- Over the past 18 months, the Avalanche EVM-compatible Contract Chain has attracted a large number of users and developers with its low gas fees and transaction times, which can support the creation of a strong DeFi-centric dApp ecosystem.
- Despite its high performance, the C-chain does not provide a sustainable, long-term scalability solution. Avalanche has set out to solve this problem, using subnets to push projects horizontally.
- A subnet is a blockchain network for a specific application. They isolate customizability from performance and benefit, making them attractive for high-performance, blockspace-intensive applications (e.g., games/Metaverses) and entities constrained by complex rule sets (e.g., traditional financial institutions) force.
- X-Chain is a nascent, underdeveloped design space that allows users to create custom assets.
- The current narrative revolves around the gaming sub-network, where multiple blue-chip Web2 games will be released on-chain and potentially bring in millions of game users.
Avalanche is a proof-of-stake (PoS) platform for creating digital assets, smart contracts and application-specific blockchains. The network has two strategies for optimizing performance:
- Novel consensus mechanism that provides high throughput and speed with low fees.
- Horizontal scaling, allowing projects to deploy their own subnets.
The umbrella network, the main network, consists of C, P, and X chains. Today, the vast majority of Avalanche applications are deployed on Contract Chain (C-Chain), a smart contract platform compatible with the Avalanche EVM. However, while Avalanche’s consensus enables speed improvements and lower fees, it does not provide a long-term solution to scalability.To achieve this, Avalanche enables projects to create custom blockchain networks (subnets) using the Platform Chain (P-Chain). Finally, the Exchange Chain (X-Chain) exists to create and move Avalanche-native digital smart assets. Like Subnet, this design space is fairly new and underdeveloped, but has seen some unique projects (in use and in development) over the past year.
High level Avalanche ecosystem
Two important metrics when evaluating an ecosystem are developer and user activity.
The number of unique contracts deployed, daily active users, and transactions decreased with market conditions.Nonetheless, these figures are still considerably higher than a year earlier.
Wallets, Exchanges and Bridges
Until recently, users could only gain full access to the Avalanche network and its ecosystem by using an EVM-compatible plugin wallet such as Metamask in combination with an Avalanche wallet (access to X-chain and P-chain). To bridge this gap and create a simple yet comprehensive user experience, Ava Labs, the master R&D team of the Avalanche network, recently announced the beta version of Core. Core is a browser extension and mobile wallet that allows users to traverse the entire network and ecosystem (decentralized applications (dApps), subnets and internal chains), as well as native bridges and exchange assets.
The Avalanche-Ethereum bridge, native to Avalanche, is the largest bridge to connect to Ethereum in terms of total value locked (TVL). In addition to supporting the transfer of ERC-20 tokens to the C-chain, the Avalanche bridge also plans to add support for the Bitcoin network (currently available via the Core extension). For bridged assets from other chains (eg, BNB, NEAR, Solana, etc.), the most popular bridges in terms of TVL are Multichain, Stargate, and Synapse (in that order).
Overview of dApps and Subnets
Over 200 projects call the Avalanche network home. These projects can be broadly classified as native or non-native. Many existing projects are non-native, i.e. cross-chain (e.g. Aave, Curve, etc.) due to C-Chain’s EVM compatibility and strong bridging ecosystem around the Avalanche network. However, a subset of projects are native, meaning they exist only on Avalanche, or start on Avalanche, or where the vast majority of activity is on Avalanche.
Another difference between projects is where they are deployed on the network. Although the vast majority of projects are still on the C chain, starting in April, the first batch of projects began to deploy their own subnets through the P chain.These custom, application-specific blockchain networks prevent projects from clogging the network by splitting traffic and isolating performance. In turn, these projects benefit from better performance and customizability in terms of fees, validator sets, virtual machines, and more.
Avalanche’s first two custom subnets have gone live with the rollout of a large number of testnet subnets. Going forward, they are expected to play an increasingly important role in the ecosystem.
Just like projects, groups that fund the Avalanche ecosystem can be divided into two categories: Avalanche-focused groups and general groups. Avalanche Foundation, Ava Labs, Aventures DAO, Avatar Ventures, and projects such as Trader Joe and Avascan are all Avalanche-focused capital allocation institutions.
The most active member is the Avalanche Foundation, which has allocated tens of millions of AVAX over the past year to fund the development and growth of the Avalanche ecosystem. In addition to individual funding rounds, its four broad advocates to date are Avalanche Rush, Blizzard Fund, Multiverse and the Culture Catalyst Initiative.
Other sources of funding based on the Avalanche project are the public, angel investors and investment firms.
Retail investors in Avalanche have the opportunity to fund some noteworthy projects (such as Crabada and Platypus Finance) through startup platforms like Avalaunch and Rocket Joe, as well as community-driven accelerator Colony Labs.
The most active “general” investment firms in the early Avalanche native protocol by number of deals are Muhabbit Capital (MC) Ventures, GBV Capital, Shima Capital, Three Arrows Capital and ZBS Capital.
Decentralized Finance ( DeFi )
The characteristics of C-chain, especially in terms of performance and interoperability, have prepared for a surge in DeFi activity. Two other catalysts were the introduction of Chainlink price feeds in June 2021 and the launch of Avalanche Rush, a liquidity mining incentive program thereafter. Although most of the activity is less than a year old, the ecosystem already covers most of the primitive functions and is now in the process of entering the experimental phase.
Decentralized Exchange ( DEX )
There are two sets of widely used DEXs on Avalanche: the generic, consistently product-based AMM-DEX and the StableSwap-based AMM-DEX.
The two largest general-purpose DEXs (by volume) are Avalanche’s native Trader Joe and Pangolin. In addition to swaps and liquidity provision, the two platforms also offer liquidity mining, staking (for their native tokens, JOE and PNG), limit orders (through integrations) and leveraged trading. Pangolin provides leveraged trading through integration with MarginSwap and WOWswap, while Trader Joe’s leveraged trading is implemented through the native lending protocol Banker Joe. Trader Joe also has its own launch platform Rocket Joe and NFT marketplace Joepegs.
The two largest DEXs that trade similarly priced assets (i.e. stablecoins and wrapped tokens) are Platypus Finance and Curve. Avalanche’s native Platypus differentiates itself from Curve by introducing the concept of Asset Liability Management (ALM) and implementing a single-variable (as opposed to invariant) curve. These two design decisions allow Platypus to provide liquidity providers (LPs) with an open liquidity pool with unilateral supply and (in most cases) the ability to offset the risk of impermanent loss.
Going forward, Dexalot is another project of interest. It is a decentralized, on-chain central limit order book (CLOB) that is already live on the C-chain. However, the properties of the C chain (latency and gas fees) do not really fit into CLOB, so Dexalot is one of the first DeFi applications to transition to its own subnet. The Dexalot subnet is currently in beta and is expected to be rolled out within the next 1-2 months.
The biggest application of Avalanche in TVL is the cross-chain liquidity protocol Aave. The next two largest lending protocols by TVL are Avalanche’s native BENQI and Yeti Finance.
The core functionality of Aave and BENQI Liquidity Market (BLM) is almost identical, allowing users to lend (earn interest) and borrow assets with overcollateralization. However, BENQI is differentiated by BENQI Liquid Staking (BLS), the first and (so far) only liquid staking protocol to support AVAX.
BENQI Liquid Stake AVAX (sAVAX) allows holders to secure the Avalanche mainnet’s safety net and earn staking rewards without causing their AVAX to lose liquidity. sAVAX can be used for DeFi applications on the C chain for additional income and instant liquidity. At the time of writing, the circulating supply of sAVAX is close to 3 million, or just over 1% of all AVAX in circulation.
Going forward, BLS plans to play an integral role in the subnet ecosystem through the upcoming launch of veQI, voting escrow QI (BENQI’s governance token). By voting to lock their QI, veQI holders will be able to directly stake AVAX to validate their chosen subnet.
Yeti Finance fills an important niche in the Avalanche ecosystem, enabling users to borrow their overcollateralized stablecoin YUSD to collateralize their interest-bearing tokens (i.e. pledged assets, LP tokens, or collateral deposited in other lending markets) ). Borrowers can collateralize established interest-free YUSD loans with multiple assets, and the Yeti Finance protocol automatically compound their earnings. Similar projects on Avalanche include Defrost Finance/H20, Abracadabra Money/MIM, Moremoney/MONEY and Teddy Cash/TSD.
GMX is the first perpetual futures market to go live on Avalanche. While derivatives DEXs as a whole have struggled to “take off,” GMX has emerged as a leader in this category with its unique approach to zero-slippage swaps. GMX’s native index, GLP, is a basket of liquid assets used for liquidity, and the prices of assets in the pool are determined using Chainlink’s market data. Since the beginning of the year, GMX has generated more than $16 million in fees on Avalanche, distributing all of its fees to GLP holders and GMX (token) stakers.
The Hubble exchange, currently in testnet, will bring some competition to Avalanche’s perpetual futures market. Hubble is differentiated by its multi-asset collateralization and cross-margining. It also facilitates transactions through an immutable vAMM based on CurveCrypto and unlocks composability by tokenizing positions.
At the time of writing, all live options protocols on Avalanche are well-known cross-chain competitors. Two of these market protocols are Opyn (operating through order books) and Dopex (using options to sell vaults). There’s also Arrow Markets, the Avalanche native options protocol currently in testnet.
Arrow Markets will be the first options protocol on Avalanche to use AMM. It will provide option sellers with partial collateral and unlock the ability to combine options to create synthetic assets. While the pricing engine calculations will initially be done off-chain, the team hopes to eventually bring them on-chain – a strong use case for subnetting given the computational load.
Like the options market, structured products on Avalanche are implementations of universal cross-chain protocols. The two largest products are Ribbon Finance and Thetanuts Finance, which focus on providing users with vaults, executing preset options-based yield strategies, and abstracting pricing and risk management.
Struct Finance recently raised a seed round to create custom interest rate products. The Avalanche-based protocol plans to start with token splits and then eventually allow users to create structured products that combine fixed-rate and yield tokens with options.
Aggregation Layers and VE-Wars
To understand the revenue aggregator landscape on Avalanche, start with Joe Wars and Platypus Party. Trader Joe’s native token JOE and Platypus’ native token PTP can both be pledged in exchange for veJOE and vePTP, respectively. These “attributed escrow” tokens can then increase the liquidity mining APR of selected farms.
Given the potential opportunity, many yield-enhancing aggregators have created products around the accumulation of ve-tokens. The two most popular yield aggregators (by TVL) are Avalanche’s native Vector Finance and Yield Yak. Yield Yak provides automatic compounding yields for 25 different protocols, while Vector Finance only focuses on maximizing farm yields for Trader Joe and Platypus Finance pools. Another similar project is Echidna Finance, which only focuses on accumulating vePTP and providing higher yield aggregation for Platypus pools. Farmer Frank and Convex-fork SteakHut Finance also run the same game rules using veJOE and Trader Jo pools. Another notable player in Joe Wars is Beefy Finance, a cross-chain automated compounder.
The enthusiasm for veJOE and vePTP is understandable. Given the centrality of Trader Joe and Platypus, once they enable voting standards, projects will want to bribe large ve-token holders (such as Vector Finance and VTX token holders) for liquidity. Controlling these criteria can turn ve holders into kingpins in the Avalanche ecosystem.
Some of the most popular DEX aggregators on the Avalanche network include ParaSwap (integrated with Avalanche’s new Core wallet), 1inch, OpenOcean, and Matcha.
Institutional and corporate adoption
Avalanche is one of the few networks designed to support organizations. It allows institutions to tokenize assets and customize blockchain networks as they see fit, especially with regard to regulatory compliance, data privacy, logic, and performance.
In a major development, Ava Labs announced it will be partnering with Aave, GoldenTree Asset Management, Wintermute, Jump Crypto, Valkyrie and Securitize to build a licensed subnet with native KYC capabilities. This list of collaborators represents the upper echelons of companies at the intersection of DeFi and traditional finance. Building this blockchain network will allow these vibrant and engaged regulated entities to use DeFi’s primitive functions on-chain and at scale.
Avalanche also has two prominent corporate partners, accounting firm Deloitte and publicly traded insurance company Lemonade. Ava Labs partnered with Deloitte to create the Close As You Go platform to improve the process associated with Federal Emergency Management Agency (FEMA) reimbursement. The Lemonade Crypto Climate Coalition is building an app on Avalanche to provide weather insurance to subsistence farmers.
Notably, both companies cited Avalanche’s eco-friendliness as a reason to build and house their projects.
From the beginning, the main goal of Ava Labs was to “digitize all assets in the world”. The X-Chain of the Avalanche Primary Network exists purely to facilitate the creation and movement of digital smart assets. It supports custom rule sets that can be designed to accommodate all types of assets and markets, pre-existing or otherwise.
Two unique, still early-stage digital assets deployed only on Avalanche are ReTok Financ’s tokenized real estate and Ryval’s (founded by Roche Freedman LLP, Republic and Ava Labs) Initial Litigation Products (ILOs).
Games and NFTs
In the past few months, the example of performance isolation has become very clear, with high-profile Metaverse/gaming projects quickly clogging blockchains. In particular, the story framing behind Crabada illustrates how Avalanche’s subnetting technology makes it the network of choice for on-chain gaming.
Crabada is a crab-themed P2E game launched exclusively on Avalanche’s C-chain. Within three months, it quickly accounted for over 30% of the C-chain’s daily transaction volume. This creates higher fees and latency for users of the entire C chain. Coincidentally, the subnet is now available for the Crabada community and all C-chain users (thanks to the launch of the subnet EVM at the beginning of the year). In early May, Crabada bridged to its own EVM-compatible subnet, the Swimmer Network.
As of now, DeFi Kingdoms is another subnet that expands directly from Harmony One to EVM-compatible subnets with the launch of DeFi Kingdoms: Crystalvale.
By successfully absorbing the transaction volume of the C chain, the Swimmer Network has contributed to a significant drop in transaction fees. All in all, this speaks to the potential power of subnets and, more directly, a win-win for Crabada users and the entire Avalanche ecosystem.
Going forward, Subnet’s track is filled with high-profile game projects – Castle Crush and Highrise Worlds stand out in particular.
Castle Crush, currently in testnet, and the community-owned Metaverse, Highrise World, are full-fledged Web2 games.Both games have around 200,000 daily active users (DAU) and 1-2 million monthly active users (MAU). The developers of Castle Crush, Wildlife Studios, also happen to be the largest gaming company in Latin America, with 1,300 employees and more than 60 games with 2 billion downloads.
In addition to bringing popular and high-quality games to the subnet, these crossovers can bring millions of new users and dozens of seasoned, high-quality game developers onto the chain. This is a huge development not only for subnets or Avalanche, but for the entire crypto ecosystem.
Other highly anticipated gaming sub-nets include first-person shooter Shrapnel, fantasy action RPG Heroes Chained, open-world RPG Ascenders, interstellar Metaverse Imperium Empires and Pokemon-style MMORPG DeFimons.
Non – gaming NFTs
While Avalanche’s robust gaming ecosystem has attracted a lot of attention, there is also a separate, fledgling NFT scene.
Most of the NFT trading volume on Avalanche comes from Avalanche native Kalao, Joepegs and Campfire or cross-chain protocols NFTrade, Element Market and tofuNFT.
Despite the small market size, there are some notable projects on Avalanche:
l Topps, one of the oldest collectibles companies in the United States, has launched the 2021 MLB Series 2 – Baseball NFT Series.
l One of the most famous works of famous street artist Banksy, Love is in the Air, became an NFT fragment on Avalanche through Particle. Paris Hilton acquired partial ownership of the project.
l Outstanding visual artist Jason M Peterson launched a 1-to-1 NFT for his Kanye West mural in Chicago’s West Loop neighborhood.
The $100 million Culture Catalyst Initiative will help drive NFT transaction volume in the coming quarters, starting with musician Grimes’ “The Galactic Children’s Metaverse Book.”
While it may not look like it, the Avalanche network is only 21 months old. The growth of its ecosystem over this time has been astounding, and it is the result of a shrewd and aggressive scaling strategy. Avalanche’s largest stakeholders have successfully increased activity on the robust, EVM-compliant C-chain by dedicating significant funds to projects and user incentives. Now that Avalanche has gained legitimacy and a solid foundation, current ecosystem stakeholders must execute their scaling strategy, which is promising and distinctive.
Certain DeFi applications seem to have a strong natural fit with subnets. For example, derivatives with performance requirements, as well as institutions with compliance, privacy and control needs, seem to be obvious targets.
However, the most promising category from a user and project acquisition standpoint is gaming. If Avalanche can solve some of the scalability concerns, such as seamless bridging between subnets and fast validator bootstrapping for new networks, it could, on its own, bring massive, entirely new classes of on-chain user.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/messari-takes-you-through-every-aspect-of-the-avalanche-ecosystem/
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