this is gonna be a fun video because avalanche is such a new protocol that one day we might watch this video in the future and realize how crazy it was for us to explain it so early avalanche hardly has any promotional material just nerdy documentation and lengthy white papers lucky for you that is exactly what we are into welcome to whiteboard crypto the number one youtube channel for crypto education and here we explain topics of the cryptocurrency world using analogies stories and examples so that you can easily understand them in this video we are going to explain what the avalanche network is what makes it different than literally any other crypto application i've seen and at the end you'll learn the secrets of the avax token including exactly why the price recently went from sixteen dollars to fifty five dollars in two weeks let's dig in to understand the avalanche network we first need an economics lesson about their unique proprietary consensus model first of all you need to know that the consensus model people used for a long long time was called practical byzantine fault around the 1980s was when this thing took off and was essentially a computer science algorithm that helped a bunch of things come together and make a conclusion based on the information that they had next up around 2009 we had the start of bitcoin which introduced the nakamoto era of consensus nakamoto created and shared the proof of work mechanism which we have an entire video about but is in many ways better than the old byzantine model finally in 2020 avalanche launched their avalanche consensus model network this thing is complicated so i'm going to attempt to give you a high level understanding of it without upsetting any of their engineers now basically the network follows proof of stake pretty closely but it does have a few unique differences first off the avalanche model uses a form of sub-sampled voting this means that there's a large group of people who volunteer to participate in the network and get randomly asked to check things to put it in their own words small random subsets of validators are asked whether they think the transactions would be accepted or rejected after it is initially thought to be valid something called network gossip happens where the participants exchange information back and forth back and forth and continue to validate the transactions or deny them one of the benefits of this is that contrary to proof of work and proof of stake mechanisms it doesn't matter how many nodes there are how many people there are in the system consensus will be reached within a certain desired time frame also due to some technicalities this consensus model is actually much more difficult to attack unlike bitcoin where you would need 51 of all the computers to attack the network or ethereum 2.0 where you would need 51 of all the staked tokens to attack the network with avalanche you would need to control up to 80 percent of the network to perform an attack let's get on to the important stuff though this model allows for up to 4 500 transactions per second per subnet and has a finality clock of less than three seconds now we'll explain what subnetting is later because it is really important but right now you just need to know that each subnet can process up to 4500 transactions per second and if you have a thousand subnets well you can do a lot of transactions compare this to bitcoin with seven transactions a second in an hour-long finality and even ethereum pales to compare with 15 transactions a second and a 10 minute finality before we continue the finality of clicking the like button is pretty much immediate so if you do us a big favor to support our hard work on creating these unique high value explainer videos it would mean a lot to us so now that i've basically explained how the avalanche consensus model works let's get into the real thing where avalanche shines it's network infrastructure so first off avalanche has one primary network that network has actually three built-in blockchains with it that's right avalanche just isn't one blockchain it is at least three but we'll get to that in a second so the first blockchain in the network is called the x chain this is the part specifically for creation management and transaction of tokens on the network now the engineers would tell us in technicality this is actually based on a dag which is a unique form of a consensus model unlike a blockchain but it is out of the scope of this video i just thought it would be interesting to add that the avalanche team is not married to one protocol next up we have the c chain so the c chain is specifically for smart contracts it is actually an exact copy of the ethereum virtual machine so that way you can instantly copy and paste and start using ethereum dapps on the avalanche network in my opinion they were very smart with this allowing developers to move their projects over without doing much work this chain also uses something called the snowman protocol which i'll talk about in a minute so we have the x chain for transactions we have the c chain for smart contracts next we have the p chain or the platform chain and it is specifically for management of the subnets it also coordinates all the validator nodes and the staking mechanism now this brings us to a very big and very important question what are subnets well each subnet is a new network in the avalanche ecosystem that's right this system is scalable in so many ways let me try to explain subnets each subnet can have multiple blockchains just like the primary avalanche network secondly each blockchain in a subnet can have its own consensus model now from what i've heard this means if you're creating one you can pick proof of work or proof of stake depending on your needs another really cool thing is that each blockchain can have its own vm or virtual machine you can copy the ethereum virtual machine just like the primary chain did another important thing about these subnets that i didn't really understand at first is that they can be permissionless or permissioned this means that they can either be public or private blockchains now you might start to understand the purpose of this if you are a government and you want the full power of a blockchain without developing the groundwork you can just add a subnet in avalanche's ecosystem maybe you're a government or maybe you're a business or an organization or some other protocol needing to use these very powerful tools without wanting to actually invest in something new in avalanche you can even change the rules for each blockchain in your network you can make it so that it is compliant across many different geographic or political requirements for example you could say every validator in your subnet needs to have a license or maybe they need to fill out certain tax information avalanche is built to be able to create and follow rules like that one last important thing that i thought i would add is that to validate your own subnet you are also contributing to the validation of the entire network via the primary three chains now let's get into something fun because moving on from the infrastructure let's get into a specific detail about the network so the main primary network uses the avalanche consensus model but ava labs created an even more powerful consensus model called the snowman protocol and yes just to make you understand them let's talk about the quick difference between the snowman protocol and the generalized avalanche protocol because the difference is quite small however it is powerful so the snowman protocol is the linearized version of avalanche so that it can fit the needs of the ethereum virtual machine basically snowman protocol has been optimized for smart contracts and high throughput on the other hand avalanche is a more general use case where it is implemented using a dag structure which is also seen on the x chain now like i said at the beginning a lot of this stuff is really confusing so i'm trying my best to explain it so that you can understand it you may need to watch this video more than once summing it all up these were a bunch of technical terms but you just need to know that the avalanche developers are really smart and basically optimize things as best they can for the situations that they see fit next up before we make any price prediction or let you in on some very useful information let's get into the tokenomics of the avax coin which powers the network first off there is a max cap of coins at 720 million this immediately makes it a deflationary asset secondly avex coins can be used as a governance on the platform meaning the more coins that you hold and stake you have more voting rights and you get to make important decisions in the future of the network here's the bad news though ava labs pre-sold 127 million coins when they launched and many of those coins are subject to an unlocking period this means many investors who bought the coin at 50 cents may want to lock in some of their 100x profits and sell immediately whenever they can now this is bad news for investors but the good news is that they aren't dumping all of these coins at once so here's a picture of their unlocking schedule and if you're thinking of investing in avax be mindful of these dates and how the past dates have affected price another thing that's worth noting is that the team and the foundation were also given around 20 of all coins finally what you've been waiting for the good news about avax and why their price has spiked so much recently so the avalanche foundation has announced a 180 million dollar incentive program to get people to try out their network this means they are quite literally giving away 180 million dollars for free as a form of advertising this happens all the time in the defy world and it's not a scam the incentive program is supposed to bring two big players to the network curve finance and ave now curve and ave have tens of billions of dollars of liquidity locked up on networks like ethereum and polygon so it was really smart of the team to get them to come over to the ava network when this initially launched we saw the price of avax spike from 15 to 55 dollars in a few weeks as hungry investors started bridging their money over using the avax bridge now we will never give financial advice on this channel and we'll probably never do price predictions but this is a very bullish signal for anyone interested in the avax network finally we want to say thank you guys so much for watching throughout this video we hope that you've enjoyed it we really hope that you've learned something and most of all we hope to see you in the next video you