* The report is jointly published by Cabin VC and AVATAR Ventures. Special thanks to AVATAR Ventures for the information and support it provides.
In early 2022, the crypto market experienced a bumpy ride, and indexes were going downward, with the market cap and the ecosystem’s development of mainstream public chains constrained under such macro environment. Starting from January, the performance of the data on the L1 public chain Avalanche has remained satisfying, showing an early sign of recovery.
Reviewing public chains’ performance in the second half of last year, DeFi, NFT, GameFi, and Web 3.0 in Avalanche attracted significant attention, the progress in Avalanche’s inter-institutional cooperation and subnet cooperation brought about new prospects, and Avalanche was widely discussed in the public chain ecosystem, crypto community, and social media: the “Social Volume” was found correlated with Avalanche’s price fluctuations.
The report centers around Avalanche Ecosystem’s latest development, on-chain data progress, and financing information and analyzes Avalanche’s data growth, narrative angles and development trends, for readers’ reference.
I. Progress in Underlying Technologies
Avalanche, established in 2018, launched its mainnet in September 2020, aiming to achieve 4500 transactions per second (TPS). In its early stage, Avalanche did not benchmark itself against Ethereum. Instead, it defined itself as a “commercialized decentralized financial platform” that provides customizable blockchain services for C-side and B-side clients. Its role has been reflected in Avalanche’s active cooperation with corporate institutions.
Currently, Avalanche’s total market value ranks 10th in the crypto market and ranks among the top 5% in the public chains, second only to Ethereum, Cardano, Solana, and Terra. From Q4 2021 to Q1 2022, Avalanche’s ROI has shown a recovery trend, mainly due to stable on-chain data growth and cooperation in the ecosystem.
1． Progress in technologies
Avalanche, featuring a three-chain architecture, has become highly recognizable in terms of its technologies. Avalanche’s Exchange Chain (X-Chain), Contract Chain (C-Chain), and Platform Chain (P-Chain) are designed for different businesses and are interoperable. Avalanche adopts such special-shaped network architecture and DAG (directed acyclic graph) data structure to optimize the PoS consensus mechanism.
(* In Avalanche’s three-chain architecture, the X-chain is used to create and trade on-chain assets, the P-chain is used to coordinate verification nodes and to create and track subnets, and the C-chain is used to create and execute EVM smart contracts and build DApps, functioning as Avalanche’s application layer.)
Compared with Ethereum, Avalanche’s architecture enhances the composability of blockchains for different demands and stands out with low latency, high throughput, and a theoretical security threshold of 80%. Currently, the maximum TPS observed from its C-Chain has reached 869. Statistics show that 31.65 transactions are done per second on Avalanche’s Trader Joe, with an average confirmation time of 3.75 seconds.
Avalanche has been updating its codes at an extremely high frequency over the past 12 months. According to cryptomiso, compared with same-track ecosystems, Avalanche’s code update frequency is only two places lower than Sonala. Avalanche peaked its update frequency in June and July last year and slowed down in the following months. A total of 59 contributors submitted 3047 updates.
(Source: github; Rank source: cryptomiso.com)
In Q4 2021, Avalanche completed its Blueberry upgrade, allowing developers to create customized virtual machines and independent blockchains with their own rules, the key to the subnet architecture.
Avalanche P-Chain’s Subnet structure is a horizontal blockchain expansion method unique to the public chain. The method can achieve part of the performance in the parallel chain concept and assets can be transferred across subnets (but Avalanche’s subnet is still different from the blockchain subnet of the Internet and computer terminologies). P-Chain has a competitive To B performance and is customizable. The P-Chain can work closely with Avalanche B side, allowing Avalanche’s iconic narrative to keep expanding. It is expected that the narrative of modular blockchain will draw the market’s attention shortly.
According to official data, the Avalanche Ecosystem has developed 428 projects. The number of Avalanche development activities peaked in January this year, and the degree of account activity has since remained stable:
Based on the acquired statistics, the number of Avalanche’s developers grew threefold in 2021. The developer growth rate of Avalanche, Polkadot, Solana, NEAR, BSC, and Terra all exceeded that of Ethereum.
Avalanche has a high-level richness in its ecosystem. According to official statistics, as of February 2022, the Avalanche mainnet has had over 1200 verification nodes. 428 projects have been developed in the Avalanche ecosystem, mainly including infrastructure, development tools, cultural products such as DAO/NFT/Gaming, DeFi, corporate institutions, and wealth management products.
Over the past few months, DeFi, NFT, and GameFi have been the main driving forces of the growth of ecological data in the Avalanche Ecosystem.
In February last year, Avalanche launched a bi-directional token bridge called Avalanche-Ethereum Bridge (AEB). The AEB inevitably triggered the TVL (total value locked) outbreak of DeFi in August last year, and stimulated the development of other third-party cross-chain bridges. According to Dune Analytics, the total TVL of Avalanche-Ethereum Bridge has reached $ 5.958 billion, ranking 1st among Ethereum bridges of the same type:
(Source: Dune Analytics https://dune.xyz/nadimchamoun/Avalanche-Bridge)
During the same period, the “Avalanche Rush”, the $180 million liquidity mining reward program announced by Avalanche, accelerated the growth. In August last year, Avalanche’s TVL rose dramatically from $220 million to $2.01 billion within a month. In the following December, Avalanche’s TVL surpassed Solana and ranked 4th in the public chain.
Hindered by the macro market environment, the growth in DeFi ecological data was only reflected in Avalanche’s market value after a period of time, a trend that can be seen in Q4 2021 and Q1 2022. In a sluggish market, Avalanche achieved a record high in the number of active addresses, transaction volume, TVL and market value in the last quarter. Over the past 3 months, the total number of addresses on Avalanche C-Chain reached 2.154 million, and the number of active addresses peaked at 800,000 in January. TVL has shown a rebounding trend. As of March, the total transaction volume of the Avalanche C-Chain has exceeded 100 million.
I. Progress in Ecosystem
Reviewing the data growth of the Avalanche Ecosystem, the report shows that the growth of “Social Volume” last year was also a reason for the data growth, in addition to other factors such as Avalanche’s technical features and support for the projects in the ecosystem. “Social Volume” comes from Avalanche’s inter-institutional and inter-ecosystem cooperation as well as the community growth, media discussion, and ecosystem growth resulting from the cooperation.
In April 2021, SushiSwap took the lead and decided to expand its services to Avalanche Ecosystem. In August of the same year, Avalanche became one of the first beneficiaries of the inclusive financial plan “DeFi for the People” announced by leading DeFi protocols such as Aave and Curve. As Aave and Sushiswap protocols got deployed on the Avalanche ecosystem, their popularity also drove the data growth of Avalanche’s native blue-chip projects Pangolin, Trader Joe, and BenQI.
Wonderland Finance (TIME) is one of the most influential and hotly-discussed representative DeFi projects in Avalanche Ecosystem. Wonderland was fork of Olympus DAO in Avalanche and led to once flipped OHM’s market cap. In this case, Avalanche’s low fees and effective community marketing and media communication produced significant influence. It is worth noticing that Olympus DAO and its founder Daniele Sestagalli have successfully taken use of the community discussion including that in TikTok. Therefore, apart from the crypto community, the project has attracted attention and discussion by users outside the industry.
Avalanche Ecosystem’s popularity continued on NFT + GameFi at the end of the year, generating hotly-discussed topics. “2021 MLB Series 2 Baseball NFT series”, Cradaba, DeFi Kingdoms, and other popular NFT and GameFi projects appeared one after another. As these projects rapidly marched into the market, the “Social Volume” of Avalanche reached several peaks. In the development of public chain in 2021, the Solunavax concept proposed by the international community demonstrated the Meme attribute brought by “Social Volume”. Solunavax, representing Solana, Terra, and Avalanche, exemplify the crypto community’s intense interest in the three alternative chains of Ethereum.
The social traffic on the official website is another proof. From January to March, the total traffic at Avalanche reached 1.228 million, slightly lower than the 1.566 million traffic of Solana on the same track. In terms of the source of traffic, Reddit and Youtube accounted for 31.33% and 14.8% respectively. Avalanche maintained a high popularity inside communities.
Concerning the peak range of media and community discussions of the topic, “Social Volume” was found correlated to Avalanche’s price performance and with a certain lag. As there is a lag of 2–3 months, it is expected that the positive impact of Avalanche’s on-chain data and cooperation in the ecosystem will keep supporting its market cap recovery.
Currently, Avalanche’s on-chain data growth mainly comes from C-Chain. In the meantime, C-Chain’s data performance affects how the market expects the P-Chain (platform chain). In March 2022, the Avalanche Foundation announced the launch of the Subnet Incentive Program, powerfully promoting the staking rate of the Avalanche network to 50.65%.
Considering the trend, the inter-institutional cooperation of Avalanche is expected to be the focus of market observation in 2022. Subnet structures and narratives of modular blockchains can further drive the data growth in Social Volume.
1．Avalanche ecosystem profile and representative samples
Avalanche’s current TVL is $11.3 billion, a decrease of around 18% compared with the record high of $13.79 billion in December 2021.
Avalanche now supports 174 DeFi projects, and the projects with top 10 TVLs are AAVE, Trader Joe, Curve, BenQI, Platypus Finance, Multichain, Alpha Finance, Wonderland, Yield Yak, and Beefy Finance. AAVE accounted for 29.52%, and Avalanche’s native projects accounted for more than 40%.
Avalanche Ecosystem consists of a wide variety of high-quality native projects and the projects supported by the ecosystem’s foundation. Almost all these projects gained millions of dollars in the seed round. The representative samples are listed as follows:
Platypus is Avalanche’s native stablecoin swap agreement. Platypus aggregates all stablecoins in the same fund pool. The stablecoins have shared liquidity and, therefore, can achieve lower transaction slippage.
Platypus raised $3.36 million in a private round and $1.05 million in a public round. In addition, it was granted $114,000 in funding by the Avalanche Foundation.
Defrost is Avalanche’s native algorithmic stablecoin protocol. Defrost is one of the powerful competitors of the DeFi project Abracadabra.
Defrost raised $3.3 million in funding. Three Arrows Capital and Defiance led the investment, and Avalaunch, CMS Holdings, and Hailstone also participated in the financing.
Pangolin is Avalanche’s first native DEX, comparable to Uniswap’s automated market maker (AMM). Pangolin improves transaction speed and reduces transaction costs relying on Avalanche’s underlying performance.
Pangolin currently has a TVL of $220 million and a market value of about $25 million.
Trader Joe https://traderjoexyz.com/
Trader Joe, a competitor product of Pangolin, achieved a 195% monthly user number growth in November last year and gradually became the preferred platform on the Avalanche chain. Trader Joe has been integrated with projects like Snowball and Penguin Finance.
With a current TVL of $1.52 billion and a market value of about $200 million, Trader Joe’s is a competitor product of Pangolin. Trader Joe’s latest round of strategic financing is $5 million.
Snowball is the first stablecoin AMM on Avalanche and a vault for compound interest mining, IDO, and stablecoin. Snowball can be considered a native Curve protocol for additional income agricultural products. At present, its diluted market value is about $4.3 million.
BenQ is a lending product on Avalanche. BENQ has raised $6 million in strategic financing, with Ascensive Assets leading the funding.
BenQ Finance gained approx. $6 million in a private round in April 2021.
Kalao is an NFT trading platform on the Avalanche chain that aggregates all available NFT on the Avalanche’s C-Chain. VR technologies and the Metaverse concept have been introduced to the platform, allowing it to support the virtual live broadcast.
Kalao has raised about $3.3 million in two funding rounds.
In Q4 2022, Topps, a global diversified consumer goods company and a collectibles platform for US trading cards, will launch the 2021 MLB Series 2 Baseball series NFT in Avalanche. The company’s sports and entertainment products cover Major League Baseball, Major League Soccer, UEFA Champions League, Bundesliga, making the company highly influential in the industry.
This NFT series was previously launched on the WAX blockchain and later migrated to Avalanche. ToppsNFT is a typical NFT on the chain.
Crabada is a Play to Earn game. Similar to Axie Infinity, players use hermit crab NFTs to participate in the game and earn CRA.
Crabada gained support from the Ecosystem and raised US$600,000 from a strategic private financing round. The investors included Avalanche and Avalaunch (the IDO platform of the Avalanche Ecosystem)
Imperium Empires https://imperiumempires.com/
Imperium Empires is a popular GameFi and Metaverse project in the Avalanche Ecosystem and one of the AAA games benchmarked against StarAltas. Imperium Empires raised $2.1 million in seed round in December 2021.
Imperium Empires has a current market value of around $8 million.
Ascenders is a sci-fi, open-world action role-playing AAA chain game powered by Avalanche. Ascenders is one of the latest projects in the Avalanche Ecosystem that has gained financing. In March, it raised $6.4 million in a private round, jointly led by Paramount Capital, Three Arrows Capital, Sino Global Capital, and Merit Circle.
Degis is the first decentralized aggregate insurance protocol based on the Avalanche Ecosystem. In February 2021, Degis raised $3 million in an angel round and a seed round.
Colony is a DAO-based community-driven fund that aims to promote the development of the Avalanche Ecosystem. In October 2021, the Avalanche Ecosystem project incubator Colony completed a $1 million seed round, and then raised another $18.5 million jointly led by GBV Capital, Foresight Ventures and the Avalanche Foundation.
2．Field supported by the ecosystem
With ample funds, Avalanche established the Asian industry foundation AVATAR which provides $20 million to build the Avalanche Ecosystem that covers DeFi, NFT, and industry infrastructure projects. The blockchain VCs such as A&T Capital, SNZ, and NGC Ventures jointly formed the invested funds.
In November 2021, the Avalanche Foundation launched an incentive program of over $220 million called Blizzard. The incentive program will focus on developers of DeFi, enterprise applications, NFT and cultural products. The funding of Blizzard Fund mainly comes from Avalanche Foundation, Ava Labs, Polychain Capital, Three Arrows Capital, and Dragonfly Capital.
From December 2021 to early March 2022, Avalanche and the Web3.0 development platform Moralis jointly conducted their largest hackathon to accelerate the development of DApp, Web3 applications, and DeFi projects.
In the official list of award-winning projects (including those of money awards), eight are related to DeFi concepts, five related to Web3.0 concepts, three related to Metaverse concepts, three related to investment management, three NFTs, two GameFi, two tools and infrastructure, and two DAO projects. The other wining projects cover decentralized storage, stablecoin, data analysis platform, and ecological service platform.
The Avalanche ecosystem supports a broader range of hot topics than other public chains. Apart from popular tracks such as DeFi and NFT, Avalanche attaches importance to supporting enterprise-level applications and Web3.0 applications. The increase in the project number in these tracks can make the Avalanche Ecosystem more recognizable.
In March 2022, the Avalanche Foundation announced that it would launch the “Avalanche Multiverse” incentive program, providing 4 million AVAX Tokens worth about $290 million to drive the increase of subnets. Meanwhile, Ava Labs, one of Avalanche’s core developers, assists and supports the subnet development.
Avalanche has competitive resources in enterprise-level cooperation. It is expected that the non-blockchain native enterprise-level institutions using AVAX subnet as a blockchain development network may become the next focus of Avalanche’s narratives due to the impact and narrative features of the inter-institutional cooperation.
The ongoing critical inter-institutional cooperation cases are listed as follows:
The cooperation between Avalanche and Topps, a trading card and collectibles company, has a significant influence. Topps is one of the oldest collectibles companies in the US and has been acquired by Fanatics, the parent company of the sport NFT platform Candy Digital.
In 2021, in collaboration with the US law firm Roche Cyrulnik Freedman LLP and consulting firm Republic Advisory Services, the Avalanche development team coined the first Initial Litigation Offering concept. Initial Litigation Offering is a blockchain-based litigation financing product open to all investors, aiming to partially fund civil litigations.
(3) STO (Security Token Offerings):
Avalanche integrated with Securitize in December 2020. Securitize is a leading institution in Security Token Offerings (STO) in the US and holds an ATS license. After integration, Securitize can use the Avalanche blockchain for the issuance and management of private securities. Since Avalanche’s three-chain architecture is flexible, compliance conditions can be embedded into the network layer to support digital securities issuance.
In March, Wirex, a digital payments platform, announced that it would integrate Avalanche into it to receive, send, store and exchange AVAX Tokens over the Avalanche network. The payment platform has 4.5 million users from traditional fields.
(5) Cooperation with other enterprises:
In November 2021, Avalanche announced that it would cooperate with Deloitte. Deloitte decided to introduce the Avalanche platform to its Close as You Go (CAYG) rescue platform to increase efficiency and reduce costs using blockchain technologies. The cooperation is an excellent demonstration of how traditional enterprises can enter Web3.0.
(6) Subnet progress
In early March, the team of Crabada, a highly popular GameFi game in Avalanche Ecosystem, launched Swimmer Network, a blockchain dedicated to games. It is Avalanche’s latest subnet. Crabada adopts a similar mechanism to Axie Infinity, with over 20 million transactions in game contracts.
The DFK Chain, led by the NFT game project DeFi Kingdoms, is one of the upcoming subnets. In the Subnet Incentive Program, Avalanche saves $15 million as reward for DeFi Kingdoms.
I. Financing Scale, Investment Institutions, and Inter-connections Across the Ecosystem
The main financing rounds of Avalanche are listed as follows:
Institutions that invested in Avalanche in the early stage include a16z, Polychain, Bitmain, NGC Ventures, Dragonfly Capital, Fundamental Labs, Galaxy Digital, NGC Ventures, Dragonly Capital, SNZ, and IOSG Venture.
In July 2020, IOSG Venture made a strategic investment in Avalanche and supported its strategic layout and market planning in the crypto market in some regions.
Benefiting from investors’ confidence in Avalanche, an Ethereum alternative, Avalanche’s latest round of financing of more than $230 million is the largest sum it has raised so far. Leading institutions such as Polychain and Three Arrows Capital participated in the funding.
Polychain and Three Arrows Capital have rich experience in investing in the public chain track. Polychain is one of the pioneering native encryption hedge funds and one of the investors for Nervos, Cosmos, and Tezos. Last year, Polychain also invested in Solana and Avalanche. Three Arrows Capital also led the investment in NEAR Protocol, Luna Foundation Guard (LFG), and projects on the same track.
According to the acquired data, in Polychain’s investment layout last year, public chain projects accounted for as high as 36.8%, and DeFi accounted for about 42.1%; 82% of the invested projects of Three Arrows Capital were DeFi projects, followed by investment in underlying technologies. The two leading investment institutions have rich investment experience in the public chain track and have invested extensively in DeFi projects. They can continuously instill resources to promote the development of the public chain.
In addition, the financing scale of projects in Avalanche Ecosystem demonstrates that most of the native projects and partner projects have gained supported from the Avalanche Ecosystem Foundation. The scale of early seed round financing ranges from about $2 million to $5 million, and subsequent rounds are often valued at more than $10 million. Projects in the Avalanche Ecosystem are funded sufficiently.
I. Trends and Conclusions
Avalanche started later than Solana on the same track, but Avalanche has grown its network effect and are gradually more influential on the market. Avalanche has a competitive technology development and market promotion progress with a large number of native products. It is expected that the inter-institutional cooperation on subnet will increase, and the ecosystem will become more diverse.
Ava Labs, a core developer for Avalanche clients, will build a blockchain with native KYC functions dedicated to institutional DeFi in its next subnet. The goal is relevant to the cooperation with institutions such as Golden Tree Asset Management, Wintermute, Jump Crypto, Valkyrie, and Securitize. The “DeFi adopted by institutions” is a valuable topic for increasing the Social Volume.
On the premise that the C-Chain data grow healthily, Avalanche’s subnet construction will be in line with the market’s vision for the Web3.0 era. One of Avalanche’s development directions is to build up Web3.0 infrastructure for enterprise-level organizations.
The following risks should also be noted:
* A high-traffic influx at a high speed may trigger performance errors. An overly high load on DEX Pangolin once caused an error in Avalanche cross-chain functions, resulting in short-term panic in the community.
* The number of existing subnets is small, and the construction progress of subnets is hard to predict accurately.
* The number of projects developed in the early stage of the Avalanche Ecosystem is high, and there exists competition inside the ecosystem.
* Under a multi-chain ecological landscape, Avalanche Ecosystem will face long-term competition with other leading cross-chain ecosystems.