What Is Avalanche (AVAX) And How Does It Work? | Binance.US

Avalanche blockchain built to prioritize scalability and speed.

This guide covers introductory questions such as “What is Avalanche?” and “What is AVAX?” and discusses how to buy, sell, trade, and stake AVAX safely and successfully.

Table of Contents

What is Avalanche?

Avalanche is an open-source, proof-of-stake (PoS) blockchain platform that supports smart contracts and is capable of supporting multiple blockchain-based projects.

The Avalanche blockchain was built to prioritize scalability — the ability to handle increasingly large applications — and transaction processing speed over other blockchain variables.

Avalanche also aims to balance customizability and cooperation with a solution it calls Subnets — custom app-specific blockchains that share the primary network’s security, speed, and compatibility.

The AVAX Token

The native token of the Avalanche network is AVAX, which the network has chosen to cap at 720 million tokens.

To help maintain this cap, the Avalanche network has set up a deflationary mechanism that burns (permanently removes from circulation) all fees paid with the AVAX token.

In addition to paying transaction fees and Subnet subscriptions, AVAX has two other primary use cases:

  • Owners can stake AVAX to become a validator (or delegate it for a validator to use)
  • Owners can use AVAX as the common unit of accounting across all Subnets and improve interoperability in the process

AVAX holders can also participate in on-chain governance and vote on proposed changes to the network.

History of Avalanche (AVAX)

Avalanche was developed by Kevin Sekniqi, Maofan Yin, and Emin Gün Sirer who went on to found Ava Labs and the Avalanche Foundation.

The Avalanche network — and the native AVAX token — went live in September of 2020. Since then, it has raised nearly US$300 million in funding and sold a total of US$48 million worth of AVAX tokens via both private and public sales.

How Does Avalanche Work?

The Avalanche network is built on the interoperability of three unique blockchains: The Exchange Chain (X-Chain), the Contract Chain (C-Chain), and the Platform Chain (P-Chain).

1) Exchange Chain

Avalanche uses the X-Chain to create and exchange AVAX tokens and other digital assets.

To make this possible, users pay transaction fees with AVAX tokens, and the network itself verifies transactions with the Avalanche Consensus protocol.

2) Contract Chain

Developers use the C-Chain to create smart contracts for dApps (decentralized applications).

To facilitate this activity, the blockchain harnesses the power of the Ethereum Virtual Machine (EVM) so that any dApps developed are compatible across platforms.

This particular chain uses a Snowman — a modified version of the Avalanche Consensus protocol.

3) Platform Chain

Avalanche uses the P-Chain to coordinate network validators, track active Subnets, and allow for the creation of new Subnets.

Like the C-Chain, the P-Chain uses the Snowman consensus protocol.

Because each of the three separate blockchains — Exchange, Contract, and Platform — take on different roles but still work together, the Avalanche blockchain as a whole is faster and easier to scale.

If all three processes ran on just one chain, the result would be slower and more difficult to scale.

4) Consensus

The Avalanche Consensus protocol is a directed acyclic graph (DAG) that allows the blockchain to validate transactions in parallel and makes the whole process run faster.

The Snowman consensus protocol is a variation of the Avalanche Consensus protocol that orders and validates transactions in a line (rather than in parallel), making working with smart contracts much easier.

How to Buy AVAX

1) Partner With a Crypto Platform

To get started buying Avalanche (AVAX), find a crypto platform — like Binance.US — that supports the token.

It’s also a good idea to partner with a platform that offers reasonable fees, gives you resources and tools to help you make the right choices, and provides access to other popular cryptocurrencies on the market.

Doing so will make it easier to buy, sell, trade, and stake AVAX (and other cryptos) as you gain more experience.

2) Set Up an Account

Once you’ve chosen the crypto platform that’s right for you, create an account and verify your identity.

Look for an account that comes with advanced security, a range of tokens and coins, low trading fees, advanced trading API, and real-time order books.

Opening an account that offers these features for all of their coins and tokens — not just AVAX — provides benefits down the road when you want to diversify your portfolio.

3) Add Funds to the New Account

The next step in buying Avalanche (AVAX) is to fund your account with fiat currency, such as U.S. dollars.

Advanced platforms will allow you to do so via several methods, including:

  • Established payment services (e.g., ApplePay or PayPal — check platform for details)
  • Debit card
  • Credit card
  • Bank transfer
  • Wire transfer
  • ACH debit from an existing bank account

You can also transfer a cryptocurrency you already own from another platform and use those funds to purchase AVAX tokens.

Before you add anything to your new account, we recommend taking the time to verify that the platform you want to use offers a funding method that is convenient for you.

This will make it easier to deposit, withdraw, and use your funds later on.

4) Decide When to Buy

Once you’ve funded your account, you’re ready to buy AVAX. To do this, decide how much you want to purchase and when you want to initiate the transaction.

Most platforms allow you to control both of those variables and either initiate the buy order manually or set your account to initiate the buy automatically when the market meets certain conditions (e.g., time and/or price).

5) Store Your AVAX in a Secure Location

When the buy order has gone through and you’ve got AVAX in your account, keep it secure by storing it in a crypto wallet.

For that, you have two options: a hot wallet or a cold wallet.

A hot wallet is an online space typically provided by the platform through which you made the purchase. A cold wallet, on the other hand, is an offline space, like an external hard drive.

How to Sell, Trade, and Stake AVAX

1) Sell

To sell AVAX, start by opening an account on a crypto platform, like Binance.US, if you haven’t already.

Once you’ve opened an account and verified your identity, fund the account with fiat currency so you can buy the Avalanche you want. If you already own AVAX, you can transfer it to this new account from another crypto ecosystem.

When you’ve got AVAX in your account, specify the amount you want to sell and when you want to sell it.

Some crypto ecosystems give you two options for doing this:

  • Begin the sale right away at the current market price
  • Wait to begin the sale at a future market price

The latter is commonly known as an automated sell order and allows you to sell your Avalanche based on either time or price (or a combination of the two).

With those variables set, the crypto platform will wait until the market matches your parameters to initiate the sell order.

When the sale of your AVAX is complete, the system will deposit the equivalent fiat currency in your account for you to use to purchase other cryptocurrencies, withdraw, or pay for products and services.

2) Trade

Trading AVAX follows the same steps as buying and selling it.

  • Open an account with a crypto platform that allows users to trade AVAX
  • Fund your account with the fiat currency of your choice
  • Purchase AVAX through this platform or transfer it from another platform
  • Use the tools, information, and resources provided by the platform to create and initiate a trade

Keep in mind that the cryptocurrency market changes very quickly, and trading Avalanche — or any cryptocurrency, for that matter — can be extremely difficult to time and execute correctly.

Before you initiate any trade orders, research and analyze the market to develop a strategy to guide your decision-making process.

3) Stake

If you’re looking for a way to earn rewards without buying, selling, or trading, try staking your AVAX.

When you stake your tokens, you dedicate some or all of your holdings so that the platform can use them to secure the Avalanche blockchain and the proof-of-stake network on which it operates.

After you stake your AVAX, the crypto ecosystem generates rewards based on a number of different factors, including:

  • The amount of AVAX staked
  • Transaction fees accumulated from circulating assets
  • Newly created block incentives

As with buying, selling, and trading, the right crypto platform — like Binance.US — will make staking AVAX as simple, secure, and convenient as possible.

Build Your AVAX Holdings With Binance.US

Buy AVAX from as little as $1 on Binance.US.

Binance.US offers reasonable fees, a broad range of cryptocurrencies, and tools and information to help you navigate the world of crypto.

To get started, register for a Binance.US account online or download the Binance.US app.

You can buy AVAX, ETH, BNB, ADA, and over 150 other cryptocurrencies with a debit card, credit card, or via bank transfer, and start your crypto journey today.

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This material has been prepared for general informational purposes only and should NOT be: (1) considered an individualized recommendation or endorsement of any digital asset or services discussed herein; and (2) relied upon for any investment activities. All information is provided on an as-is basis and is subject to change without notice. We make no representation or warranty of any kind, express or implied, regarding the accuracy, validity, reliability, availability or completeness of any such information. Binance.US does NOT provide investment, legal, or tax advice in any manner or form. The ownership of any investment decision(s) exclusively vests with you after analyzing all possible risk factors and by exercising your own independent discretion. Binance.US shall not be liable for any consequences thereof.

Risk warning: Buying, selling, and holding cryptocurrencies are activities that are subject to high market risk. The volatile and unpredictable nature of the price of cryptocurrencies may result in a significant loss. Binance.US is not responsible for any loss that you may incur from price fluctuations when you buy, sell, or hold cryptocurrencies. Please refer to our Terms of Use for more information.

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