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How Avalanche is reimagining DeFi

It’s not the first time that the native token of the Avalanche blockchain has encountered wild fluctuations. In February, AVAX shot as high as $60 only to reach a nadir in June–July. But after bottoming at $9.34, AVAX is now beyond $60 and is currently trading at $76. This has earned it a spot in the top 20 cryptocurrencies by market capitalization with $16 billion, according to Cointelegraph Markets Pro. Avalanche is among the layer-one blockchains tagged as “Ethereum killers” that appear to have reduced the dominance of the top altcoin in terms of total locked value (TVL) lately. Of the $170 billion in TVL, Ethereum presently controls 67% based on data from Defi Llama. But while the number appears high, it’s actually much lower than February when it contained about 96% in TVL.

Background on Avalanche

Avalanche was developed by Cornell computer science associate professor Emin Gün Sirer and Ava Labs in 2018. The blockchain protocol boasts high throughputs and a swift finality time. In 2019, it received initial funding through the sale of 18 million AVAX tokens priced at $0.33 each, which amounted to nearly $6 million. The following year, an additional 24.9 million tokens were auctioned in a private sale, this time at $0.50 each, bringing in an extra $12 million in funding. In July 2020, Avalanche secured another $42 million through a public token sale. And on Sept. 16, 2021, Avalanche’s most recent funding bagged $230 million from various investors led by Polychain and Three Arrows Capital. This brings a total funding amount of $290 million for Avalanche despite its mainnet launch just celebrating its first anniversary.

How is Avalanche reimagining DeFi?

Avalanche is caught in the midst of intensifying layer-one competition, with the likes of Binance Smart Chain (BSC), Polkadot and Terra vying for a larger market share from their main competitor, Ethereum. And much like its counterparts, scalability for Avalanche is similarly crucial. Avalanche boasts 4,500 transactions per second (TPS) with less than a three-second finality. In contrast, Ethereum processes 15–30 transactions per second with over 1-minute finality. Moreover, transaction fees are a lot more desirable on Avalanche compared to Ethereum. Avalanche’s fees range from 75 nAVAX up to 225 nAVAX ($0.0000048 to $0.0000144 at the coin’s present value).

However, it takes more than lower costs and faster transactions to compete with the first-mover in Etheruem. Developers willing to build applications on Avalanche are necessary to foster adoption. In this regard, it’s clear how Ethereum has the upper hand with 2,585 listed decentralized applications (DApps). But despite it being only a year old in existence, Avalanche already has attracted 320 projects.

Source: Avax-Projects

Projects such as SushiSwap, Chainlink, Circle and The Graph have benefited from the smart contract infrastructure provided by Avalanche. Nonfungible tokens, or NFTs, have also found a home on Avalanche; for example, Topps, a sports-themed trading card company, has minted a Major League Baseball NFT collection on Avalanche called “Inception.” Topps has also partnered with the German football league Bundesliga, releasing video moments from the league in two available card packages — all as NFTs on the Avalanche blockchain. What’s more, the $230 million raised by Avalanche in 2021 will be earmarked to support this flourishing decentralized finance, or DeFi, ecosystem.