Closed trust from Grayscale and large-scale blockchain failure: news from the Avalanche ecosystem
In 2023, Avalanche was among the top 10 most significant crypto projects by capitalization, but in 2024, it lost ground to some altcoins such as Toncoin (TON) and Dogecoin (DOGE). As a result, Avalanche fell out of the top 10 leaders but remains among the largest cryptocurrencies.
Avalanche disruptions
At the end of February 2024, Avalanche's network experienced a massive outage that halted the blockchain for several hours. The failure also affected the Numbers subnet, part of the Avalanche ecosystem. The point is that Avalanche is a layer zero network consisting of a parent blockchain (C-Chain) at the center of the ecosystem and subnets (subnets or subchains), essentially layer one network.
Ava Labs, the company behind the development of Avalanche, suggested that the failure was due to a new wave of inscriptions similar to BRC-20 or ARC-20 in Bitcoin, which appeared just an hour before the network stopped producing new blocks.
The ordinal analog was launched back in November 2023, causing activity on the Avalanche network to jump about 10-fold. According to on-chain analysts, about 95% of all transactions on Avalanche came from inscriptions.
Protocol updates
In March 2024, the developers released an update to Durango. One of the main elements was Teleporter, a tool based on the Avalanche Warp Messaging (AWM) protocol that allows Avalanche subnets to communicate with each other. The Teleporter tool was created to address the fragmentation issues of the Avalanche ecosystem.
Teleporter is compatible with the Ethereum Virtual Machine (EVM), enabling the development of decentralized applications that work with Avalanche subnets in the Solidity programming language.
According to the updated roadmap, developers have planned several improvements to the blockchain protocol itself:
- Ultra-fast transactions: the Avalanche team is working on improving the transaction processing engine to achieve transaction completion within 250 milliseconds;
- Increased network bandwidth;
- Improved development tools to simplify and accelerate the process of building decentralized applications and subchains in the Avalanche ecosystem. The team plans to introduce a HyperSDK tool that will significantly accelerate the development of subchains;
- Enabling a subnetwork staking mechanism will enhance the Avalanche ecosystem experience for users.
New partnerships and AVAX rate dynamics
Avalanche enables fast and cheap transactions, making blockchain suitable for various financial services. For example, in February 2024, Citigroup, one of the world's top 20 banks and one of the largest financial conglomerates in the U.S., partnered with Ava Labs to develop a proof of concept for the tokenization of private securities funds.
In August of the same year, Grayscale Investments, one of the largest investment firms in the U.S., announced plans to launch a closed-end trust fund on the Avalanche blockchain for large private and institutional investors. According to Grayscale, Avalanche will play a meaningful role in the tokenization of real-world assets (RWAs) — a sector that is already one of the top trends in the crypto industry in 2024.
Despite the presence of significant partners, after March 2024, when the AVAX price reached an annual high of $60, the cryptocurrency's exchange rate fell to $22 by August amid a general decline in the crypto market. Over the past few months, the exchange rate of the most prominent altcoins has been highly correlated with the price of the leading cryptocurrency, Bitcoin, and has largely followed its movement.
However, over the past year, the AVAX cryptocurrency's exchange rate has more than doubled, and its capitalization has increased from $3.5 billion to $9.3 — that is, by about 160%. This difference in growth between capitalization and exchange rate is because new AVAX coins are regularly released and used as rewards for validators, not to mention periodic unlocks.
In August 2024, for example, the Avalanche team unlocked ~9.5 million AVAX and announced plans to regularly unlock 1.6 million AVAX quarterly through 2030, which could put additional pressure on the cryptocurrency's price. According to CoinMarketCap, all 56 percent of the AVAX interest of all possible AVAX — about 404 million — is circulating in the market.
Despite the current adverse market dynamics, Avalanche remains a promising project that continues to be joined by new, internationally notable players. For example, another investment company, Franklin Templeton, which manages assets worth $1.6 trillion, is also planning to join the Avalanche ecosystem. Still, the details of the cooperation have not yet been disclosed.
