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Supply Information

The AVAX token has a capped supply of 720 million tokens, and 360 million tokens were available on the mainnet launch in September 2020 (with the majority locked in vesting periods between 1-10 years); the remaining 360 million AVAX tokens will be released over time to staking validators. 

Note the reward rate is subject to protocol governance and allows token holders to determine the rate at which max supply is ultimately reached. As with Bitcoin, reward rates will decrease over time as the supply gets closer to the cap (although at a much smoother rate, rather than infrequent halvings).

It’s important to note that, unlike other capped-supply tokens—which bake the rate of perpetually minting, AVAX is designed to react to changing economic conditions.  

As of 2023, AVAX’s inflation rate is at ~10-20% (depending on unlocks). This is markedly higher than that of Bitcoin or Ethereum.

Source: K33 Researcj

However, unlike ETH, all AVAX fees are burned (discussed below), which should create deflationary pressures longer-term. Also, note that AVAX inflation emissions are subject to governance over time and can be reduced, so users need to better understand the conditions under which this will change and how this affects the total inflation rate over time. This is quite different from Bitcoin's immutable, programmatically-designed issuance schedule and brings real-world politics into the monetary policy protocol. This is concerning due to the wealth concentration extant in Avalanche, discussed later.

AVAX supply schedule. Source: CoinGecko AVAX's projected token distribution by the year 2028 projects better than rivals Solana, Cardano, and others but suffers when compared to Ethereum. Source: K33 Research

The objective of AVAX’s emissions function is to reach a capped supply in a similar fashion to Bitcoin’s emissions curve yet maintain the ability to govern the rate at which the system reaches said limit.

Fees and Transaction Costs

Avalanche borrows from Ethereum's EIP-1559 fee structure with some important differences. Users pay two fees for transactions: 1) a base fee set by the network based on block space demand and 2) a tip to determine how their transaction is ordered in a block.

Transaction fees for all three Avalanche chains, as well as future subnet subscription fees, are paid in AVAX and ultimately burned. This eliminates AVAX from the circulating supply, helping to somewhat offset the current high inflation rate.

Source: TokenTerminal

Gas fees are dynamic and based on demand. In early 2022, the amount of gas used compared to the C-Chain’s capacity (a proxy for usage and demand) was near all-time highs. However, since May 2022, the combination of the crypto bear market and Avalanche’s top dapp Crabada moving to their own subnet has caused a dramatic decline in C-Chain gas usage (chart below). 

Total gas used per day, AVAX C-Chain. Source: SnowTrace

For most of the 2021 bull market, nearly every Avalanche metric was on the rise, including protocol revenue (fees). This is the sign of a healthy network that has real demand for block space. In fact, in April 2021, Avalanche generated the third-most fees behind Ethereum and Binance Smart Chain. However, Avalanche suffered a setback when Cradaba moved to its own subnet (fewer fees for the L1) and the wider crypto market suffered a downturn in 2022. As of 2023, things are looking slightly up as fees are once again beginning to trend upwards on-chain. 

AVAX fees in 2023. Source: Token Terminal