What is Avalanche (AVAX), the cryptocurrency that has risen 500% in two months? AVAX has gone from $12.90 at the beginning of August to $65 at press time.
Avalanche market capitalization is more than $14.3 billion, much higher than it showed two months ago when it totaled $2.8 billion. A few days ago, it raised $230 million in funding from a group of investors led by Polychain and Three Arrows Capital. The influx of new money into the company boosted AVAX's price by 31.44% in the last seven days.
Its interoperability with the Ethereum blockchain, high scalability, and low transaction fees are its main advantages. However, Avalanche's blockchain has suffered two hacks for more than $38 million in recent days.
Avalanche is an open, programmable Smart Contract platform for decentralized applications. Like Cardano (ADA) and Solana (SOL), Avalanche competes with Ethereum's blockchain for Smart Contract development. However, unlike the two blockchains mentioned above, Avalanche has the advantage of its compatibility with the Ethereum Virtual Machine (EVM). In other words, the Avalanche blockchain can host applications developed on Ethereum but with more benefits.
Advantages over Ethereum
The first advantage is scalability. The Avalanche blockchain can perform 4,500 transactions per second (TPS), far exceeding Ethereum, which only allows 14. Also, transactions conducted on the Avalanche blockchain take less than a second to be confirmed. On Ethereum's blockchain, the time is 14 seconds.
The main reason for its scalability is that Avalanche uses its consensus system based on Proof-of-Stake. In Avalanche's system, millions of users can act as validators, guaranteeing high transaction speed, thanks to the probabilistic purpose. In this system, a validator randomly selects other validators to ask them for their preferences. Participants in the Avalanche network generate confidence in the correct decision shared by all nodes in the network. With sufficient confidence, a decision is quick and secure.
Another significant advantage over Ethereum is that implementing smart contracts on Avalanche costs only a tenth of what they cost on the network created by Vitalik Buterin. Transaction fees on Avalanche are based on Ethereum's dynamic fees (EIP-1559), setting a cap on the gas fee and a cap on the gas "tip." However, Avalanche's tariffs are much cheaper.
Interoperability as a significant advantage
Like Polkadot, which allows interoperability between different blockchains, Avalanche developers argue that connecting multiple blockchains is the future of this technology. The Avalanche bridge allows easy asset transfers between the Ethereum blockchain and the Avalanche blockchain. A great advantage over the other blockchains that are postulating to compete with Ethereum in the future. One of the reasons that have increased AVAX price was the launch of such a bridge last July 29.
As with other new blockchains, such as the Binance Smart Chain (BSC), some platforms built on the Avalanche blockchain have also suffered hacks. Yesterday, the DeFi platform built on the Avalanche blockchain, Vee Finance, suffered a hack totaling 8,804.7 ETH and 213.9 BTC. That is a total of approximately $35 million.
It was the second hack on Avalanche's blockchain in recent weeks. Last September 12, Zabu Finance, another DeFi platform built on Avalanche's blockchain, suffered a $3.2 million theft.
Avalanche originated at Cornell University (Ithaca, USA), where three researchers - Emin Gün Sirer, Kevin Sekniqi, and Maofan - created Ava Labs to make a more scalable product than Bitcoin. The project started in 2018, but developers didn't launch the blockchain until September 21, 2020. Avalanche's ICO raised $52 million between public and private sales. The company raised $230 million in a funding round a few days ago.