Avalanche (AVAX) Proof-Of-Stake High TPS DeFi
The cryptocurrency world is constantly changing, especially when it comes down to the alt coins, or coins that are not Bitcoin. A coin that may be in one day, could be out the next, and this is why it is always important to do your research before investing in any cryptocurrency project. This week, a project which experienced a spike, followed by a fall, is one that may be unfamiliar to most of you, a project known as Avalanche.
What is Avalanche?
Avalanche is a DeFi blockchain project launched by parent company Ava Labs. Avalanche, who’s token is abbreviated AVAX, aims to be a program similar to Ethereum, but for the DeFi world. This project comes about because many people in the cryptocurrency world put a high value on privacy. And as Ethereum switches from a proof of work to a proof of stake consensus, this takes away a portion of the decentralization people want to see from a product like Ethereum.
Avalanche focuses not only on hosting decentralized finance applications, but also as an exchange marketplace for exchanging alt coins. This puts it in the same realm with SushiSwap and UniSwap, while also giving it an additional interoperability layer. All of the smart contracts on Avalanche operate without outside input and execute automatically.
The History of Avalanche
Avalanche, as previously mentioned, was created by Ava Labs in 2019. The ICO for the token took place in July 2020 and the mainnet launched soon after in September 2020. Ava Labs is run by three co-founders, Emin Gun Sirere, Chris Lavery, and Maofan Yin. All three men have extensive backgrounds and experience in technology, and are looking to bring the world a project like it has never seen before. Besides the ICO, the men also received a large amount of funding thanks to a venture capitalist by the name John Wu.
What is AVAX?
On exchanges, you will almost always see Avalanche associated with AVAX. AVAX is the native token used to make transactions on the Avalanche blockchain. AVAX is deflationary, and as users spend AVAX on transactions, the token is collected and burned, thus increasing the scarcity of the coin. Currently there are 720,000,000 AVAX tokens, only 70,000,000 of which are in circulation. The rest are held by private investors who cannot currently spend the token as they are locked in vesting periods.
Is Avalanche Truly Decentralized?
All this talk about decentralization probably has you thinking that Avalanche is a better alternative to a blockchain like Ethereum, but this isn’t necessarily true. Like Ethereum, Avalanche runs on a proof of stake mechanism which affects its decentralization. This is because the way proof of stake works inherently has a little bit of centralization — mainly in that stakers are chosen based on how many coins they own. And if you own a lot of AVAX, you’ll be able to stake a majority of the transactions. This hurts decentralization because, in general (and Avalanche falls into this category) when an ICO is issued for a coin, the creators of the coin are given first dibs. This means that although Avalanche may advertise that it is decentralized, that you can almost bet that a large portion of the holders of the AVAX token are the names mentioned above. And this decreases the decentralization of the coin.
So honestly, although Avalanche advertises that it is more decentralized than Ethereum, there isn’t really much difference, and it seems to be just a new version of Ethereum. It does have a lot of advantages such as being able to process 4,500 transactions per second, and advanced security protocols that make it a safer option than a lot of other decentralized blockchain projects. But as to if this will be enough to surpass the market capacity of Ethereum is uncertain.
Should You Buy Avalanche?
Although Avalanche is a fairly new project, it is surprisingly established and stable for a project that was only started two years ago. And if you’ve invested in Ethereum in the past, or intend to invest in it in the future, there is really no reason not to invest in Avalanche, because the projects basically do the same things. The only major difference is that new ETH is being printed all the time, not making it the best from an investment standpoint, while Avalanche is deflationary, and no more is being printed. This means that an investment in Avalanche looks better on paper than an investment in Ethereum.
But this brings up another issue. As of the writing of this article, Avalanche is holding the 48th spot on coin market cap. This means it is a popular coin, but it overshadowed by over 40 other projects. And even if the coin is deflationary, this means absolutely nothing if the project doesn’t have a large following.
The lack of following in Avalanche is a bit concerning. It just doesn’t have the massive fan and user base that a coin like UniSwap does. Now this could be because of the age of the project, but it could also be because there just isn’t a demand for a more decentralized and deflationary Ethereum. And thus if you do decide to invest in the project, you should do so with caution with the assumption that it is possible to lose all of your money.
How to Buy AVAX
If you do decide that an investment in Avalanche is for you, then first you need to acquire a wallet that can hold the token. Avalanche is compatible with hardware wallets such as Trezor and Ledger Nano X, as well as several different software wallets you can download to your computer.
After you have your wallet set up, you can head over to an exchange like Binance or Gate.io to purchase your AVAX. Do note that you cannot purchase AVAX with fiat money and that you will instead need to purchase Ethereum or Bitcoin first in order to secure your AVAX. Once your transaction goes through, you will be the proud owner of some AVAX tokens!
Whether you decide to invest in some AVAX, or maybe you want to wait and invest in a different project, it’s important to know that any investment in cryptocurrency is risky and that you should enter it prepared to lose all your money. But you could also make a pretty penny too, you just never know!