Avalanche (AVAX)

Avalanche (AVAX) is the native cryptocurrency of the Avalanche network, a proof-of-stake platform for smart contracts and for launching separate, connected blockchains. AVAX pays transaction fees, is staked by validators to secure the network, and is the common unit of account across its chains. Its supply is capped at 720 million tokens.

Avalanche is built by Ava Labs, a company co-founded by the Cornell computer scientist Emin Gün Sirer, and supported by the Avalanche Foundation. Its main smart-contract chain is compatible with the Ethereum Virtual Machine, so it competes with the Ethereum Blockchain for the same developers. Independent networks built on Avalanche, once called subnets, are now called Avalanche L1s.

Picture a large business park. There is one main building where most companies rent space and share the lifts, the reception and the security desk. But any company that wants its own building can put one up on the same site, set its own entry rules and still use the park's roads to reach everyone else. Avalanche works the same way: a shared main network, plus room for organisations to run their own chains alongside it.

AVAX is the currency of the park. It pays the fees for using the main building, and people who lock some of it up help run security and earn rewards in return. The way the network reaches agreement is a little like a fast office poll: each computer keeps asking a few others which answer they prefer until the whole group settles on one.

The Avalanche consensus protocol was first described in 2018 in a paper by a pseudonymous group called Team Rocket, and Ava Labs was formed to develop it. After a public token sale in July 2020, the mainnet launched on 21 September 2020. Its main smart-contract chain attracted a wave of DeFi projects in 2021, helped by incentive programmes and a bridge from Ethereum. Financial firms later used Avalanche for tokenized funds and other pilots. On 16 December 2024 the Avalanche9000 upgrade, also known as Etna, went live; it renamed subnets as Avalanche L1s and sharply cut the cost of running one.

The primary network has three chains, each with a job:

• The C-Chain runs EVM smart contracts and is where most users, tokens and applications live.
• The P-Chain tracks validators, staking and the creation of Avalanche L1s.
• The X-Chain handles the creation and transfer of simple assets, including AVAX.

Validators reach consensus by repeatedly sampling a small random group of other validators and adopting the majority answer, which gives finality in around a second. Primary network validators must stake at least 2,000 AVAX, and smaller holders can delegate to them; see delegated staking. Before Avalanche9000, every validator of an Avalanche L1 also had to validate the primary network and stake 2,000 AVAX. Since the upgrade, L1 validators pay a small continuous fee in AVAX instead, initially about 1.33 AVAX a month, which lets companies run their own chains, including permissioned ones, at far lower cost.

AVAX has a hard cap of 720 million tokens, with 360 million created at launch and the rest released over time as staking rewards. All transaction fees on the primary network are burned, so the change in supply over a period depends on two flows:

• $\Delta S$ is the change in total AVAX supply over the period.
• $I$ is the new AVAX issued as staking rewards.
• $B$ is the AVAX burned as gas fees.

With illustrative figures, if a month brings $2{,}500{,}000$ AVAX of rewards and $100{,}000$ AVAX of fees, supply grows by $2{,}500{,}000 - 100{,}000 = 2{,}400{,}000$ AVAX. Because burned tokens no longer count towards the cap, the network can keep paying rewards for longer than it otherwise could.

• Fees and staking. AVAX pays gas on the C-Chain and secures the primary network.
• Decentralized finance. Exchanges, lending markets and stablecoins such as USDC run on the C-Chain.
• Custom chains. Gaming studios, exchanges and financial firms run Avalanche L1s with their own rules and fee tokens.
• Tokenized assets. Avalanche has been used to issue funds and other tokenized real-world assets.

Critics note that activity on the C-Chain has risen and fallen with incentive programmes, and that splitting projects across many L1s can fragment users and liquidity. A large share of supply went to Ava Labs, the foundation and early investors. Like other networks that rely on bridges and smart contracts, Avalanche applications have suffered hacks, and the shift to cheaper L1s has raised questions about how much value flows back to AVAX holders. Validators on the primary network need capable hardware and a sizeable stake, and the sampling method behind Avalanche consensus is younger and less studied than older designs, and in February 2024 a bug stopped block production on the C-Chain for several hours.

• Avalanche
• Avalanche developer documentation