Avalanche Eco_ Explained

Takeaway:

· High scalable blockchain system without sacrificing decentralization or security

· Uses three native tokens that have different functionalities inside the Avalanche ecosystem

· Allows the development of Web3 applications

· Has a two-way token bridge that enables a smooth ERC-20 and ERC-721 transfers between Avalanche and Ethereum

The launch of the Avalanche has attracted much attention from the DeFi community. Not only did the ecosystem expand very fast, but the Avalanche token price also skyrocketed without stopping.
Check the latest AVAX prices: https://www.gate.io/trade/AVAX_USDT
In this article, you will learn why this protocol is so interesting and its impact on the DeFi world.
Are you curious now and do you want to learn more about Avalanche? Let's jump in!

1.What is Avalanche (AVAX)?
Avalanche ($AVAX) is a smart contract-capable blockchain platform focused on transaction speed, low costs, and eco-friendliness. But what Avalanche truly wants is to deliver the most highly scalable blockchain without sacrificing decentralization or security.

Launched in 2020 by Ava Labs (https://www.avalabs.org/), Avalanche quickly climbed the cryptocurrency rankings and is now one of the most popular coins. Avalanche price is skyrocketing and is now worth nearly $14 billion across Avalanche dapps. Avalanche dapps are decentralized applications and are built on various blockchains inside the Avalanche ecosystem. They are also known as Web3 applications or in short - dapps. If you want to understand Avalanche growth you need to see the following picture which lists the Avalanche ecosystem and all the dapps that were created within just one year.

Avalanche is a serious competitor to the stellar team in a heated race to produce the world's fastest blockchain with a passionate community, and dedicated backers. These two have a head-to-head race.
Stellar current price: https://www.gate.io/trade/XLM_USDT

2.How does the ecosystem work?

The Avalanche network consists of several blockchains and uses a unique proof of stake mechanism to achieve high output, estimated to reach over 4500 transactions per second.
Avalanche claims that its protocol merges the benefits of "Nakamoto consensus" (robustness, scale, and decentralization) and "Classical consensus" (speed, quick finality, and energy efficiency) to form this new mechanism.


3.The Avalanche-Ethereum bridge?

Avalanche-X is Avalanche's accelerator. Accelerators are co-processors designed specifically to perform a computationally intensive cryptographic operation on which the developers can build their decentralized applications – the dapp we mentioned before. One of the biggest achievements of the Avalanche-X is the development of a cross-chain Ethereum bridge.

The Avalanche-Ethereum Bridge is a two-way token bridge that enables smooth ERC-20 and ERC-721 transfers between Avalanche and Ethereum. Ethereum-based assets can be used with dapps on Avalanche and users can lock these assets in the ChainBridge contract and produce an equivalent token on the Avalanche network.

4.Avalanche’s Benefits

The main benefit is that Avalanche can avoid Ethereum’s high transaction fees. As DeFi became more and more popular, users were struggling due to Ethereum's high network fees. With the price of ETH climbing up, even small token swaps on Ethereum are becoming excessively expensive for new users. Even small transactions could easily cost 0.1 ETH. Which could be too pricey for the swap. It's not very practical, right? Another downside of Ethereum is the gas prices. The sudden spikes in gas prices can even lead to a transaction failure, costing the user potentially hundreds of dollars’ worth of ETH without even executing the transaction. That’s bad.

And here is where Avalanche's biggest advantage lies. The Avalanche-Ethereum Bridge represents a step towards transferring Ethereum's slow and costly DeFi infrastructure to the significantly faster and cheaper Avalanche network. Avalanche transaction fees cost a few cents and are significantly faster - currently so rapid as to be near-real-time. Since we know what Avalanche is and what its benefit is, let's dive deeper and have a look into its ecosystem.

5.The Avalanche-Ecosystem

Ava Labs claims to have built the fastest smart contract blockchain platform till now. By utilizing three different blockchains in a synergy, Avalanche performs at an internet scale and helps to build the platform wherein crypto is used worldwide daily.

This vision is not only ambitious and futuristic but is already backed up by a growing community that raised a $230 million ecosystem fund.

The reason for this huge community backup is that Avalanche’s core innovation consists of three blockchains rather than the usual single blockchain. The reason behind this design is quite simple but brilliant at the same time. Each blockchain does one specific task within the broader Avalanche ecosystem instead of having one chain do all the tasks.

This way the system is very efficient and each blockchain are agile, allowing it to achieve the goal of cryptocurrencies - decentralization, security, and scalability.

Now let’s have a look at each blockchain that forms the Avalanche ecosystem – AVAX, JOE, and PNG.

· Exchange Chain (X-Chain)

The Exchange Chain (X-Chain) is the blockchain responsible for creating and handling Avalanche assets. Avalanche’s native token AVAX is the current most popular cryptocurrency on the platform, but decentralized exchange tokens JOE and PNG aren’t far behind. JOE and PNG projects designed in the Avalanche ecosystem.

AVAX to USDT: https://www.gate.io/trade/AVAX_USDT

Transactions on the X-Chain generate fees paid in AVAX. That’s similar to the gas fees on Ethereum. But even if you are transferring any coin inside the Avalanche ecosystem, for example, JOE, the transaction fees are pain-settled in AVAX. The AXAX coin is burned from the supply, permanently lowering the amount of AVAX in circulation. Using AVAX between subnets is important because it helps interoperability between subnets that would otherwise use their internal cryptocurrencies.

· Contract Chain (C-Chain)
Smart contracts are Avalanche’s key feature enabling developers to build decentralized applications on Avalanche while leveraging the platform’s security and scalability benefits. That way the Avalanche ecosystem can be expanded and enhanced with new applications.

The C-Chain runs smart contracts for the Avalanche platform and is EVM (Ethereum Virtual Machine) compatible allowing the deployment of Ethereum smart contracts on Avalanche. This creates the link to existing Ethereum apps, such as DeFi titans Aave, which can now easily deploy a version of their product on the Avalanche ecosystem.

Aave to USDT: https://www.gate.io/trade/AAVE_USDT

With C-Chain developers can deploy Ethereum smart contracts on Avalanche and have access to the latter’s features using the same Ethereum developer tools as always.

· Platform Chain (P-Chain)

Avalanche’s P-Chain allows anyone to create a Layer 1 or Layer 2 blockchain or even create a group of them. These blockchains are called subnets, with the P-Chain being the link between them. The P-Chain manages the subnets by keeping track of validators, but at the same time, the subnets are also responsible for validating the P-Chain. It's mutual verification between them. These subnets are the key factor for the scalability of the Avalanche ecosystem. The Avalanche’s subnets work similarly to Ethereum 2.0 sharding.

Subnets can be created by users on-demand and as needed. In practice, this means a subnet, once its scaling limits are temporarily exhausted, can launch another subnet to meet or exceed network traffic demands and free up transactions.

Their creation is unlimited since subnets can infinitely create other subnets. Avalanche’s P-Chain has a roughly 4,500 transaction per second limit, about 2x higher than Visa. But owing to its unlimited capacity for generating subnets, Avalanche does not have a practical TPS limit.

Here is the above-mentioned information in a single picture. It's worth studying it.

6.AVAX Staking Rewards

All subnets, including the Primary Network, require validators who own and stake AVAX tokens as security. But you don't have to be a validator to get rewarded for staking. You can borrow your stake from a validator to earn a percentage of the staking rewards. It's a nice way to contribute to the Avalanche ecosystem and get a nice return of roughly 10%.

Author: article_bot
*This article only represents the views of observers and does not constitute any investment advice.
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