The core features derived from the Avalanche token model include a consensus mechanism, a controlled minting process, and a reward system that affect the validator and delegator. It is worth noting that these features primarily operate through the X-Chain and P-Chain respectively.
This section explores the technical implementations of these features through detailed conceptual and mathematical explanations.
1. THE CONSENSUS PROCESS
Avalanche consensus, a core feature of the AVAX token model tied to the Consensus Token Value Capture Mechanism, drives value by requiring the validator on the P-Chain to stake AVAX for participation in securing the network. When a validator receives a transaction, it queries a random subset of k = 20 validators for their preferred transaction, adopting the majority’s choice if at least alpha = 14 validators agree, as defined by the Snowball algorithm. This process repeats, incrementing a counter consecutiveSuccesses each time the same preference is confirmed, until the counter exceeds the decision threshold beta = 20, at which point the transaction is accepted. If fewer than 14 validators agree, the counter resets to 0, and the validator continues sampling until consensus is reached. The Snowball algorithm ensures rapid finalization for non-conflicting transactions, as honest validators cluster around a single preference through a positive feedback loop. For conflicting transactions, the protocol rejects those that conflict with accepted ones, maintaining network integrity. The consensus process guarantees that if one honest validator accepts a transaction, all will eventually agree, with safety and liveness thresholds parameterized by alpha and beta.
2. MINTING STAKING REWARDS
AVAX’s minting process generates staking rewards to incentivize the validator, starting with a genesis supply of 360 million tokens and minting additional AVAX to offset transaction fee burns, managed via the P-Chain. While AVAX remains inflationary until reaching the cap of 720 million tokens , the minting formula balances emissions by weighting rewards based on stake amount and duration, encouraging longer staking periods.
The following formula calculates the total tokens Rj at year j:
Rj = Rl + ∑∀u ρ(u.samount, u.stime) × ×
R_j— represents the total AVAX tokens at year j, starting with R₁ = 360M, up to a cap of 720MR_l— is the total tokens from the last year the governed parameters γ, λ ∈ ℝ were changed- — the sum reward weight for all stakers , where
c_j— indicates the un-minted supply (up to 360M) available at year jL— normalization factor defined as
The formula adjusts rewards using rho, which increases with staking duration (u.s_time in weeks) and stake amount (u.s_amount in AVAX), ensuring fairness in reward distribution. The governed parameters gamma and lambda allow flexibility, recomputing the un-minted supply c_j when changed. This minting process, while inflationary, is capped to maintain scarcity, balancing AVAX’s economic model. The P-Chain’s reward distribution methods such as RewardValidatorTx finalize the process, ensuring the validator receives minted AVAX for securing the network.
3. DISTRIBUTING STAKING REWARDS
AVAX staking rewards are distributed to Primary Network validators at the end of their staking period, through a formula that accounts for stake, supply, and staking duration, managed via the P-Chain. The validator must maintain at least 80% uptime to receive rewards, with the reward amount scaled by their stake relative to the total supply and adjusted by the remaining tokens to be minted. The formula calculates rewards based on the un-minted supply, the validator’s stake percentage, and a consumption rate that varies with staking duration, encouraging longer staking periods. A validator achieves the maximum reward when their staking period equals the minting period of one year, optimizing the effective consumption rate.
The amount of staking rewards a validator is entitled to is described below:
reward = (maximum_supply − supply) × × × effective_consumption_rate
maximum_supply— the total cap of 720M AVAX tokenssupply— the current AVAX token supplystake— the validator’s staked AVAX as a fraction of supplystaking_period— the duration (in seconds) of the validator’s staking, from 2 weeks to 1 yearminting_period— fixed period of 1 year over which staking occurseffective_consumption_rate— multiplier depending on staking duration
The effective consumption rate is computed as a weighted average, favoring the maximum rate of 0.12 for longer staking periods, enhancing rewards for commitment. This distribution mechanism ensures fairness, as rewards scale with stake and uptime.