Authors: Daniel Khoo, Jake Kennis, Beili Baraki, Seth Zhuo
introduce
introduce
Avalanche is an EVM-compatible layer 1 platform, which focuses on speed and low transaction costs, and aims to solve the current scalability problems faced by Ethereum. It can achieve its vision through some core functions, such as sub second finality of transactions, Snowball++ for special consensus protocol upgrades, transaction output, and verification of the network with more than 1,200 full block generation nodes. In short, Avalanche delivers what users know and love for a fraction of the cost.
To adapt to the multi-chain future, Avalanche has built one of the best bridging experiences with Avalanche Bridge. It made transferring assets from Ethereum safer, cheaper, and faster, and facilitated $27 billion in tokens moving in and out of Ethereum. Also important is Avalanche's shared security model, which deals with transactions at the subnet level, allowing applications to choose the degree of security they require. This is the biggest difference between Ethereum and other applications, because it tends to pay a high price for security.
Avalanche is just over a year old, but has made a name for itself as the Ethereum protocol with a vibrant native app ecosystem and audience. The $180M liquidity mining incentive announced in July has spurred a lot of activity, but we've also seen continued growth in TVL, volume, bridging activity, and many other metrics. In TVL alone, it was less than $200 million in July, and today Avalanche has increased it to $13 billion, a 65-fold increase in less than 6 months.
Classification of DeFi-based applications by TVL, 6 of the top 10 are native to Avalanche. These apps are often forks of their Ethereum counterparts, with obvious incentives for farming. The popularity of these native apps highlights the community forming around Avalanche as a layer 1. It’s worth mentioning that Trader Joe’s is a local AMM that allows users to use Zaps to trade, farm, bet, and even allow you to receive LP pairs with just one click. Trader Joe consistently ranks in the top 5 of all DEXs with an average daily trading volume of approximately $750 million. These features and user activity on Trader Joe's, along with its $2.5 billion in TVL, reflect the creation of a growing developer community and a profitable LP environment in Avalanche.
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Avalanche Landscape & Top dApps
The Avalanche ecosystem is very strong. It covers all major aspects of the blockchain from DeFi, NFTs, DEX, P2E, etc. The picture below is provided by CCK Ventures, from which we can see the ecosystem of Avalanche.
EVM compatibility allows major Ethereum DeFi projects like Aave and Curve to easily migrate to Avalanche, furthering the trade chain. Aave holds the lion's share of 25.82% with a TVL of over $13.9 billion across all Avalanche projects, with a TVL of $3.59 billion. This is followed by Trader Joe and Benqi, both localized Avalanche.
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Avalanche Bridge
Considering the multi-chain future, an important feature of L1 or even L2s is accessibility. Importantly, users are able to transfer tokens from one blockchain to another quickly and securely at low cost. This can be achieved through a so-called blockchain bridge, which is a connection that allows tokens or arbitrary data to be transferred from one chain to another, enabling interoperability between networks.
Users can use Avalanche Bridge to transfer ERC20 tokens from Ethereum to Avalanche's C-chain. This is a bridge that supports various ERC-20 tokens, most notably WETH, USDC and WBTC. The transfer process takes an estimated 10-15 minutes in total and only costs $3 (from Ethereum to Avalanche).
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Transaction & Gas
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Ethereum gas price median (Gwei)
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Transaction Yield and Summability Comparison
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Avalanche Daily Volume
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Comparison of Ethereum and Avalanche in terms of daily Gas fees
It can also be seen from the graph above that in August, the daily gas fee paid on Ethereum started to increase significantly. This is mainly due to the increase in NFT projects deployed in the summer. Ethereum’s high gas fees have forced many projects to expand on other networks that are cheaper and more convenient.
Avalanche enables the creation of fast, low-cost, and ruggedness-compatible dApps. Therefore, various NFT projects are utilizing the network for deployment. For example, Topps NFT marketplace (designed for the scale and speed of global sports fans), Kalao (an NFT ecosystem that fully exploits the potential of metaverse experiences), Venly marketplace (a peer-to-peer, blockchain-agnostic NFT marketplace) and Crabada (a game to win NFT games). Additionally, a portion of the Avalanche Foundation’s recently raised $20 billion fund will be earmarked for NFTs and cultural applications. However, it’s worth noting that the most active Avalanche applications are still DeFi dApps such as Trader Joe’s and Pangolin (both DEXs), accounting for 23% and 7.5% of all on-chain activity, respectively.
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Comparison of Ethereum and Avalanche in terms of transactions
in conclusion
in conclusion
Given the increasing demand for block space, many L1s and L2s have been exploring new scalability design approaches. The defining characteristics of scaling solutions revolve around different consensus mechanisms and execution environments, resulting in higher performance and lower fees.
Typically, liquidity mining incentives are used as a mechanism to guide liquidity to incentivize users to use these chains. As we have seen time and time again, liquidity is not reliable. It will be interesting to see which players in the market stand out when all these incentives are used. Avalanche has grown tremendously over the past 12 months, and we're excited to see what it can do in crypto in the future.
