Avalanche (AVAX) gaining momentum: can blockchain stay in the top ten?
The decentralized Avalanche platform has returned to the top ten blockchains by capitalization and continues to gain momentum, showing positive trends in all key metrics.
What is Avalanche?
Avalanche is a zero-level blockchain platform that utilizes a proprietary Proof-of-Stake-based consensus mechanism and is compatible with the Ethereum Virtual Machine (EVM). Avalanche is a decentralized infrastructure for creating Tier 1 blockchains similar to Ethereum, BNB Smart Chain, Tron, Cardano, etc.
The Avalanche network was released in 2020 by the Ava Labs team. A unique feature of this blockchain was the burning of native AVAX tokens, which users used to pay the network's transaction fees.
Avalanche has seen rapid growth
In the last quarter since October 2023, the Avalanche blockchain has risen from 22nd to 9th position in the CoinMarketCap ranking, and its capitalization has grown by 380% during this period — from $3.24 billion to $12.34 billion.
Avalanche has risen to No. 8 among all blockchains, according to DeFi Llama data in terms of the number of assets blocked in DeFi protocols (TVL), which has almost reached $830 million. However, the figure was over $10 billion in 2022, so it will still take time for Avalanche to reach the same TVL level.
Avalanche ranks 5th regarding the number of DeFi protocols running on the network, behind only Ethereum, BNB Smart Chain, Arbitrum, and Polygon. There are currently 359 DeFi protocols running on the Avalanche blockchain, including:
- Aave's lending platform,
- DEX exchanges Trader Joe's, Balancer, WOOFi, and Thorchain,
- the popular crosschain bridge Stargate.
Over the past year, the AVAX native cryptocurrency has more than doubled from $16.19 to $33.57, and since October 2023, the price reached a local low of $9.06 — by 370%.
According to the analytical service CoinMarketCap, the number of AVAX cryptocurrency holders has grown more than 8 times to 60.5 thousand over the past year. According to Token Terminal, the daily number of active users of the Avalanche network exceeded 58 thousand, which is 9.3% more compared to the previous month.
Why is Avalanche so popular?
Avalanche is one of the most used blockchains in the decentralized finance (DeFi) environment due to its low fees, which average just a couple of cents, and high transaction speeds.
The Avalanche network is often used for cheap transfers of stablecoins like USDT or USDC and wrapped tokens like WBTC and WETH. The blockchain provides access to DeFi platforms for users, especially those who don't have large sums of money for swaps, liquidity mining, and other Ethereum transactions due to the network's costly fees.
The team behind Ava Labs has an ambitious goal to catch up with Ethereum. This goal will be challenging to achieve, but Avalanche has every chance to get a foothold in the top ten blockchains, and the statistics only confirm this.
"Inscriptions" in the Avalanche blockchain
After the popularity of ordinals and BRC-20 tokens on the Bitcoin blockchain, "inscriptions" started appearing in other decentralized networks, and Avalanche is no exception.
In June 2023, ASC-20, Avalanche's BRC-20 counterpart, appeared on the Avalanche blockchain. Since its introduction, the number of ASC-20 tokens has already exceeded 35,000. Inscriptions in the Avalanche blockchain have even gotten their name — Avascriptions.
According to Dune Analytics, just a week after the launch of ASC-20, trading activity and volumes have skyrocketed by 2,000%. The most popular ASC-20 tokens were AVAV, DINO, and SNOW. For example, the capitalization of the AVAV token has already exceeded $30 million.
Avalanche plans for 2024
The developers have planned several updates to improve network performance. The team will significantly enhance the consensus protocol to reduce transaction completion time to 250ms. In addition, the developers plan to upgrade the consensus capacity to increase network throughput, leading to higher technical requirements for validator nodes.
Other planned updates include the launch of the new HyperSDK toolkit and the native HyperVM virtual machine. HyperSDK will make it easier for developers to run subnets on the Avalanche blockchain and easily modify and update any of their components.
The HyperVM virtual machine will help better optimize the Avalanche blockchain to increase its throughput and functionality. New levels of network performance will be available to developers, and HyperVM will open up new opportunities for the AVAX cryptocurrency.
Planned upgrades include improvements to Avalanche Wallet Messaging (AWM) and Teleporter contract-to-crosschain messaging systems and introducing a new type of database, FirewoodDB, with linear access optimized specifically for blockchain storage. FirewoodDB is designed to improve the efficiency of validators by reducing their processing time.
Conclusion
If all the planned updates to the Avalanche network materialize, it could make the blockchain even more attractive for active DeFi users and investors.
However, it is worth considering that in the same year, 2024, the Dancun update to the Ethereum network is planned, which is expected to reduce commissions to a few cents. If this happens, the Ethereum ecosystem and related blockchain projects, including second-tier solutions like Polygon, Arbitrum, and Optimism, could see a new wave of growth. At the same time, competing blockchains could decline.
