences give Avalanche an advantage in some areas, but like other Web3 technologies, it also has limitations that users should be aware of.

How does Avalanche work?

Avalanche’s underlying architecture is pretty complex, so it can be difficult to understand how it differs from Ethereum and other blockchains. However, we can simplify things by breaking it down into three key aspects:

Although Avalanche uses a PoS system like Ethereum and many others, it has a unique consensus mechanism. Transactions are confirmed by nodes that sample a small, random set of other validators, checking for agreement. This sampler procedure is made possible by a process called “gossiping,” in which validators repeatedly talk to each other to reach consensus.

For example, one validator sends a message to another validator, which samples more validators, which then sample even more validators. This happens over and over again until the whole network reaches an agreed upon outcome. It sounds rather convoluted, but this actually speeds up the consensus system so that transactions can be processed faster.

Developers can create specialized Avalanche chains that have their own set of rules — similar to Ethereum’s shards or Polkadot’s parachains. Consensus on these chains is reached by subnetworks, or subnets, which are essentially groups of nodes that are designated to a set of blockchains. Validators in these subnets must also validate on the primary Avalanche network.

Specialized chains give developers access to certain functions or processes that aren’t available on the Avalanche blockchain by default. This allows them to create DApps or smart contracts with features that wouldn’t normally be supported by the primary network, and it solves the dreaded scaling problem that many of today’s blockchains suffer from.

Multiple blockchains
Avalanche actually incorporates three different blockchains in an effort to address the limitations of the blockchain trilemma, which are decentralization, scalability, and security. Many believe it is possible to achieve a maximum of two of these things with a single blockchain, so Avalanche was designed to solve the problem by combining three into one.

Those blockchains are:

  • Contract Chain (C-Chain): This is the chain that hosts and executes smart contracts. It is based on the Ethereum Virtual Machine and therefore allows for cross-chain interoperability with Ethereum.
  • Exchange Chain (X-Chain): This is the default Avalanche blockchain on which assets like Avalanche’s native token, AVAX, are created and exchanged.
  • Platform Chain (P-Chain): This chain coordinates validators to enable subnetworks.

Who invented Avalanche?

Avalanche was co-founded by Emin Gun Sirer, Kevin Sekniqi, and Maofan “Ted” Yin — researchers and doctoral students from Cornell University. The trio developed it after its fundamentals were detailed in a 2018 whitepaper published by a group known as “Team Rocket.” Avalanche made its official public debut in March 2020.

It wasn’t until September 2020 that the native AVAX token, which is worth just under $20 as of January 2023, was launched. A year later, the Ava Labs Foundation that runs Avalanche received a $230 million investment, through the purchase of AVAX tokens, from a group that included Polychain and Three Arrows Capital.

Today, Avalanche has a market value of over $6 billion, which puts it firmly within the top 20 most valuable cryptocurrencies in the world — above Uniswap, Chainlink, Ethereum Classic, and Bitcoin Cash. However, Avalanche has a long way to go if it wants to catch up with Ethereum, which is currently worth just under $210 billion.

Pros and cons of Avalanche

As we touched on earlier in this guide, some of Avalanche’s biggest advantages are its speed and affordability. It has the ability to process up to 4,500 transactions per second, which is significantly greater than the 15 transactions per second that Ethereum is capable of, and its transaction fees are usually less than a few dollars, though this depends on the transaction.

In addition Avalanche has a reward structure that incentivizes participation from network contributors, while its unique blockchain supports a wide range of projects. This, coupled with its speed and ability to scale effectively, could give Avalanche a long-term advantage over its biggest rivals. However, it should be noted that it has some drawbacks, too.

As things stand, one of Avalanche’s biggest cons is the strong competition it faces from the likes of Ethereum, which remains the primary choice for most developers because of its size. Furthermore, Avalanche makes it difficult to become a validator with a minimum stake of 2,000 AVAX tokens, which would currently cost around $40,000.

Avalanche has also faced criticism for the fact that it does not penalize malicious or careless validators by taking away some of their tokens, which is usually the case on other blockchains. This means that bad actors and those who do not correctly fulfill their validator duties do not have to worry about financial losses, so they have no incentive to do better.


Frequently Asked Questions

Some of Avalanche’s biggest partners currently include Aave, Binance, BitMart, Chainlink, Coinbase, Deloitte, Mastercard, MetaMask, OpenSea, Securitize, and SushiSwap.

You can buy AVAX tokens from a wide range of centralized and decentralized exchanges, including Binance, Coinbase, eToro, and MoonPay.

Yes. One of the ways to make passive income with Avalanche is to stake your AVAX tokens and earn rewards for contributing to the PoS system.

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About the author

AAG Marketing


This article is intended to provide generalized information designed to educate a broad segment of the public; it does not give personalized investment, legal, or other business and professional advice. Before taking any action, you should always consult with your own financial, legal, tax, investment, or other professional for advice on matters that affect you and/or your business.

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