What is Avalanche and how does it work? A beginner's guide to AVAX

Avalanche AVAX -5.27% is a decentralized platform that aims to provide a faster, more secure, and more efficient way of processing transactions.

In this beginner's guide, we will explore what Avalanche is, how it works, and how it uses the AVAX coin.

What is Avalanche?

Avalanche is a blockchain platform that was launched by Ava Labs in 2020. The platform is designed to be smart contract-capable, meaning it can execute contracts automatically when certain conditions are met. The primary goals of Avalanche are to improve on existing blockchain technology, particularly in the areas of scalability, interoperability, and usability.

The native token of the Avalanche ecosystem, AVAX, serves as the medium of exchange within the network and is used for various purposes such as transaction fees, and staking. Staking AVAX is a way to secure the network and receive coins in return.

In terms of scalability, Avalanche is designed to process thousands of transactions per second, making it more efficient than many other blockchain platforms. It typically offers lower transaction fees compared to platforms like Ethereum, making it a cost-effective solution for users.

How does Avalanche work?

Avalanche operates distinctively through the utilization of three separate yet interconnected blockchains, each with a specific role in the network's functioning.

The X-Chain is responsible for creating and managing assets. The C-Chain is designed to facilitate the creation of smart contracts, supporting ERC-20 tokens, decentralized applications and NFTs. Lastly, the P-Chain's role is to coordinate validators and support the creation of application-specific blockchains called subnets.

In order to use Avalanche, token holders must send their tokens from one chain to another depending on what they're planning to do with their tokens.

The Avalanche consensus protocol gets nodes on the network to work together and process transactions. It enhances the network's security by conducting random checks on validators' transaction confirmations. This approach increases the likelihood of a transaction being valid.

The Snowman consensus protocol functions similarly but processes blocks linearly. This is used by the X-Chain and the P-Chain and will soon be used by the X-Chain.

The unique three-blockchain structure of Avalanche addresses common blockchain issues, offering a solution that is highly scalable, interoperable and user-friendly, thereby making it a standout in the blockchain industry.

What are subnets?

Subnets allow developers to create customized blockchains with specific rules, regulations, and functionalities tailored to their needs.

Subnets are ideal for specific applications like private enterprise blockchains, government or regulatory-compliant blockchains, gaming networks, and decentralized finance (DeFi) ecosystems. They can enforce specific legal compliance, privacy settings, and performance metrics as required by their use case.

Each subnet can have its own governance model, allowing communities to establish consensus mechanisms and rules that best suit their particular blockchain. Each blockchain is validated by one subnet, but a subnet can validate multiple blockchains.

Validators on a subnet also secure the Avalanche mainnet (Primary Network). This dual role ensures a high level of security for both the mainnet and the various subnets.

Although subnets operate independently, they are not isolated. They can communicate with other subnets and the Primary Network, facilitating interoperability within the Avalanche ecosystem.