Avalanche and AVAX currently rank as the tenth-largest project in the crypto ecosystem after an explosive rise in price over the past year.
Over the past year, Avalanche (AVAX) has seen its value grow to a $24 billion network in market capitalization, representing a staggering 3,000% during the period. The growth has not only been on the markets but the network itself, with nearly 750,000 transactions on the chain daily, up from barely 50 daily transactions at the start of the year. The growth has positioned the blockchain in a prime position to dethrone Ethereum as the largest L1 smart contract chain, alongside Solana, Cardano, and Terra.
In recent months the Avalanche ecosystem has exponentially grown, with DEXs, NFTs, staking platforms, decentralized VCs, and other decentralized projects launching every week on the network. We sought to find out what is making Avalanche ecosystem a natural competitor to Ethereum, apart from the low transaction fees on the former.
What is Avalanche?
Avalanche Network is a high throughput layer 1 blockchain ecosystem that is secured through the proof-of-stake (POS) consensus mechanism. Launched in 2020, Avalanche aims at offering instant, cheap and efficient transactions across decentralized finance (DeFi) applications, subnets, and custom blockchains.
As the Ethereum DeFi ecosystem blew up in 2020, transaction fees on the blockchain also grew significantly, with a single transaction fee at times costing over $200. This caused a massive exodus of users to other chains such as Polygon, Avalanche, and Solana hence setting a path for the growth of these chains. Undoubtedly, the Avalanche ecosystem is set for an explosion as the number of dApps on the network grows by the day.
Amidst the boom and euphoria, what really stood out was the growth of the decentralized exchanges, or DEXs, on the blockchain. Pangolin exchange and Trader JOE, two of the largest DEXs on the Avalanche ecosystem experienced explosive growth rates in daily volume traded, the amount staked, and fees generated - showing the grotesque growth of the Avalanche network.
The rising DEX ecosystem on Avalanche Network
In the early days of 2021, little trading was happening on DEXs, as most of them were built on Ethereum and charged exorbitant transaction fees. However, the launch of Pangolin exchange, an Avalanche-based DEX, changed the game. It reduced transaction fees by 95% allowing anyone to participate in the DeFi ecosystem. It uses the same automated market-making (AMM) model as Uniswap, features a native governance token called PNG that is fully community distributed, and is capable of trading all tokens issued on Ethereum and Avalanche.
As one of the first DEXs built on Avalanche, Pangolin offers users a cheap, quick, and secure channel to finalize trades on the network. It enables users to swap assets while enjoying sub-second transaction finality and transaction fees as low as a few cents.
In August, the Avalanche network welcomed Trader JOE, another DEX on Avalanche, further growing the DeFi ecosystem on the blockchain. The two DEXs have been at the forefront in leading user adoption rates to the Avalanche network.
Building the future from within
Apart from the DEXs, the growth of decentralized venture capital firms also contributed greatly to Avalanche's explosive growth. Launch in 2021, Colony is an Avalanche-based ecosystem accelerator, powered by its native CLY token. The platform targets Avalanche-based projects with an aim to bring the “structural integrity of traditional finance to DeFi”, its website reads.
The community-driven platform provides early-stage funding and liquidity to Avalanche-based projects and protocols. Additionally, via smart contracts, the project purchases and stakes AVAX and subnet tokens. And finally, Colony also purchases select Avalanche projects to form an index. The project lays out a futuristic and properly incentivized foundation that will help future Avalanche projects kick start their crypto journey.
This incentivizes developers to build on Avalanche and develop the best of applications that help the network scale. Powered by a first-of-its-kind funding mechanism, Colony imbues traditional venture capital with a spirit of Community through open governance, support, and inclusion.
The platform recently announced an $18.5 million funding round led by the Avalanche Foundation, the arrowhead for Avalanche’s product development support. The funds will be used to develop better VC solutions and sponsor new projects built on the Avalanche network. Additionally, some of the funds will be invested in budding projects (via ecosystem farming) and liquidity provision for the various projects.
Final words
It has been a busy and successful year for Avalanche since its mainnet launch in 2020. The growth of the ecosystem is not limited to DEXs and decentralized VCs. Private Securities, Initial Litigation Offerings (ILOs), Synthetics, Stablecoins, DeFi applications, Prediction Markets, and more applications have been built on Avalanche, creating a self-sustaining ecosystem.
With $AVAX currently placed 10th in crypto market cap rankings, there’s more room for growth as the ecosystem welcomes a decentralized financial ecosystem tailored for everybody.
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2022-01-18 14:06:20
