Avalanche functions as a platform for decentralized applications (DeFi), funds, trading and other services. Its goal is to become the most popular blockchain for smart contracts, and it wants to achieve this with a higher transaction output, up to 6,500 transactions per second.
It has a unique structure, and its network consists of three separate blockchains, which are interoperable with each other.
The Exchange Chain (X-Chain) is used to create and exchange native AVAX tokens and other assets. It uses Avalanche's consensus mechanism.
The (C-Chain) or contract chain hosts smart contracts and decentralized applications. It uses the Snowman consensus mechanism.
The Platform Chain (P-Chain) coordinates network validators, keeps track of active subnets and enables the creation of new subnets. Each subnet can validate multiple blockchains, but only one subnet can validate a blockchain. It also uses the Snowman consensus mechanism. This division of computing tasks enables higher throughput without compromising decentralization.
All nodes process and validate transactions using a so-called DAG protocol. Transactions are processed simultaneously and a random selection of validators ensures that transactions are correct. There are no blocks in this consensus mechanism, which allows for instant finalization, thereby significantly improving the speed of the blockchain.