Avalanche (AVAX): Measuring the Layer 1 Disruptor's Impact

Not​‍​‌‍​‍‌ long ago Avalanche managed to break a record number of daily active addresses that went beyond 150,000. As a result, in 2025, Avalanche was ranked as one of the fastest-growing Layer 1 networks. CoinMinutes' analyses have been tracking these metrics closely, and the question remains - Is AVAX a wise choice or simply another gamble disguised as a technologically advanced facade?

Avalanche Technology Architecture

Avalanche is a Layer 1 blockchain platform – in other words, it acts as its own network and doesn't need a blockchain like Ethereum for security. If you compare it to housing, it is like owning your house vs. renting an apartment in someone else's building. You get to decide everything, but you also bear the entire responsibility.

Most blockchain platforms are victims of a dilemma called "scalability trilemma" - that is blockchains get to choose speed OR security OR decentralization, and hardly ever combine all three. Bitcoin, for example, opts for security at the cost of speed. Meanwhile, Ethereum, at its early days, was extremely decentralized but could only process a handful of transactions per second. Solana, while increasing transaction speeds, has been criticized for being less decentralized.

Avalanche's creator is Emin Gün Sirer of Cornell University and it was launched in September 2020 with an ICO funding of $42 million. The platform is among the Layer 1 challengers that appeared in the wake of the realization that neither Bitcoin nor Ethereum could handle real-world adoption.

The Three-Chain Architecture

Parallel chains for faster, smarter scaling

In​‍​‌‍​‍‌ contrast to Bitcoin or the main Ethereum layer, that have a single-chain architecture, Avalanche features three parallel chains with each chain having different functions. So, for example, asset transfers can't slow down smart contract computations, and network management operations can't interfere with other operations.

X-Chain (Exchange Chain) is the network that holds the creation and the exchange of assets, such as tokens, NFTs, and digital collectibles. To perform its functions, it is built very fast, cheap, and efficient because it runs a minimal framework. At present, the point should not be the X-Chain technicalities (yet), but rather to recognize that it is designed for simple ​‍​‌‍​‍‌transfers.

Meanwhile, the C-Chain (Contract Chain) is the one that models smart contracts and decentralized applications. Due to its EVM compatibility, it can take Solidity code from the Ethereum network almost as it is. Thus, it is the core technology of DeFi protocols, NFT marketplaces, gaming platforms, and Web3 applications.

The P-Chain (Platform Chain) is in charge of recording validators, managing staking, and coordinating subnets. Besides providing network security and governance, the backbone distributes validator rewards and makes protocol voting possible.

The thing is users have to think of three different addresses for chains (X-avax, 0x..., P-avax format), which is thousand times more complicated than single-chain platforms like Solana. There have been instances where people transferred tokens to the wrong chain format and thereby lost their ​‍​‌‍​‍‌coins.

The​‍​‌‍​‍‌ Avalanche Consensus Mechanism

On the blockchain, consensus means that all validators independently execute the transactions and agree on them. Take, for example, proof-of-work that is the mechanism behind Bitcoin, the one where all nodes are involved in a competition to find a solution to a mathematical puzzle; or proof-of-stake that is the consensus algorithm of Ethereum whereby validators authorize each block. However, it too suffers from a drawback as this makes the whole network slower as it grows larger.

The "Snowball Consensus" is the title of the novel protocol with which Avalanche deals with the problem. Instead of checking with all validators, it checks with a smaller group, i.e. about 150 validators to get its answers. The transaction is executed or turned down by these validators. If the validator group consulted supports the transaction, they take it to another group. They do this until they reach an extremely high level of certainty.

From small samples to near-instant finality

This method is similar to the snowball analogy, whereby the snowball is rolling down a hill. At every new cycle it would get bigger - the confidence stronger, which is where the method gets its name ​‍​‌‍​‍‌from.

For users, faster finality equates to transactions that are almost instant. This also can lower the entry barriers for staking if validators want to participate.

Performance​‍​‌‍​‍‌ and Developer Accessibility

Bitcoin is limited to only 7 transactions per second. On the mainchain of Ethereum, the throughput is between 15-30 TPS, but Layer 2 solutions are currently responsible for lowering the transaction fees considerably. Solana state that it can achieve 65,000 TPS, however, there is much controversy surrounding its decentralization. Avalanche pretty fast, in theory by bringing 4,500 TPS to the table.

The crux of the matter? Fast enough for most cases, not the fastest of choices, but still very ​‍​‌‍​‍‌gable.

That being said, developer accessibility is what grabbed my attention most of all. The Contract Chain of Avalanche makes use of the Ethereum Virtual Machine (EVM), whereas with Polkadot you have to learn their Substrate framework, and programming skills in Rust are a must for Solana, a language that most developers are not acquainted with.

In short, developers writing Solidity smart contracts can simply deploy their Dapp on Avalanche without any code alterations. It could be likened to a "write once, deploy everywhere" method which is actually doable.

Subnets are small blockchains that depend on the Avalanche network for running their operations just like Polkadot's parachains. Each subnet has the capability to solve different problems while at the same time it is co-operating with the security model of Avalanche. FIFA is creating a subnet for sports NFTs. Benqi customizes the subnet to revolutionize DeFi lending. Game developers creating low-latency chains with a high rate of transactions so they can handle game state without the main network getting congested.

The ecosystem today is made up of numerous decentralized applications. Although this figure is far less than 30,000+ developers of Ethereum (source: Yahoo Finance) and 17,000+ developers of Solana (source: Electric Capital), the rate at which it is growing is higher than that of most other Layer 1 platforms - something we've been monitoring closely in our CoinMinutes ecosystem coverage.

AVAX Market Analysis & ​‍​‌‍​‍‌Tokenomics

As​‍​‌‍​‍‌ per Coinbase, AVAX volume is hovering a bit over $450 million which indicates that the liquidity is pretty good. The market cap is nearing the $5.6 billion mark.

Avalanche token supply: 60% in circulation

According to Coinmarketcap, with a maximum supply of 720 million tokens and about 429 million AVAX tokens in circulation, it means that 40% more tokens can be released into the market.

AVAX token has four main functions: firstly, it is used as gas fee for transactions performed in the network; secondly, by running a validator or delegating a validator, one can receive staking rewards; thirdly, the token gives the right to participate in governance activities (however, most people do not participate in this); and finally, the token may be converted into collateral on DeFi platforms.

The supply changes of the coin create a quite interesting tension. AVAX has a supply cap of 720 million tokens - that is, no inflation as is the case with fiat currencies. The idea is that the network burns 100% of its transaction fees and therefore tokens are permanently removed from circulation. This sounds very much like a deflationary model, doesn't it?

Nevertheless, the situation is more complex than that. What the validator rewards almost $275 million in newly-created tokens are doing is offsetting the burning process.

This state is the source of what I call the "make-or-break issue": the network in newly minted tokens gives to validators more than what users pay in fees. Not a very sustainable situation for long and the presence of a countdown timer makes it all the more urgent.

Price Outlook & Market Drivers 2025–2030

According to MarketVector, the annual volatility has been over 70%. Let me explain it to you. The S&P 500 has a volatility of about 15%. The volatility of technology stocks is between 20 and 30%. Bitcoin's volatility is between 60 and 80%. And AVAX's volatility is more than 70%.

What​‍​‌‍​‍‌ is Driving AVAX in 2025

The new functionalities sound quite fascinating, actually. Maybe you would like to know a tiny detail? VanEck (a $373 billion asset manager) launched VBILL, a tokenized U.S. Treasury fund that is multi-chain compatible, including Avalanche. Blockchain powered by the Avalanche network was used by FIFA to deploy a Web3 solution. Grove Finance has raised the institutional credit limit by $250 million.

Real-world asset tokenization is rapidly shedding the "future" label and is becoming a "now" concept. CruTrade is tokenizing wines and thus creating the pathway for the billion-dollar market to be accessible. Tixbase settles the sports industry's ticketing problems through the use of blockchain ​‍​‌‍​‍‌verification.

On​‍​‌‍​‍‌ the other hand, the issues are equally grave. The Total Locked Value has dropped to $1.195 billion, compared to the whopping $21 billion peak in late 2021 (defiLlama and Coin98 Insights data). This finding points to the fact that users are willing take part in DeFi protocols; however, they are not really utilizing these protocols extensively - as they only limit their activities to transfers, staking, and NFT trading.

Meanwhile, transaction fees for Ethereum Layer 2 solutions such as Arbitrum, Optimism, and Base are less than $0.01. For AVAX, the average is $0.08 per transaction. This is a competitive problem that is deteriorating rather than improving.

Price Predictions - What Analysts ​‍​‌‍​‍‌Say

According​‍​‌‍​‍‌ to CoinCodex price prediction, the probability of the price going over $14 by December 2025 is very high.

Standard Chartered - an investment bank - is predicting $55 for 2025 and $100 for 2026. They are seeing fast subnet adoption and an Etna upgrade as two main reasons that can cause a subnet launching cost to drop by as much as 96% cutting. Nevertheless, this is contingent on the continuation of the bull market. Any macroeconomic downturn will render these predictions invalid.

AVAX price scenarios: Bullish, base, bearish

TokenMetrics give more plausible scenarios with a bullish case of $50, a base case of $20-$35, and a bearish case that keeps 2026 in the low teens. So, a trading range of $15-40 can be inferred with macro factors either pushing to one side or the other.

The question will be whether AVAX will be produced or annihilated when 2030 comes. If Avalanche increases network fees by 24 times while still being able to maintain network security, the platform can actually become self-sufficient and consequently, AVAX will gain long-term value. In this case, price expectations of $100-300 would start to sound reasonable. If the network fails to do so, it will experience a decrease in security and the price of AVAX may fall to the $5-10 range.

Risk​‍​‌‍​‍‌ Analysis

The Sharpe ratio is currently 0.72, which indicates that the returns are insufficient to compensate for the volatility. Generally, a Sharpe ratio of more than 1.0 is considered to be good.

The most alarming thing is the fact that the Calmar ratio is at -0.42. This figure indicates that the returns are negative while the maximum drawdown is still quite high. From a risk point of view, it may be more advantageous for you to invest in any other asset class than in this ​‍​‌‍​‍‌one.

Market​‍​‌‍​‍‌ and Financial Risks

Competitors are not going to be holding their breath, but they do have a plan to a certain extent of how they will respond to the offensive by introducing new features and thus attracting more users. To put it simply, Ethereum Layer 2 solutions are many times cheaper than a transaction on AVAX. In turn, Solana is said to achieve a higher throughput. On top of that, Polkadot is announcing that it has a more flexible architecture. The question whether users will still decide to go for AVAX if the competitors are doing almost the same but better and cheaper is indeed a very interesting one.

Volatility is one of the riskiest factors that investors very frequently fail to take into account in their risk assessment. The bear markets in the crypto space are what lead to the most direct consequences that the whole sector experiences in every aspect. The downtrend of Bitcoin is mainly what causes the sell-off of altcoins that eventually leads to the fall of the entire market. In a case of a macro stress event, AVAX might lose 70-90% of its value.

Technical and Operational ​‍​‌‍​‍‌​‍​‌‍​‍‌Risks

Understanding Avalanche’s main risk factors

The​‍​‌‍​‍‌ three-chain complexity referred to is the major factor that causes the user experience to be less than seamless. Besides the requirement of different wallet addresses, the three-chain complexity also refers to bridge transactions that are done between chains. Consequently, the three-chain world has more learner's curves and user mistakes than the single-chain platforms like Solana where everything is done in one place.

Elite engineers usually follow the most promising ecosystems in terms of the future, network effects, and funding. Without disruptive growth, developers might eventually move to "winning" chains that can provide more career opportunities.

Regulatory​‍​‌‍​‍‌​‍​‌‍​‍‌ uncertainties have been the constant factor that puts AVAX on edge. As an example, what about the staking rewards: will they be considered as securities? Will DeFi protocols be subjected to regulations? Hence, not only would it be incredibly difficult for Avalanche to make the transition, but it may also be obliged to cope with a crisis at the same time.

AVAX Investment Guide - From Purchase to Strategy

Getting Started (Easier Than You Think)

AVAX is among the top 10 cryptocurrencies by market cap and can be exchanged at any reasonable major trading platform like CoinBase, Kraken, or Binance.

Investors will generally find dollar-cost averaging more desirable than one-time purchases. For example, if someone has $1,000 to invest, instead of investing all at once, it would be a better decision to invest $100-$500 over a specified period of time. This method averages your cost basis and lowers the risk of market timing.

Knowing how to size your position is significantly more important than knowing the right time to enter. While you get to know the platform and learn how volatility affects your psychology, it would be a wise decision to only use a small amount of money. The idea here is to gain experience rather than to maximize returns.

Security and ​‍​‌‍​‍‌​‍​‌‍​‍‌Staking

There are three ways in which you can store your crypto: wallets on exchanges offer the easiest way but come with security risks, software wallets like MetaMask are more secure and you are the one who holds the private keys, while hardware wallets such as Ledger Nano provide the highest level of security through offline storage.

Never disclose your seed phrase to anyone even if they claim to be "support". Jot down the seed phrases on paper and keep it in a place where only you have access to it. Do not take pictures of them - the place where the picture is saved might be in the cloud, and that's the way hackers can get to it. If you misplace your seed phrase, the AVAX there will be lost permanently.

Staking AVAX comes with tax obligations

Tax​‍​‌‍​‍‌ alert: The rewards from the staking activities are considered as income at the time of the recipients. The tax has to be paid even if the AVAX price drops after the reward issuance. In order to keep away from unexpected situations, set aside 30-40% of your staking rewards for ​‍​‌‍​‍‌taxes.

Investment​‍​‌‍​‍‌ Decision ​‍​‌‍​‍‌Framework

One should consider AVAX if they had faith in the rapid adoption of blockchain beyond the current use cases. They should keep their investment horizon for 3-5 years instead of waiting for quick profits. They should allocate less than 5% of their portfolio to high-risk crypto investments and understand the implications of the volatility.

It is better to pass on AVAX if one needs any level of guaranteed returns or portfolio stability. This also includes those who maintain a low-risk tolerance and lose sleep over 20%+ portfolio swings, people who do not understand blockchain technology well enough to evaluate the threats from the competition, and those following social media hype without doing any research.

Bulls who are convinced of the blockchain adoption should consider AVAX as a potential investment, use dollar-cost averaging to make purchases.

Cautious​‍​‌‍​‍‌ hedgers that want to have some crypto exposure but still be worried about the risks should allocate 1-2% of the portfolio, make a single purchase at a market drawdown, and reassess the thesis after the 2030 staking reward decision.

Finally, a zero-position observer who believes that risks outweigh rewards may monitor the ecosystem for the development of potential catalysts and revisit the investment thesis every 12-18 months in line with the changing fundamentals. Always remember - FOMO is rarely the right way to make investment ​‍​‌‍​‍‌decisions.

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