Avalanche Rush

Avalanche Rush

At just over a year old, Avalanche boasts a vibrant ecosystem of native apps and popular Ethereum based protocols. A lot of the activity was bootstrapped with their US$180mm liquidity mining incentives announced in July, but we have seen sustained growth and activity in terms of TVL, volumes, bridging activity and many other metrics.

Introduction

Avalanche is an EVM compatible layer 1 platform that is focused on speed and low transaction costs. It aims to solve the scalability issues currently facing Ethereum today. It is able to carry out their vision through some of its core features such as sub second finality of transactions, unique consensus protocol upgrades through Snowball++, transactional throughput, and having over 1,200, full, block-producing nodes validating the network. In short, Avalanche delivers the products users know and love for a fraction of the cost.

In line with a multi chain future, Avalanche has built out one of the best bridging experiences with their Avalanche Bridge. It made it more secure, cheaper and faster to bridge over assets from Ethereum and has already facilitated well over US$27bn worth of tokens to and from Ethereum. It is also important to note Avalanche’s shared security model, which is handled at the Subnet level and allows applications to select the amount of security needed for their apps. This is a key distinction from Ethereum, where apps tend to overpay for security. 

At just over a year old, Avalanche boasts a vibrant ecosystem of native apps and popular Ethereum based protocols. A lot of the activity was bootstrapped with their US$180mm liquidity mining incentives announced in July, but we have seen sustained growth and activity in terms of TVL, volumes, bridging activity and many other metrics. In TVL alone, Avalanche went from less than US$200mm in July to well over US$13bn today - a 65x increase in under 6 months.

Sorting the DeFi based applications by TVL, 6 of the top 10 apps are native to Avalanche. These apps are generally forks of Ethereum counterparts and come with significant farming incentives. The popularity of these native apps highlight the community forming around Avalanche as a premiere layer 1 chain. To highlight, Trader Joe is a native AMM that allows users to trade, farm, stake and even allows you to receive an LP pair with only 1 click using Zap. Trader Joe consistently ranks in the top 5 amongst all DEXs averaging around $750 million daily volume. These features and user activity on Trader Joe alongside it’s US$2.5bn in TVL, show the growing developer community and profitable LP environment being created within Avalanche.

Major Ethereum projects such as Aave and Curve have also migrated to Avalanche with farming incentives, further driving traffic into the chain. Avalanche is quickly becoming home for DeFi, crypto dApps and enterprise solutions.

Avalanche Landscape & Top dApps

The Avalanche ecosystem is one that is very robust, covering all the major aspects of blockchain, from DeFi, NFTs, DEX, P2E etc. A breakdown of the ecosystem could be seen in the image below, by CCK Ventures.

Source: CCK Ventures

Being EVM compatible, major Ethereum DeFi projects such as Aave and Curve are able to migrate into Avalanche easily, further driving traffic to the chain. With a TVL of over US$13.9bn across all Avalanche projects, Aave takes the lion's share of 25.82%, with a TVL of US$3.59bn. It is followed closely by Trader Joe and Benqi, which are native to Avalanche that has gained immense popularity as well. 

Other notable dApps native to Avalanche include Wonderland (the most successful OHM fork with over US$2bn staked), Cradaba (a Play-and-Earn idle and battle game centered around an Undersea world filled with fierce fighting Hermit-Crabs). 

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Avalanche Bridge

Given the multichain future, one important feature for L1s or even L2s is accessibility. It is important for users to be able to transfer tokens from one blockchain to another swiftly, securely and at low-cost. This can be done through what is known as a blockchain bridge, which is a connection that allows the transfer of tokens or arbitrary data from one chain to another, enabling interoperability between the networks. 

For the transfer of ERC20 Tokens from Ethereum to Avalanche’s C-Chain and back, users can utilise the Avalanche Bridge. It is a trustless bridge that supports a variety of ERC-20 tokens, with the most famous being WETH, USDC and WBTC. Transfers take an estimate of 10-15 minutes in totality, with low fees of $3 (from Ethereum to Avalanche). More details about fees and other FAQs can be found here.

The Avalanche Bridge Activity can be monitored on Nansen Dashboards. After the Avalanche Foundation announced the US$180mm DeFi in mid August, we saw a spike in the volume in the Avalanche Bridge, reaching more than US$370mm in volume on 27 August alone. As Avalanche grew in popularity due to more dApp launches, backing from reputable VCs and liquidity mining programs (Curve, Aave, Trader Joe, Benqi) - activity on the bridge continued to grow and maintained at high volumes, reaching a peak on 23 September with over US$600mm in volume.

Avalanche Bridge Volume (Eth to Avax only)

Source: Nansen.ai as at 3 Dec 2021

Transactions & Gas 

The scalability issue is a major problem limiting the growth and adoption of many blockchain networks. On the Ethereum network, high gas fees resulting from congestion has encouraged many developers to migrate to other L1 chains and L2 solutions. High gas fees become extremely prohibitive when the cost of completing a simple transaction is higher than the value of the asset being transferred. High gas fees price out retail participants and cannibalize business models by making them financially unfeasible. Retail is being priced out by large token holders and bots, forcing them to take on high gas costs and congestion at the base layer (along with the bad UX). This of course limits the growth of the network and consequently stifles innovation in the wider crypto space. The rise in median gas prices over the past two years can be seen in the graph below, which is readily available on Nansen’s gas tracker dashboard.

Ethereum Median Gas Price (Gwei)

Source: Nansen.ai as at 3 Dec 2021


Avalanche comes with a transactional throughput of more than 4,500 tps and a transactional finality of less than 2 sec. This is extremely promising in relation to other blockchain networks.

Transactional Throughput and Finality comparison 

Source: https://www.avax.network/

The graph below highlights how daily transactions on the Avalanche network have been steadily growing over the past six months. This traction corresponds to the growing number of projects that have been joining the ecosystem ranging from DeFi primitives such as DEXs, money markets, asset management protocols to NFTs and enterprise adoption.

 Daily Txs Avalanche

Source: Nansen.ai as at 3 Dec 2021

A significant uptick in the daily transactions can be seen at the beginning of August. This corresponds to the announcement of “Avalanche Rush” – a US$180mm DeFi Incentive Program which attracted blue-chip DeFi applications to deploy on Avalanche. Additionally, another major increase can also be seen during the month of November, as major announcements such as the partnership with Deloitte were also made during this time. Furthermore, increases in the number of daily transactions are expected to increase significantly in the coming months as the recent partnership with Fireblocks, a leading provider of custody and settlement solutions for digital assets highlights.

Daily Gas Paid Ethereum vs Avalanche

Source: Nansen.ai as at 3 Dec 2021

From the graph above, one can also observe that the daily gas paid on Ethereum started to increase significantly during the month of August. This was mainly driven by the rise of NFT projects being deployed during the summer. The high gas fees on Ethereum forced a lot of projects to seek expansion on other networks where deploying their projects will be cheaper and more accessible.

Avalanche enables the creation of fast, low cost and Solidity compatible dApps. Thus, various NFT projects have already leveraged the network for their deployment. Examples include the Topps NFT marketplace (designed for the scale and speed of worldwide sports fans), Kalao (an NFT ecosystem unlocking the full potential of metaverse experiences), Venly Market (a peer to peer, blockchain agnostic NFT marketplace) and Crabada (a play-to-earn NFT game). Moreover, part of the recent US$200mm fund raised by the Avalanche Foundation will be specifically dedicated to NFTs and culture applications. It is important to note however, that the most active applications on Avalanche are still DeFi dApps such as Trader Joe and Pangolin (both DEXs) representing 23% and 7.5% of all onchain activity respectively.

The transaction ratio between Avalanche and Ethereum has been increasing significantly, particularly since the month of August. 

Transactions Ethereum vs Avalanche

Source: Nansen.ai as at 3 Dec 2021

The ratio increased from 1% at the beginning of August to a peak of 54% on the 26th of November. To highlight the performance of Avalanche let’s reference the previous graph displaying daily gas costs. On the 26th of November, the daily gas paid on AVAX was $1,311,682, while it was $51,389,748 on Ethereum. While AVAX had more than half of the amount of Ethereum transactions on the day, the cost of processing these transactions was more than 20 times cheaper than the Ethereum equivalent. This comparison highlights the performance of the Avalanche network at a fraction of the cost.

Conclusion

Given the increasing demand for blockspace, many layers 1s and 2s have been exploring new design approaches to scalability. Some of the defining features of scaling solutions revolve around differing consensus mechanisms and execution environments, resulting in higher performance and cheaper fees. 

Oftentimes, liquidity mining incentives are used to incentivize users to these chains as a mechanism to bootstrap liquidity. As we have seen time and time again, liquidity is not loyal. When these incentives run out, it will be interesting to see which player(s) in the market emerge on top. Avalanche has been able to gain significant traction over the last 12 months and we are excited to see its role in the future of crypto.

Does this sort of data interest you? All the data used in this article is readily available on the various dashboards on Nansen. Explore Avalanche Contracts, Token God Mode, Wallet Profiller and Smart Alerts on Nansen today!

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Disclaimer

The authors of this content and members of Nansen may be participating or invested in some of the protocols or tokens mentioned herein. The foregoing statement acts as a disclosure of potential conflicts of interest and is not a recommendation to purchase or invest in any token or participate in any protocol. Nansen does not recommend any particular course of action in relation to any token or protocol. The content herein is meant purely for educational and informational purposes only and should not be relied upon as financial, investment, legal, tax or any other professional or other advice. None of the content and information herein is presented to induce or to attempt to induce any reader or other person to buy, sell or hold any token or participate in any protocol or enter into, or offer to enter into, any agreement for or with a view to buying or selling any token or participating in any protocol. Statements made herein (including statements of opinion, if any) are wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader or any other person. Readers are strongly urged to exercise caution and have regard to their own personal needs and circumstances before making any decision to buy or sell any token or participate in any protocol. Observations and views expressed herein may be changed by Nansen at any time without notice. Nansen accepts no liability whatsoever for any losses or liabilities arising from the use of or reliance on any of this content.

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