2021 was an explosive year for layer-1 blockchains and cryptocurrency in general. Although Ethereum is still the industry leader, however, due to network congestion and other limitations that the network is experiencing, there are appearances of other Layer-1 smart contract platforms that can offer superior features for users such as Solana, Binance Smart Chain.
And among the layer-1 blockchain projects, Avalanche (AVAX) is probably one of the most prominent. With a market cap of $20 billion, Avalanche is still gaining momentum in the cryptocurrency space and powers DApps on its network.
What is Avalanche?
Avalanche is a revolutionary blockchain that is created to build and scale decentralized applications (dApps). The project seeks to unseat Ethereum as the most widely utilized smart contract in blockchain ecosystems, with features that include easier access for all users of any level or experience.
Avalanche aims to be a global asset exchange where anyone can launch or trade any form of asset, and control them using smart contracts. The developers have been working hard on cutting-edge technologies to deliver a fast, low transaction fee and scalable network.
- Network Architecture: The primary network consists of 3 built-in separate blockchains: (X) Chain, Platform (P) Chain, Contract (C ). The key aspect of Avalanche's system design includes the ability to create chains that maintain certain properties such as being compliant with regulatory standards while maintaining decentralization, security and scalability. The scope of Avalanche is far bigger with the potential for unlimited subnets to be deployed on Avalanche for greater scalability.
- Subnets: Subnetworks offer a new form of scaling previously untouched by prior blockchain experiments. The way Avalanche subnets work is similar to Ethereum 2.0 sharding. More importantly, subnets can be created by users on-demand and as needed.
- Snowman Consensus: Snowman is a new consensus protocol that builds on the Avalanche consensus. This order in which transactions are processed benefits smart contracts, as it makes their execution easier with less chance of them getting stuck or lost.
- Scalability: Avalanche is capable of handling thousands of transactions per second and can accommodate thousands of validators without sacrificing performance while ensuring confidentiality and safety.
- Interoperable: The platform was designed with excellent decentralization in mind. This feature enables multiple client implementations across the network without any centralized control and avoids disagreements among users of different interests or motives.
⇒ With such outstanding features in its ecosystem, Avalanche is the perfect place to develop dApps as well as other leading platforms like Aave or Curve deploying on Avalanche.
Avalanche Highlight Numbers
- Chain ID: 43114
- Main Currency: AVAX
- Monthly Active Address (C-Chain): (January 2022): 800,614
- Highest transactions per day on C-Chain (January 2022): 1,100,404
- Avg Transaction Per Month: $1.1M.
- Average Gas Fee: $0.23 (27173% less expensive than Ethereum fees)
- Total Market Capitalization: $20B (peaked at $30B)
- Rank: #12
- Validators: 1242
- Total Value Bridged: $1.2B
Roadmap and Development Progress
- Q2 2020: Cascade Testnet was launched as the first public test nest. Denali was the second public test nest with a plan to distribute two million tokens to contributors.
- Q3 2020: Released Everest as a fully-featured version of the Avalanche network that acted as the final phase of testing before the launch of Avalanche’s mainnet.
- Q4 2020: Avalanche mainnet launched on 21st September 2020 which featured the release of all Avalanche chains (X, P, and C). The network supported the full EVM compatibility and development toolkit through C-Chain at launch.
- Q1 2021: Apricot was released with fees reduction and other important updates to improve the network. Avalanche-Ethereum Bridge (AEB) was released.
- Q2 2021: Apricot phase 2 was released to activate Ethereum Berlin Upgrade with more EIPS were supported. C-Chain was updated with dynamic fees and other powerful tools.
- Q3 2021: Apricot phase 3 added dynamic fee calculations to the C-chain, increased CreateSubnetTx and create ChainTx fees and fixed multiple corruption bugs in delegator validation. The network also enforced MaxStakeWeight for delegation transactions.
- Q4 2021: Two important updates were released this month, including:
- Apricot Phase 4 (September, 2021): Introduced Snowman++ on the P-chain and C-chain. A minimum gas price of 25 nAVAX and the maximum gas price of 1000 nAVAX were added in the C-chain dynamic fee mechanism.
- Apricot Phase 5 (November, 2021): The network has optimized the C Chain Fee Algorithm and added the ability to export/import AVAX to/from C-Chain along with other important updates such as Atomic Transaction Batching. X-Chain dynamic fees, Pruning and fast synchronization were also updated.
In 2021, in addition to releasing important technical updates to improve the network. Avalanche also launched multiple incentive packages to stimulate the ecosystem to grow.
- August 2021: Avalanche Rush was released with $180M of funds to introduce more applications and assets to its growing DeFi ecosystem. Avalanche Rush brought Aave and Curve to deploy on the network.
- September 2021: $230M worth of AVAX was completed in a private sale to some well-known crypto funds. Polychain and Three Arrows Capital were leading the investment.
- November 2021: Avalanche Foundation launched an incentive program called "Blizzard" to support DeFi and NFT. The fund is worth over $200M with Polychain Capital, 3AC, Dragonfly Capital among others as investors.
Investors and Partners
Avalanche is supported and invested by many large and experienced partners in the market. Typically, the project has raised capital up to $290M from major funds in the market such as Three Arrows, Dragonfly Capital or Polychain. Notable funding rounds include:
- Series A - Feb 1st, 2019: Ava Labs raised $6M during this round.
- Initial Coin Offering - Jun 25th, 2020: $12M was raised by Bitmain, Dragonfly and Capital Partners were the leading investors.
- Initial Coin Offering - Jul 22th, 2020: $42M was raised through this ICO event.
- Initial Coin Offering - Sep 16th, 2021: $230M was raised with Polychain, Three Arrows Capital as the leading investors.
Avalanche Ecosystem Overview
In just one year, we have seen the outstanding growth of Avalanche. The project, which only released the mainnet at the end of 2020, has now entered the top 10 projects with the largest market cap in the market. It is considered one of the fastest-growing blockchains with an impressive $30 billion market capitalization at an all-time-high price.
The Total Value Locked rallied more than 30% from February bottom. This happened due to the Platypus war and multiple new multi-chain projects launched on the chain.
The Daily Transaction Count keeps increasing while the Daily Active Addresses goes sideways. This partly shows that lack of unique improvements on the network to attract many new users.
However, Avalanche's ecosystem is still a large ecosystem with nearly 400 projects in all areas from DeFi, NFT, Infrastructure, GameFi, and other sectors. We will review each category in the next section.
- Pangolin: The first decentralized exchange deployed on Avalanche. However, the initial design tokenomics inadequately affected the development of the project. In Q4 2021, Pangolin released a new tokenomics design among other important updates to improve their platform.
- Platypus Finance: Platypus is a fairly new project with a unique approach to stake stablecoins on Avalanche such as USDT, DAI, USDC. It has quickly become a place to go for stakers to earn much higher profit with their boosted APR mechanism.
- TraderJoe: TraderJoe is your one-stop decentralized trading platform on the Avalanche network. The platform combined DEX services with DeFi lending to offer leveraged trading. The total value locked of TraderJoe is the highest ($1.45b) among top dexes on Avalanche as it offers advanced features and profitable staking pools.
- Curve: Curve Finance is a Decentralized Exchange (DEX) built on the Ethereum blockchain specially designed for swapping stablecoins such as USDT, USDC, and DAI, etc. Curve quickly become the top dex with dominant total value locked on Avalanche since deployed with Avalanche Rush. As a highly reputed platform, Curve partially attracted more users to the ecosystem with more than $1b Total Value Locked.
Currently, the AMM DEX sector on Avalanche has appeared quite fully with diverse features. TraderJoe is still the number 1 platform and still on its way to becoming a DeFi station with other features like Lending. Therefore, this sector on Avalanche is currently quite competitive..
However, latecomers like Platypus are also having outstanding features like Boosted APR or Pangolin trying to improve its platform, while also offering better staking pools to attract users. Competition is inevitable in the near future for DEX.
⇒ To become a leading AMM DEX in the Avalanche ecosystem, a project with outstanding and innovative features like the case of Platypus is essential.
Lending & Borrowing
Lending & Borrowing allow the cash flow to be used in the most efficient way. Therefore, it is an important sector in any ecosystem.
Currently, Lending & Borrowing Avalanche accounts for most of the total value locked volume of the system. Top projects in this segment that are worth mentioning are:
- Aave: A fairly well-known platform, which since being deployed on Avalanche has enjoyed great success. Part of that is thanks to the support of AvalancheRush as well as the project has been trusted and has a large user base for a long time. Currently, Aave is leading in total value locked on Avalanche with over $3 billion locked.
- BenQi: The first algorithmic liquidity market protocol on Avalanche. Invested by AvalancheRush and passionately supported by the community, the project has been very successful since its launch. Currently, the project has a total value locked volume at $2.5b. However, the borrowing volume was only $1.5b while the total supply amounted to $2.5b. This shows that the capital is underutilized in this platform.
- Blizz Finance: A decentralized, non-custodial liquidity market protocol operating on Avalanche. The platform gained attraction from users quickly by growing its Total Value Locked to over $1b in within 3 weeks since its launch. However, the number of users has been gradually decreasing since November 2021 and currently Total Value Locked is at $250M.
In addition, there are a number of other prominent projects in the Lending & Borrowing segment that are operating in Avalanche's ecosystem such as IronBank (IB), 88mph (MPH), Beta Finance (BETA) which are also developing quite well.
Overall, the Lending & Borrowing segment still accounts for most of the Total Value Locked volume of the Avalanche ecosystem. Projects in this segment are still building and releasing new features. Recently, BenQi also launched the Liquidity Staking feature or TraderJoe is an AMM-DEX platform that has also launched the Lending feature.
The Yield and Yield Aggregator arrays are currently occupying Total Fund Locked volume right behind AMM-DEX and Lending & Borrowing. Some of the most prominent projects include:
- Beefy Finance: Beefy Finance is a Decentralized, Multi-Chain Yield Optimizer platform that allows its users to earn compound interest on their crypto holdings. The platform has been deployed on Avalanche and has the 2nd highest total value locked volume after Fantom at $250M. The project supports a wide range of Vaults, in which, users can farm AVAX tokens with APR up to 20% with Boosting Feature. This is an ideal platform to earn passive income for those who are participating in more than one ecosystem.
- Alpha Finance: Alpha Finance Lab is an ecosystem of cross-chain DeFi products. Since its launch on Avalanche in early November 2021 and supported by AvalancheRush, the platform's Total Value Locked volume has grown consistently and maintained at $500M. Currently, there are 15 farm pools for the Avalanche chain with attractive APY offered.
- Yield Yak: Yield Yak is the first Yield Aggregator platform on Avalanche and also has AvalancheRush support. With the auto compound mechanism, the project offered attractive APY levels and maintained Total Value Locked up to nearly $800M by November 2021. Currently, there are quite a few pools being supported by Yield-Yak including USDC.e-USDT.e pair with APY level up to 23.8%, very suitable for those who want to earn stable income during a volatile market.
⇒ According to DeFilama's index, projects in the Yield and Yield Aggregator segments are seeing good growth recently due to the strong volatility of the market. The projects offer quite diverse levels of APYs so that investors can choose to optimize their capital with different strategies.
In the context that NFT is growing and attracting more users, including large organizations. In 2021, the outstanding event such as Topps launched the 2021 MLB Series 2 Baseball NFT collection.
Helped the NFT array on Avalanche to get more attention. In addition, some prominent projects in this segment include:
- Kalao: Kalao (KLO) can be termed as an integrated ecosystem that is built on the Avalanche blockchain platform for decentralized finance (DeFi) and non-fungible token (NFT) services. Currently, the NFT marketplace is open on Kalao, which empowers users to create, purchase, sell and collect NFTs.
- Gameswap: Another prominent project, Gameswap, which makes NFTs games and trades NFT games, has also appeared on Avalanche.
There have been quite a few NFT collectibles and NFT Marketplace projects that are appearing more widely on Avalanche C-Chain, such as AvaxCells, AvaxPunks or NFT Stars
⇒ Currently, NFT projects on Avalanche have started to appear with their diverse products. However, with a field that is receiving a lot of attention as right now, surely projects have to do more accelerate developments and attract users.
Launchpad has always been a place that attracts a lot of users with investment opportunities that bring high returns and attract users. We have seen many successful and profitable launchpads like Polkastarter, Dao Maker or Red Kite.
In the Avalanche ecosystem, prominent Launchpad platforms include:
- Avalaunch: Avalaunch is the first Launchpad project in the ecosystem and is supported by Ava Labs. There have been quite a few projects listed on Avalaunch, including the Crabada (Play-to-earn) game that has had a massive ROI of more than 100x (ATH-price) since IDO.
- Colony: Colony is a unique launchpad platform that focuses on investing in early-stage projects in the Avalanche ecosystem. The platform also provides liquidity for DeFi protocols with Index values to track the top projects on Avalanche. The project is a perfect combination between the traditional financial model and DeFi, which will open up many opportunities for investors to receive tokens in the early-stage stage for many different projects and scale up their portfolios.
Launchpad has always been the choice for high returns for investors with small capital. Compared to other ecosystems, the launchpad projects built on Avalanche still appear quite a few. The most prominent name is still Avalaunch with high-quality and profitable listings.
However, a successful Launchpad eventually will attract more and more users, the opportunities will become competitive. As we can see, the total participation from the initial stage compared to the current has increased tremendously. Therefore, the opportunities have been shrunk along with the same money spent.
Colony is the second most notable name, but the project was launched quite late when the market was tending to be saturated.
In addition, there are many other DeFi projects that also have their own launchpads such as Lydia Finance, Rocco Finance or Penguin Finance. Therefore, this segment is quite competitive. Investors will always find opportunities in new launchpads, so this will still be an area with many opportunities in the future.
GameFi is a very hot trend in the period from Q4 of 2021. Currently, Gaming projects are still facing many limitations due to short development time.
However, in such a short time, there have been some very successful projects such as:
- Crabada: is a fork of the very popular game Axies Infinity. However, Crabada has been very successful since its launch and attracted a lot of users. This is currently project with the highest ROI on Avalaunch's launchpad.
- TaleCraft: is a GameFi PvP project with card gameplay built on the Avalanche platform. With different gameplay, TaleCraft will require more skill from the player which is a lucky factor when minting NFTs like other games.
- Yay Games: YAY Games is an innovative Dapp that acts as a decentralized game publisher by aggregating games focused on Play-2-earn, NFTs, and DeFi. The project is supported by Avalanche Rush Program and is considered to be a blue-chip DeFi-GameFi project.
GameFi projects are facing a lot of problems with tokenomics or repetitive gameplay. And the projects built Avalanche is no exception. At the initial stage, this could be a good opportunity to attract new investors. However, The biggest obstacle to keeping users engaged is still a huge challenge.
Infrastructure projects do not attract much attention from investors, but this is a very important component to developing an ecosystem. For Avalanche, this array of projects has appeared quite enough to support the development of other projects. Some notable names include:
- Cartesi: Cartesi is a Layer-2 platform that fixes the scalability and high fees on blockchains through two pieces of infrastructure. With the partnership of this platform, the issues of scalability and transaction fees in the Avalanche ecosystem will be improved.
- Chainlink: Chainlink is a decentralized Oracle network. It aims to act as middleware between smart contracts and external data sources, allowing smart contracts to securely access off-chain data feeds.
- Moralis: Moralis is a one-stop-shop for all your blockchain needs. The platform offers everything from design to hosting and growth of great dApps, with an interface that allows users and developers easy access into external projects or chains alike.
- The Graph: The Graph is an indexing protocol for Ethereum and IPFS networks that anyone can build or publish open APIs with makes data easily accessible.
- Blocknet: This project has developed an interoperability protocol to connect different blockchains and oracles. It also provides communication between nodes, interaction with external APIs via smart contracts on the different blockchains including Avalanche.
- Gravity Protocol: Gravity Protocol is a system that supports oracles and sidechains, which can be used to bridge the gap between blockchains. It also allows for cross-chain communication as well as seamless integration with other cryptocurrencies in one easy interface.
The customer group of Infrastructure segment is crypto projects. Therefore, it will be difficult for end-users like us to evaluate the effectiveness and quality of these projects.
⇒ The projects mentioned above are the top projects in the market for their segment. Therefore, it can be said that Avalanche's ecosystem has a fairly complete Infrastructure array to expand and continue to develop in the future.
Currently, there are a number of Derivatives projects built on Avalanche, such as:
- GMX: is a spot and derivatives platform with market and limit order functionality to trade various large-cap assets with up to 30x leverage and no slippage.
- Ribbon: is a new protocol that helps users access crypto structured products for DeFi. It combine options, futures, and fixed income to improve a portfolio's risk-return profile
- Dopex: is a decentralized options exchange that uses option pools to let anyone buy or sell options in a capital efficient and simplified manner.
The most outstanding project is GMX with the Open Interest accounting for 25% overall. There are more projects that picked Avalanche as the chain to deploy. This will create an advantage in the subnet but will meet a lot of competition from Ethereum's Layer-2s.
Predictions about Avalanche Ecosystem
In this section, I hope that you have understood a bit about the Avalanche ecosystem and outstanding projects. It is one of 2021's fastest-growing ecosystems with Total Value Locked at times surpassing Binance Smart Chain.
- In the Metaverse category, projects such as Decentraland or Sandbox are necessary. However, with the "Internet of Blockchain" infrastructure platform for high multi-chain interoperability, Avalanche can become a promising land in the future of building Metaverse.
- The derivatives category is currently attracting new users. Other ecosystems also have their projects built such as Solana. As one of the largest ecosystems, we can expect projects to be built on Avalanche in the near future.
- Currently, the public-facing roadmap for Avalanche does not maintain any updated information. However, large incentive programs such as AvalancheRush and Blizzard are not fully utilized. The development of DeFi, NFT and GameFi are expected to be continuously developed.
- Avalanche's aim is to be an Internet of Blockchain platform. Therefore, in the future, the appearance of subnets will be necessary for the development of this platform. It is very likely that there will be subnets like Layer-2 on Ethereum platforms that will appear on Avalanche.
Invest in AVAX token
AVAX Token is currently sitting at $74 and ranked number 10 on the total market capitalization. With the Total Fund Locked within the top 5 ecosystems, there is still potential for the token price to grow in the future, however, we need to monitor their developments closely and be careful with our investments as this is not financial advice.
For AVAX holders, there are various options to earn passive income by participating in these platforms:
- AMM: TraderJoe, Pangolin, SushiSwap…
- Lending: BenQi, Aave, IronBank…
- Yield Aggregator: Yield Yak, Beefy Finance, Alpha Finance…
Moreover, the attention is shifting to the Platypus war on the network.
Platypus is an AMM for stableswap with a slightly lower slippage than Curve. The platform offers unique features such as: Reward Voting, Permissionless Pool and Decentralization. Users can utilize this opportunity to earn profits paid in stablecoins in a high voltalie market. There are already projects built on Platypus to take advantage of incentives that attract more users by the amount of PTP paid.
Currently, there are quite a few games appearing on Avalanche. Users can participate in games to bring themselves profit in their free time. An example of the most popular game in the Avalanche ecosystem is Crabada.
⇒ Users can participate in the game and mining process. Mining can be up to 4 hours but brings 3.75 CRA and 303 TUS (a token of CRA similar to how SLP side Axie Infinity works).
In addition, you can participate in creating and trading NFTs on marketplaces to make a profit. Some famous marketplaces can be mentioned as Kalao or AvaxPunks.
Currently, the number of new projects appearing on Launchpad has gradually decreased with Q4 2021. However, this is still a good investment opportunity with small capital and high profit.
Typically, the number of participants on Avalaunch is quite high. However, this is still a good investment opportunity for those who already own XAVA tokens.
To conclude, that is all you need to know about Avalanche and its well-constructed ecosystem. We hope you’ve gained valuable insights to understand the future potential and find opportunities in the crypto market, especially in the Avalanche ecosystem.