Blockchain
Axelar Cryptocurrency Explained – Forbes Advisor Australia
Interoperability is a major barrier to blockchain adoption as a mainstream technology, so the ability to easily build and interact across multiple chains is important, both for developers and end users of decentralized applications (dApps).
Through Axelar’s decentralized network, connectivity provided via “gateway smart contracts” and software development kit (SDK), the platform essentially enables:
- DApp developers can build on their chosen layer 1 blockchain, then connect to external chains without incurring excessive gas fees or additional development costs.
- dApp users can securely use their assets and data (e.g. cryptocurrencies/NFTs) from one blockchain in any application on any other blockchain.
Co-founder Sergey Gorbunov said: “For application developers, they need to be able to choose the best blockchain for their use case, without sacrificing access. For users, they need to be able to combine the resources they want with the applications they want, without taking unnecessary risks that come with ad hoc bridges and suboptimal security approaches.”
Built on the Cosmos Tendermint SDK, Axelar’s mainnet launched in 2022, two years after the project was founded and after raising over $64 million in venture capital funding.
The network’s native token, AXL, has three main purposes:
- To encourage and reward network validators that contribute to consensus mechanisms.
- To pay taxes on the network incurred during user transactions and other network usage costs.
- To grant governance rights. The more AXL you own, the more say you will have when voting on governance proposals related to the operation or upgrade of the protocol.
Apps and other services that use Axelar can purchase the AXL token to cover their users’ transaction fees, making interactions smoother from the customer’s perspective.
Transaction fees and rewards are used as a means to attract validators and stakers, and are paid in AXL. Here’s how it works:
- Cross-chain transactions are secured through a proof-of-stake mechanism, with data verified across a diverse and decentralized network of computing nodes (validators).
- For their role in creating new “blocks” of data and confirming transactions across multiple chains, validators are rewarded with AXL tokens. AXL from transaction fees (aka gas fees) is also used to compensate validators and stakers.
- Investors holding AXL delegate their coins to a validator’s staking pool to earn a portion of the validator’s earnings, net of the validator’s fee.
How will it scale? The project stated: “As Axelar grows and connects more and more chains, it becomes increasingly restrictive to require each Axelar validator to run a node for every chain supported by the network.
“Instead, Axelar validators are incentivized to run nodes for as many supported chains as possible, through increased staking rewards, based on the number of chains they support.”