Avalanche Staking

Avalanche Staking

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Jonathan
Jonathan

An editor at Coincrop


24 Aug 2022 | 22 min read
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thereum (ETH), the prime Bitcoin (BTC) competitor, suffers from well-known negatives, like high gas fees and slow transactions. That’s where many ETH-like and ETH-based counter parts stood up to solve the drawbacks. However, only a few assets managed to hold competition with the second largest crypto by volume.

Avalanche (AVAX) is one of those cryptos currencies with low gas fees and speedy transactions. It somehow took its fair share of the cryptocurrency market with promising features right from the start. The scalable asset has excellent potential to overcome the barriers to decentralized finance.

In this guide, we look at Avalanche Staking and what it involves.

Disclaimer: All of the information written on Coincrop is without influence and based on our analysis. No guarantee is offered concerning the accuracy of this information and therefore, any individual following up on it does as such completely at their own risk. Rates are correct at time of publication.

What is Avalanche?

Avalanche (AVAX) is a blockchain-based cryptocurrency platform for users and developers. The decentralized and open-source ecosystem stands on a smart contract derived from the original Ethereum network. Also, it’s the resultant consensus protocol featuring DAG (Directed Acrylic Graph) data structure.

Meanwhile, AVAX refers to the native token of the blockchain in market circulation. Anyone can put AVAX into use for crypto trades, paying fees, digital collectibles, and Defi asset works. Its blockchain services don’t require the involvement of an intermediary to conduct a business trade.

Likewise, Avalanche (AVAX) is one of the most recognized Ethereum alternatives in the industry. It aims at providing scalable, fast, and low-cost transactions like other ETH-based competitors. However, several features are available in its ecosystem to make AVAX somewhat different from others.

Many AVAX enthusiasts use Blockchain 3.0 to describe the Avalanche network. It’s more like an iterative upgrade for Blockchain 1.0 and 2.0, denoting Bitcoin and Ethereum, respectively. But the heterogenous network introduces a somewhat new consensus protocol to achieve finality in seconds.

What is the history of Avalanche?

Professor Emin Gün Sirer from Cornell University (USA) Kevin Sekniqi, and Ted Yin founded Avalanche in 2018. A pseudonymous developer group named Team Rocket proposed Avalanche in the whitepaper. An IPFS (Inter-Planetary File System) link published the whitepaper on May 18, 2018.

Snowflake's novel consensus protocol focused on providing a powerful and flexible network. And the associated platform should suit all types of relatable networks and applications. But Ava Labs created the Avalanche Staking network and its AVAX token based on Team Rocket’s Snowflake.

They announced the first seed sale in February 2019 after founding Ava Labs in June 2018. Investors purchased $18 million AVAX tokens for $0.33 per asset with one-year vesting. Seven investors, including Andreessen Horowitz, Polychain, and Balaji Srinivasan, attended the sale.

Emin Gün Sirer later collaborated with Team Rocket to publish a revised version in June 2019. They eventually launched the first public testnet based on the revised Avalanche whitepaper. It raised $12 million from a private sale in May 2020 by selling 24.9 million AVAX for a $0.5 price per token.

Ava Labs announced its native token AVAX for Initial Coin Offering (IFO) in June 2020. The IFO raised $24 million within 24 hours on July 15, 2020. And the Everest test network went live by August 2020. The network is a fully-featured ecosystem of the projected Avalanche platform initially.

The network launched its Mainnet in September 2020 to deliver the first upgrade. It was called Apricot as of January 2021. AVAX reached the peak of $6.98 on September 22, following the mainnet launch. Also, the platform unlocked all its AVAX assets from public sales on March 4, 2022.

Avalanche Defi ecosystem is currently growing at a slow pace due to surged market volatility. They also have projects like Prosper, a non-custodial prediction market. Meantime, the network launched its first Stablecoin named ‘TrueUSD’ to emphasize additional Defi (Decentralized Finance) applications.

How is Avalanche created?

Avalanche Staking functions on the Proof-of-Stake (PoS) protocol to enable users to stake tokens in the network. It collaborates with the proposed consensus to provide a hybrid solution. The imposed Nakamoto model with a classic speedy consensus created a powerful algorithm for AVAX.

Blockchains from the PoS protocol go by subnets to function as a mini-network. Thousands of subnets; therefore, many mini networks join in shaping Avalanche. Also, each blockchain in the system is customizable to meet specific user demands.

The secure decentralized ecosystem allows people to execute smart contracts to create Defi apps. The mechanism integrates a triple-blockchain system for simple transactions and developments. This system features – X-Chain, C-Chain, and P-Chain for the mechanism to work.

Team Rocket’s Snow Family concept combined the best of both consensus models for the PoS network. Snow Family consists of Snowflake, Avalanche, and Snowball to fuse the DAG structure. Millions of users can scale AVAX without surging the power demands or hardware purchases.

What makes Avalanche unique?

The network integrates a high degree of programmability to the dApps developers. Also, the system can solve several other congestion issues related to the ETH-based cryptos. The scalable ecosystem appoints a unique 3-blockchain mechanism mentioned above.

    1. Exchange Chain (X-Chain)

It creates the native AVAX token to exchange with other supported assets. And the chain directly uses the consensus protocol. These tokens have to follow standardized rules like the ERC-20 tokens. 

    2. Contract Chain (C-Chain)

It hosts smart contracts and dApps with the Avalanche Virtual Machine (AVM). Developers comfortably fork ETH Virtual Machine-compatible apps. The chain integrates Snowman consensus for these tasks.

    3. Platform Chain (P-Chain)

It coordinates the network validators to track and create new subnets. Each subnet is a set of validators, resembling a validator carte. The Snowman consensus mechanism does the job with this chain.

Market analysts consider AVAX deflationary to give more control to the developers. Burning transaction fees control the circulating amount for Avalanche Staking. And the token’s demand remains steady to regulate the market price to hold stability.

How do I purchase Avalanche?

Open an account on your chosen exchange platform with sufficient AVAX in its store. Submit a Purchase Request for the token after making deposits in your account. You can choose bank transfer or debit/credit card to deposit in a fiat currency.

You should see the purchased amount following a successful request. The following crypto exchange platforms have AVAX for you to buy: Binance, Coinbase, eToro, Crypto.com, KuCoin, Bitfinex, Gate.io etc

You can buy the token with USD or other supported fiat currencies on Binance and Coinbase. But other platforms often use stablecoins like USDC (USD Coin) or USDT (USD Tether). AVAX and Stablecoin work as a trading pair, converting the token into USD-pegged assets.

How do I store Avalanche?

However, you should be a little wary to keep the purchased/traded assets on the exchange wallet, unless it’s a trusted and noted exchange. These wallets can be prone to scams, breaches, hacks, and frauds. The industry comes forward with four different options:

    1. Hardware Wallet

It’s a device similar to a flash drive to store the access keys to your digital assets. This cold storage facility isn’t connected to any network. Ledger/Trezor is currently the most popular cold wallet brand.

    2. Software Wallet

Downloadable apps or programs to your device keep track of your cryptos. This hot storage requires internet connectivity all the time. There are many software wallets available as apps/programs. 

    3. Paper/Text Storage

You can write down the access keys on paper or a text file. However, this method is barely used these days due to the high chance of losing the paper. It’s more like a temporary storage solution.

    4. Crypto Exchange

Storing in exchange platforms is necessary to trade your available assets. You can transfer the cryptos right before making a transaction. But never consider freezing the assets in their wallets.

Access keys refer to Keystore files, private/public keys, and the recovery phase. Ledger Nano X cold wallet lets you connect to any 3rd party wallet. Also, the Avalanche Network has a non-custodial wallet feature. 

What are the advantages of Avalanche?

    • Infinite Scalability

Older crypto assets can consume enormous energy to complete a transaction. But AVAX can boast more validators than other competitive networks. The Avalanche ecosystem can process 4500 transactions per second (TPS). It makes the infinitely scalable network use minimal time and energy for completion.

    • Excellent Interoperability

The infrastructure of subnets allows Avalanche to interoperate with other crypto units. It also includes secure data transfer between different platforms while trading. An improved Defi enables entirely seamless interoperability for AVAX. Here, the blockchain is a common platform for sharing assets/data. 

    • Further Usability

The network is easy, simple, and practical to adapt and implement to develop other dApps. Its mechanism lets users and organizations deploy L1 and L2 blockchains. You can go for permission and permission-less uses. The thriving ecosystem can deliver a stable, powerful, and secure decentralized application.

    • Low Transaction Cost

Ethereum’s slow transaction is also associated with a hefty transaction fee. And one primary objective of AVAX concerns the reduction of the gas fee. Avalanche Staking delivers minimal costs combined with an excellent transaction speed. However, different transactions take varying fees due to trading types/conditions.

    • Deflationary Strategy

Extreme volatility is one of the most following features of the crypto world. But the original AVAX project aimed at minimizing the drawbacks. Instead, the Avalanche network derives a stable token relating to the market. And its deflationary burning mechanism will always keep up with the demands.

What are the disadvantages of Avalanche?

You get the negatives associated with Avalanche on the other side. There are several limitations to choosing this crypto asset:

    • Stiff Competition

Many crypto assets are circulating in the market to solve ETH’s drawbacks. Low gas fees and fast transaction time are available on many cryptos. It often threatens the market demand of AVAX.

    • Specified Staking

Anyone interested in becoming an Avalanche Staking validator must stake 2000 tokens at least. Any less won’t get you anywhere near the system. It poses a lousy impression on newbies due to the summed-up total.  

    • Validator Penalty

Also, the stable ecosystem suffers from careless and malicious validators. Their reckless actions often end up plunging the value. But there’s penalizing rule for those by taking away their AVAX stake.

How many AVAX are in circulation?

Total supply of AVAX to the market is 404,229,626 against 284,025,421.76 tokens in circulation (at the time of writing). And the maximum number can reach 720 million or 720,000,000. Its distribution among holders is as follows –

    • 2.5% - Seed Sale

    • 3.5% - Private Sale

    • 10.0% - Public Sale

    • 9.26% - Foundation Allocation

    • 7.0% - Community Endowment

    • 0.27% - Testnet Incentive

    • 5.0% - Strategic Partner

    • 2.5% - Airdrop

    • 10.0% - Team

    • 50.0% - Staking Rewards

10% of seed, private, and public sales are released on mainnet launch. And the remaining tokens are released every three months.

Team, airdrop, and partner tokens are scheduled for every 4-year release. Other portions’ releases depend on the network schedule.

Should I invest in Avalanche?

Avalanche is the prime competitor of Solana (SOL) to take down Ethereum. It enjoyed a skyrocketing start following the market launch. However, the price keeps struggling throughout the entire 2022.

Investors are looking for more stability, profits, and security. And short-term investors aren’t exactly interested in its high pricing. AVAX seems like a good long-term investment to avoid the recent decline.

The project is entirely legit, secure, and dependable. Its high volatility related to the market makes it more valuable. The superior serviceability explains why Avalanche can take over ETH in the future.

How much can I earn from Avalanche staking?

There are various ways in which you can earn rewards from Avalanche Staking:

OrganizationDeposit assetsReward assetsAPY Rate
OKEx

Saving

Deposit AvalancheAvalanche (AVAX)

Earn AvalancheAvalanche (AVAX)

102% - fixed (5 days)

Midas Investments

Saving

Deposit AvalancheAvalanche (AVAX)

Earn AvalancheAvalanche (AVAX)

10.5% - flexible

Nexo

Saving

Deposit AvalancheAvalanche (AVAX)

Earn AvalancheAvalanche (AVAX)

10.0% - flexible

Trofi

Saving

Deposit AvalancheAvalanche (AVAX)

Earn AvalancheAvalanche (AVAX)

10.0% - flexible

YouHodler

Saving

Deposit AvalancheAvalanche (AVAX)

Earn AvalancheAvalanche (AVAX)

9.50% - flexible

Bit2Me

Saving

Deposit AvalancheAvalanche (AVAX)

Earn AvalancheAvalanche (AVAX)

7.50% - flexible

Okcoin

Saving

Deposit AvalancheAvalanche (AVAX)

Earn AvalancheAvalanche (AVAX)

7.24% - fixed (15 days)

Avalanche Staking Conclusion

The declining crypto market may not present AVAX with its full potential. But Avalanche includes almost everything for anyone looking for ETH alternatives.

Still, you can earn satisfactory profits from long-term AVAX investments. You only have to settle for the limitations associated with the working ecosystem.

Avalanche Staking FAQs

ERC-20 is a set of functions referring to a token on the Ethereum blockchain. But AVAX is Avalanche’s native token, not compatible with ERC-20. You need to use Wrapped AVAX (WAVAX) to make the contract compatible with ERC-20.

Yes, the Avalanche token is available for staking to support a network for certain rewards. The scarce token can deliver a good yield in return on long-term staking. And these rewards are either high network utilities or money compensations.

Avalanche is considered one of the top Ethereum killers for various reasons. There are available for superior speed, lower gas fees, and minimal trading charges. And lots of investors moved from AVAX to ETH during its first market launch.

AVAX powers the transactions within the Avalanche network. It also serves as a token to distribute system rewards, governance participation, and paying gas fees. But the transaction facilitator is yet to be used for real-world payments.


Jonathan

Jonathan

An editor at Coincrop
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Jonathan is a Crop Crop staff writer based in the UK, covering the best rates for cryptocurrency earning and borrowing products. When not at work, he's likely sailing.


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