With over 14,500 listed cryptos and more added daily, you may wonder how many more cryptocurrencies can the market support?
For new crypto to succeed in a vast sea of cryptocurrencies, it must stand out from the others and have something unique. We've got the popular dog-themed memes like Dogecoin (DOGE) and Shiba Inu (SHIB), the big boys like Ethereum (ETH), and, of course, Bitcoin (BTC), and many other cryptos that may or may not have functional utility.
So, what makes Avalanche (AVAX) good crypto for staking and investing?
Five things can make or break crypto success:
- Does it have unique and innovative technology?
- Is it scalable without compromising decentralisation efficiency?
- Is it interoperable with other blockchains?
- Are transaction speeds, gas fees etc., better than other cryptos?
- Does it capture the attention of investors and the public?
The good news is that the Avalanche network can answer "YES" to the above questions.
Avalanche seemed to appear from nowhere, but AVAX has managed to reach the #12 position on CoinMarketCap by the end of 2021, showing an increase of 2.73% in trading volume with a market cap of $17 billion.
The image above shows a 3-month chart for Avalanche (AVAX) (Source: CoinMarketCap)
Suddenly, Avalanche (AVAX) is on every crypto enthusiast's radar.
This post introduces you to Avalanche (AVAX). You will learn why it is so unique, with so much scope for future growth, and in conclusion, you will know how to stake Avalanche (AVAX) so you can generate rewards.
Contents:
Who Is The Founder Of Avalanche?
How To Become An AVAX Validator
How To Become An AVAX Delegator
How To Stake AVAX Via An Exchange
Recap Of How To Stake Avalanche (AVAX)
What Is Avalanche (AVAX)?
The Avalanche website announces it is "Blazingly Fast, Low Cost, & Eco-Friendly."
Avalanche (AVAX) is a layer one blockchain with unique architecture, functioning as a platform for custom blockchains networks and decentralised platforms.
The most notable thing about Avalanche is its super-fast transaction speeds. It is a real contender for unseating Ethereum as the #1 blockchain for smart contracts. With transaction speeds of up to 4,500 tps (transactions per second), Avalanche is fast, but scalability is not compromised.
AVAX is the native coin of Avalanche used to pay transaction fees. It also provides a currency unit between Avalanche subnets, and it secures the blockchain through the staking process.
One of the primary issues with blockchains is to maintain levels of decentralisation when scaled. It's one of the main reasons for high gas fees, such as Ethereum's prohibitively high transaction fees.
The Avalanche network determined to solve these issues and has three interoperable blockchains, each with a distinct purpose:
- X-Chain – the Exchange Chain is similar to the Ethereum ERC-20 standard. The X-chain creates and exchanges the AVAX tokens and other crypto assets using the Avalanche consensus mechanism.
- C-Chain – the Contract Chain hosts decentralised applications and smart contracts. It uses the Avalanche Virtual Machine to enable developers to fork EVM-compatible (Ethereum Virtual Machine) DApps using the Snowman consensus mechanism.
- P-Chain – the Platform Chain works to coordinate network validators, track active subnets (sets of validators) and facilitate the creation of new subnets. Each subnet can validate several blockchains.
This unique technology and division of tasks enables efficiency without compromising decentralisation and facilitates improved interoperability between blockchains
The Avalanche network mechanism bears no resemblance to how the Ethereum network and Bitcoin network operates. These networks have all nodes validating transactions. But Avalanche blockchains adapt the consensus mechanisms on the use case, so each one is different.
Avalanche launched the mainnet in 2020 and has since developed an ecosystem of DeFi and DApps. As a result, SushiSwap and TrueUSD, Ethereum-based projects were integrated with Avalanche.
The platform continues working to improve interoperability between Ethereum and its ecosystem by developing bridges, for instance.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Who Is The Founder Of Avalanche?
Professor Emin Gün Sirer, Ava Labs founder and cryptographic research veteran, launched the Avalanche ICO (initial coin offering) in 2020. Gün Sirer has worked on Ethereum research and Bitcoin scaling solutions. As a result of which, he wrote a whitepaper and launched Ava Labs.
In 2019, the Avalanche project concluded a funding seed round that garnered support from several high-profile investors. The Avalanche ICO closed in less than 24-hours, raising a staggering $42 million.
What Is AVAX Staking?
The Avalanche network uses a proof of stake (PoS) consensus mechanism. You can stake your AVAX tokens with the network by depositing and locking up all or some of your AVAX for a defined period, during which time you cannot use your AVAX tokens or move them.
Staking AVAX validates transactions and secures the network. As an incentive for staking your AVAX, you earn rewards.
Proof of stake is not unique to Avalanche, as many other cryptocurrency blockchains use this consensus mechanism. It is more efficient and cost-effective than the proof of work (PoW) consensus mechanism, which requires miners to validate transactions. PoW is energy-intensive and can result in higher transaction fees. Bitcoin, for instance, uses PoW.
When your AVAX is locked in, it's a way of ensuring that the validation nodes are committed to the stability and development of the network.
How To Stake AVAX?
You can stake AVAX by becoming a validator or a delegator.
A Validator's primary role is to validate transactions and secure the Avalanche blockchain. The More AVAX you stake, the more frequently you can be active in the network and receive more rewards.
Delegators are AVAX holders that want to stake their tokens but prefer a more passive approach. A delegator puts their trust in a validator node by delegating their staked AVAX tokens, and they too also receive rewards.
How To Become An AVAX Validator
The requirement for becoming an Avalanche network validator is 2,000 AVAX tokens, and you must commit to stake for a minimum of two weeks but less than one year.
Today's AVAX price is $72.75, so that's a commitment of $145,500, no small sum for the average person.
All validators have a maximum weighting, consisting of their own validator's stake and how much AVAX is delegated to them.
The maximum is either five times the total staked by the validator or the minimum of 3,000,000 AVAX tokens. If you staked the minimum 2,000 AVAX, you could only have 8,000 AVAX delegated.
The weighting restriction is for security measures as there's a risk that validators could defraud the system by creating rogue nodes that act as delegators.
How to Receive AVAX Rewards
An Avalanche validator must be online and correct 60% of the time as a minimum for receiving rewards. Validators can set delegation fees for their services as there are no set fees.
Don't Miss: Avalanche Price Predictions
How To Become An AVAX Delegator
It's a lot less commitment to become a delegator in the Avalanche network, with a minimum of 25 AVAX tokens staked ($72.75 x 25 = $1,818) but the same rules apply. There's a minimum staking period of two weeks and a maximum of one year.
You must choose a validator node to process transactions for your stake and pay a fee for their services, typically no less than 2%.
Although the validator is doing the work, your AVAX stake is not at risk as the validator cannot spend staked tokens. You receive back your original stake at the end of the lock-in period, plus any rewards generated. Rewards are proportional to the amount of AVAX tokens you have staked.
So now you understand how the staking process works for your AVAX tokens, we'll outline a step-by-step process for staking or delegating your AVAX.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
How To Start Staking Avalanche (AVAX)
Read the step-by-step guides to staking AVAX as a delegator and a validator.
How To Stake AVAX As A Delegator
- Go to the AVAX website to access the official AVAX wallet – You can create a new wallet or access your existing wallet. If your AVAX tokens are in a crypto exchange or another wallet, click on "create new wallet." Carefully follow the guidelines.
It gets a bit complex from this point because new users must understand the Avalanche blockchains three sub-chains:- The Exchange Chain (X-Chain) – to create new asset classes. If you create an address in this chain, it is an X address. On this chain, your AVAX remains liquid, meaning you can move it around to other X or P addresses.
- The Platform Chain (P-Chain) – the P-Chain manages Avalanche network metadata. An address on this chain is a P address. If you hold AVAX in this chain, it becomes illiquid, meaning you cannot freely transfer to another P address. If you want to move your AVAX, you must return them to your X address. From there, you can then send to other P addresses.
- The Contracts Chain (C-Chain) – this contracts chain enables smart contracts and has nothing to do with the staking process.
- To start the staking process, if your AVAX is in your X address, transfer them to your P address by clicking "earn" on the sidebar on the right. The minimum transaction fee is 0.001 AVAX, so allow that amount on your transfer total.
- Enter the amount of AVAX you wish to transfer and click on "transfer" and then "confirm."
- When your funds are in the P address, click "add delegator" on the "earn" page. You should then see a list of validators.
- Choose a validator and click on "select."
- On the delegate section, choose the staking period and how much AVAX you want to stake.
- Enter the address where you want to receive your AVAX rewards
- Click on "confirm" and "submit."
- That's it. You have now delegated your AVAX to a validator and will receive rewards.
Becoming an Avalanche network validator requires significant financial and time commitment and a high level of technical expertise. You must stake 2,000 AVAX, and the node must run live online 24/7.
Your job as a validator is to mint new AVAX tokens and validate new blocks. The technical requirement for becoming a network validator is beyond the scope of this post, but you can find out more on the AVAX Validator page.
If you don't have $257k spare to become an Avalanche network validator, you can stake AVAX via a crypto exchange.
How To Stake AVAX Via An Exchange
AVAX is available on many of the leading cryptocurrency exchanges.
The staking process may vary between exchanges, but here is a step-by-step guide to staking AVAX on Binance, the world's largest crypto exchange.
As the exchange serves as the validator, there's no further involvement required from you. Rewards are paid out daily.
- Go to Binance exchange and create an account
- Buy AVAX tokens or transfer from another wallet to the exchange
- As soon as funds are in your wallet, click on "finance."
- Click on "Binance Earn."
- Search for AVAX by typing in the search bar
- Click on "stake."
- Enter the total amount of AVAX coins you want to stake and how long you would like to stake your tokens.
- Click on "confirm."
- You will now earn daily rewards
There are other crypto exchanges available to stake AVAX, like eToro that listed AVAX so now you can stake the token with the world's leading social trading platform.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Recap Of How To Stake Avalanche (AVAX)
Avalanche (AVAX) has made incredible progress in a short time. The unique technology sets it apart from many other cryptocurrencies.
Interoperability is the key to Avalanche's success and its current position as the #12 listed cryptocurrency out of 17,200 cryptos (Coinmarketcap).
The financial and time commitment for staking AVAX as a network validator is prohibitive for most people. With 2,000 AVAX, it would cost over $145k.
Staking AVAX as a delegator is less expensive with 25 AVAX, but that's still over $1,800.
The easiest route to stake AVAX is with a cryptocurrency exchange. This method is 100% passive, and you can earn rewards. Interest pays out daily with most crypto exchanges.
Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.
Trading, staking or investing in financial instruments such as cryptos may not be suitable for all investors. It does involve risk and the possibility of a loss of capital. There are no guarantees for profiting from staking cryptocurrencies, and it's advisable only to risk what you can comfortably afford to lose.
eToro – The Best Platform To Buy Avalanche
eToro have proven themselves trustworthy within the Crypto industry over many years – we recommend you try them out.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
FAQs
Does Avalanche have an online community?
The Avalanche network has a thriving community across a broad range of social media platforms.
How is Avalanche (AVAX) better than other cryptocurrencies?
The following table represents data from the Avalanche (AVAX) website.
| Bitcoin | Ethereum | Polkadot | Avalanche | |
|---|---|---|---|---|
| Transactional Throughput | 7 tps | 14 tps | 1,500 tps | > 4,500 tps |
| Transactional Finality | 60 min | 6 min | 60 sec | < 2 sec |
| Energy Efficient | No; ASIC- Optimal | No; GPU-Optimal | Yes; CPU-Optimal | Yes; CPU-Optimal |
| Number of validators | 3 Pools w/ >51% hash rate | 2 Pools w/ >51% hash rate | < 200 nodes relay chain | Thousands of nodes |
| Sybil Protection | Proof of work | Proof of work | Proof of stake | Proof of stake |
| Safety Threshold | 51% | 51% | 33% | 80% parameterized |
Avalanche is by far the most advanced and efficient cryptocurrency compared to three of the top cryptos. This data represents why Avalanche has become so successful in a short time and is infinitely scalable.
How much can I earn from staking Avalanche (AVAX)?
Currently, the Avalanche website suggests the average staking yield is around 9.82% APY. The actual amount you earn depends on the number of AVAX tokens you have staked. It also depends on the price of AVAX. If the price rises during your locking period, you will earn more revenue.
Is it safe to stake AVAX?
The Avalanche wallet is offline, which makes it less vulnerable to cyberattacks.
Although the Avalanche wallet is via a web browser, it uses a JavaScript app that you can see in the web browser, but it is not connected to a server.
If you have concerns, try disconnecting from the internet. You should find that the wallet still works. To date, there have been no security issues with the Avalanche wallet.
If you stake AVAX through a crypto exchange, there is more risk because your wallet is with a third-party wallet provider. Crypto exchanges are prime targets for cyberattacks.
The other risk is the cryptocurrency markets. There are no guarantees for the longevity of crypto, and, as with all financial instruments, there are always associated risks, even with decentralised currencies.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
What are the Pros and cons of staking AVAX?
Pros:
✅ Most cryptocurrency blockchains using proof of stake deploy slashing – a means of punishment for the malicious activity of network validators. Avalanche does not have a protocol for burning staked tokens, meaning AVAX tokens are never destroyed.
✅ Unlike many other crypto blockchains, becoming an Avalanche network validator requires very little hardware, unlike Bitcoin, which involves complex, expensive, and high-end computing.
✅ Staking AVAX secures the network and, if you stake via the AVAX wallet, you can access it offline.
Cons:
❌ If there are issues with malicious validators, there are no punishments. But, their activity could mean losing your accrued interest.
❌ Staking your AVAX means it is illiquid during the locking period. If the crypto market suddenly changes, you cannot access your AVAX until the end of the locking period.
❌ If you lose any of the data needed to access your wallet, you could lose access to your AVAX holdings. But it's the same for almost all crypto wallets. Make sure you back up all the details required for logging in to your AVAX wallet.