AVAX is the native token of Avalanche, a highly scalable Proof of Stake blockchain created by AVA Labs that offers sub-second transaction finality, full support for the Ethereum Virtual Machine, high-speed smart contracts and application-specific sharding (which enables developers to launch applications suited ot their own needs). The main network and the AVAX token were launched on September 21, 2020.
Avalanche was created by former Cornell University professor and CEO of Ava Labs Emin Gün Sirer. The Avalanche platform is based on a consensus protocol of the same name that was outlined by an anonymous group known as Team Rocket in 2018. Gün Sirer later collaborated with Team Rocket on a revision of their original paper in 2019.
On launch, Avalanche is based on two consensus engines that secure the network, offer decentralisation and enable the platform to scale to millions of participants: i) Avalanche, which is a Directed Acyclic Graph (DAG) optimised consensus protocol, and ii) Snowman, which is a chain optimised consensus protocol.
The use cases for the AVAX token include: securing the network, paying for fees and providing the basic unit of accounts between the multiple blockchains deployed on the larger Avalanche network. Participants can become full block-producers and validators by staking AVAX where they can earn staking rewards. The token can also be used to create new blockchains and sub-nets within the Avalanche platform. Subnets are periphery blockchains that are uniquely configured blockchains that are supported by the main Avalanche network.
The resouces spent by a validator for staking and the rewards accumulated for validating are both proportional to the validator's total stake. A validator can earn more rewards for locking their stake for longer, where the rewards are based on proof-of-correctness and proof-of-uptime, incentivising them to stay online and operate correctly. The default value to participate in staking is 2,000 AVAX. Staking rewards will evolve as the system progresses but for the first year, the annual staking rewards will target a minting rate of 7%-12%.
Fees for a range of operations on the network are paid in AVAX, but they are not paid to any specific validator. Instead these tokens are burned, increasing the scarcity of AVAX. The minting function ensures that the number of burned AVAX tokens do not lead to the network to grind to a halt.
The AVAX token is capped and will eventually reach a total supply of 720 million. The genesis block will have 360 million tokens and the remainder will be minted according to a formula where the emission depends on the amount of tokens staked (if more AVAX tokens are staked, the emission will be faster and the maximum supply will be reached sooner). The emission function ensures that the AVAX token reaches a capped supply, similar to Bitcoin's emission curve, but also maintaining the ability to govern the rate at which the maximum supply is reached.
The public token sale took place between July 15, 2020 and July 29, 2020, which allocated 10% of the total supply to investors. Approximately 6% of the supply was sold in the seed sale and private sale. Roughly 24% of the supply is to be allocated to the ecosystem, through various methods such as the foundation, strategic partners, community & developer endowment, testnet incentive program and an airdrop. Ten percent of the supply is allocated to founding and non-founding members of AVA Labs, while 50% of the entire supply will be used to reward validators for staking.
For more information on the AVAX token, check out AVA Labs' token whitepaper.