How it works

Like Ethereum, Avalanche can power a wide variety of applications like stablecoins, DeFi protocols (lending, savings, decentralized trading), and NFTs. Avalanche is also compatible with Solidity, the programming language used by the Ethereum network, which means developers from one of the largest and most engaged communities in crypto can build on Avalanche and use it to deploy custom private or public blockchains as “subnets.” And whereas the Bitcoin blockchain can typically process around seven transactions per second, Avalanche claims to be able to process over 4,500 transactions per second. 

Avalanche’s network consists of three component blockchains: the Platform Chain (P-Chain) which coordinates validators and the creation of subnets, the C-Chain for the creation of smart contracts, and the X-Chain for managing and exchanging assets.

The native asset connecting the Avalanche network is the AVAX cryptocurrency. There will only ever be 720 million AVAX coins in circulation, and AVAX can also potentially be used in proposing and voting on future network upgrades.

Keep in mind

AVAX rewards can be earned by staking directly on the Avalanche network (note: Coinbase does not currently enable staking directly on its platform), which helps secure, validate, and govern Avalanche while enabling the following features: 

• Fast, peer-to-peer transactions

• Decentralized computation and storage

• Creation of new “subnet” blockchains

Participants become general network validators by staking their AVAX on the Avalanche Platform Chain (P-Chain). Participants can also delegate their stake to another validator, who then earns a portion of their validator reward. You can also become a validator of specific subnet blockchains by staking AVAX.