Why Avalanche AVAX
If you are new to crypto and looking to learn instead of hopping on the last hot trend, this week’s crypto of the week might grab your attention, I’m spotlighting Avalanche AVAX. It’s a broadly covered project with alot of credibility and potential uses in the real world. It also gives me a great opportunity to share about how altcoins really work. I will break down what it is, how it works, why people get into it and the risks involved in investing or trading AVAX. No false promises, just a clear overview you can easily digest.
What is Avalanche AVAX
Avalanche is a Layer-1 (L1) blockchain platform created by AVA Labs and that has launched in 2020. It focuses it’s selling pitch over fast transactions, high throughput and the ability to launch customizable sub-chains called subnets within it’s ecosystem.
It’s native token, AVAX, is used as the base value of their ecosystem as well as for fees, staking and security purposes.
What is Avalanche used for?
Here are examples of the uses for the AVAX token:
- Transactions and fees: For each and every transactions made on the network (smart contracts, dApps or even transfers) you use the AVAX crypto to pay fees. In other words, it fuels the Avalanche ecosystem.
- Staking and Security: Token holders can stake AVAX to be a part of the network validation (in other words delegate their stake) and earn rewards. Staking makes their network even more secure.
- Subnets and Custom Chains: Another thing that sets AVAX apart is that the Avalanche Project allows other projects to launch their very own blockchains named subnets inside the ecosystem. This feature allows them more flexibility for purposes such as gaming, enterprises and DeFi.
- Tokenization / Real World Assets: There is alot of talk about Avalanche being used to tokenise real-world assets such as treasury bill funds or even real estate. These have yet to be seen and would be a game changer for AVAX!
- DeFi and dApps: The platform is fully supporting decentralized finance protocols, NFTs, apps giving AVAX a potential utility beyond speculative holding. This is very important to have a real value to the asset you invest in.
Tokenomics (Supply, Emission, Unlocks)
Here are numbers to help you understand how the supply and inflation work and why it matters to you!
- The genesis supply of AVAX was 360 million AVAX.
- The maximum supply is capped at 720 million AVAX.
- The paid fees are burned when the transactions happens, which provides the market with deflationary pressure. At the same time, the staking rewards are minting new tokens providing the counterpart inflationary pressure to balance it out.
- The unlocks are scheduled for team, foundation, partners, etc. There is even a public unlock calendar you can find.
- The solid supply cap and burn mechanism give it a built-in scarcity but staking rewards mean it is not just deflationary. That balance is a very big pro for that altcoin.
Roadmap and Developement
Here are the nice to know highlights of the development roadmap for Avalanche:
On their 2025 roadmap, it’s intended to improve consensus efficiency, scalability and provide with a growth in the ecosystem.
They always promote growth via grants and build-programs for new projects and/or subnets.
They are now focusing on real-world asset tokenization and institutional use. This however still has to be confirmed as the publishing of this post.
As a beginner, is means that you are facing a growing ecosystem with upside potential.
Strenghts and Opportunity
Now how doe Avalanche stands out as a interesting asset for a beginner?
It’s an established, not ultra-exotic altcoin. AVAX is relatively well known and available in most exchanges and spot trading brokers. It’s available to anyone.
It’s architecture stands out as a solid and growing asset that has the potential to get alot of development. Especially considering the subnets.
The built in scarcity, the capped supply and the burning mechanism gives AVAX a dynamic structure that some other altcoins lacks. That can be a good potential for traders here.
The growing ecosystem with the Defi, the subnets, tokenization of real world assets fits right in the crypto world.
Weaknesses and Risks
As you probably already know, there is always risks when investing or trading cryptocurrencies.
Avalanche has alot of competition on the Layer-1s scheme such as Solana, Ethereum, Near Protocol . This means the market could potentially shift and the AVA could fall out of love for traders and investors.
The subnets, as awesome as they can become, also can be the ecosystem’s Achiles heel. They are increasing the risk when exposing to that specific currency.
The planned unlocks can easily put alot of pressure on the pricing of that crypto meaning that there could be price drops showing up in the future.
Competitors
Here is a quick list of AVAX’s competition:
- Ethereum (ETH): The most dominant smart-contract platform with a huge network effect.
- Solana (SOL): high-throughput, low fee L1 with a well established ecosystem. One of the majors in the L1 world.
- NEAR(NEAR): A modern L1 that focuses on ease for developers and scalability.
Avalanche’s niche is in the subnet and the customization capability combined with a high performance. There is however some serious competition.
How traders might want to approach it
Since I want to keep that post beginner friendly, here are some approaches to invest or trade AVAX:
- Spot buy and hold: Buy a small amount of AVAX and hold it on the long run, setting a satisfying target to exit and watch the ecosystem develop itself.
- Dollar-Cost Averaging (DCA): Instead of looking for a bottom price to buy it, regularly buy some to average the cost and reduce the risk when the price drops.
- DeFi / Staking: Once you understand the staking mechanics and it’s risks, you might want to stake AVAX to earn rewards. This is a great way to learn how crypto protocols work. Remember however that staking your tokens will lock them for awhile depending on the agreed upon terms.
- Active trading: Not for the complete beginner! You might want to build a strategy around trading that token. I recommend an EA that will allow you to trade it on a lower timeframe instead of on the daily chart since it has limited backtest history on most platforms.
Beginner-friendly Buying Platform
If you’re looking to purchase AVAX and you’re new to crypto, a reliable and user-friendly platform is very important.
I recommend using Coinbase for your first purchase. It’s beginner friendly, safe, trusted and gives you access to AVAX. You can create an account here
If you’re interested in trading the AVXUSD (which is the spot trading symbol). I recommend using blueberry markets as a broker of choice. You can create an account here
Conclusion
AVAX is an interesting altcoin to explore if you’re new to crypto and want to learn. The price is not yet as high as bigger names such as Ethereum but it also provide with a solid ecosystem and is big enough to be trust worthy. The supply and burn mechanics provide that altcoin lots of potential.
