Avalanche Part 1: Winning with Better Technology, Capital, and User Experience
Multipart Series On My Thoughts On Avalanche
Avalanche has roared into a top 15 cryptocurrency in the past five months. Avalanche today trades at over $100 (~2600% Y/Y Growth) at a $22B market capitalization, and holds the number one Ethereum Bridge (excluding Ronin / Axie). Avalanche’s growth and acceptance in the crypto ecosystem is astounding, especially considering it competes as a Layer 1 protocol.
Despite only launching in September 2020, how did Avalanche achieve such breakout success? The answer comes from methodical execution by the Avalanche Foundation and Ava Labs to achieve burgeoning legitimacy in the cryptoworld. Specifically, Avalanche used their technically superior Layer 1 attributes as their foundation, layered on capital to build momentum, and provided a better user experience for crypto users.
First, Avalanche offers better underlying Layer 1 technology compared to Ethereum. The Avalanche blockchain supports over 4,500 transactions per second (TPS), sub two-second finality, and cheaper gas fees (<$1 per transaction, usually less than 50 cents). Meanwhile Ethereum is handicapped at 15 TPS and triple digit gas fees. As the Avalanche protocol transaction volume grows, Avalanche can secure transactions on the mainnet, providing scalable, frictionless user experience without having to rely on different rollups.
The Avalanche technology advantage also extends to their three native chains -- C-Chain, X-Chain, and P-Chain -- and Ethereum bridge. The most notable Avalanche chain today is the C-Chain because of its EVM compatibility. The C-Chain has the most activity on Avalanche today and integrates with their native Ethereum Bridge launched in July this year. The Avalanche Bridge is the clear winner amongst Layer 1 Ethereum competitors: since launch, over $12B have bridged over from Ethereum. Avalanche also offers 0.75 AVAX token as an airdrop to refund Ethereum users for gas fees needed to enter the Avalanche ecosystem. By subsidizing Ethereum gas fees and providing a seamless bridge experience, Avalanche lowers the barrier to entry for Ethereum holders to explore Avalanche.
Second, Avalanche uses their balance sheet cash to attract not only crypto users but also EVM-compatible projects. In July of this year, Avalanche announced two major funding announcements: the protocol raised $230M from notable crypto investors (Polychain, Dragonfly, Three Arrows) by selling treasury tokens and the $180M Rush program in August 2021. The more important of the two capital announcements is the Rush Program, which provides liquidity mining incentives for Ethereum-based DeFi projects to launch on Avalanche. Aave and Curve both quickly launched on Avalanche taking advantage of the free capital.
Although the Rush Program is only three months old, the cash incentive clearly works. Avalanche provided $20M to Aave that generated $6B in TVL and $7M to Curve that generated $771M in TVL, representing 300x and 110x return on capital, respectively. Today, the Avalanche TVL stands at $18B, a staggering increase from <$300M before launching Rush.
Furthermore, Avalanche has continued to deploy capital in order to attract developers. Just this month, Avalanche launched Blizzard, a $200M fund backed by their investors to support developers building native applications on their protocol. Through Blizzard, not only will the Avalanche Foundation provide capital but also technology, business development, and ecosystem integration support to developers. While too early to tell the success of the program, Avalanche has increased their TVL by over $3B since the announcement.
Finally, Avalanche stands out with their user experience. The onboarding process into Avalanche starts as soon as one bridges over Ethereum with the Bridge. Once the Ethereum enters the C-Chain, the Avalanche landing page welcomes new users to the top Avalanche projects. Users can immediately stake, yield farm, trade, and more across all the Avalanche native and EVM-compatible DApps. The value proposition is clear with the first transaction: no need to set wide slippage parameters nor gas limits. Unlike Ethereum that provides little to no instructions to newcomers, Avalanche deliberately guides users, providing a successful launch into the Avalanche ecosystem.
Avalanche has emerged as a clear Ethereum competitor and has strategically deployed capital to win developers and users. With EVM compatibility and cost scalability, Avalanche is directly tapping into Ethereum’s network effects to bootstrap their own network. The Avalanche story is not yet complete, but the momentum is high, and the Avalanche value proposition narrative is starting to achieve mainstream adoption.
Thank you for reading my first Substack article! Look out for Avalanche Part 2 and my thoughts on other crypto projects in the coming weeks.
Disclaimer: I hold a position in Avalanche, which I use as a learning tool to explore the AVAX ecosystem. This is not investment advice.
Thanks Dice - interesting read and shows the power of frictionless onboarding especially for projects like Avalanche to build community and growth
Great overview- AVAX Definitley better for the users than ETH, dont have to be a whale to swim in this pond!