Avalanche (AVAX) recently announced that it had completed a $230 million private sale of its currency. It is up 1870% year to date, as of September 2021, and has been seeing some well-deserved media attention and is making headlines with its bullish run. What really has been causing this, and does it warrant our interest?
What is Avalanche?
Founded in 2018 by a Cornell University professor and Computer Scientist, Emin Gun Sirer, it went on to raise over 60 million Dollars after its main net went live in September 2020. Getting its name from a novel cryptocurrency consensus protocol called Avalanche, AVAX works differently compared to other tokens. Due to its unique protocol and massive speed, Avalanche can process about 4500 transactions per second while achieving finality within a second.
Contrary to other currencies, AVAX is used as a primary payment method for all transaction fees related to Avalanche, which are later burned from the supply of 720 million, 40% of which have gone to private investors. This process of burning transaction fees related AVAX has a massive impact on its Tokenomics, which shall be discussed later in the article. One of its most useful capabilities is that its subnet capabilities make it possible to run multiple different VMs at the same time.
Avalanche Rush and the DeFi expansion
One of many recent developments of the Avalanche ecosystem was the announcement of Avalanche Rush, a $180 million liquidity mining program launched with Aave and Curve in order to introduce more applications to its fast-growing ecosystem. Phase 1 of the Rush program will allow AVAX to be used as liquidity mining incentives for Aave and Curve users. A total fund of $27 million is allocated to fund this incentive program.
The program was designed with a goal to demonstrate the Avalanche foundation’s commitment to creating a more decentralized, accessible and cost-efficient ecosystem, and the evidence of the growth of DeFi on this network can be seen on the increasing TVL protocols such as Benqui and Pangolin.
Asset Migration facilitated by Ethereum bridge
Another major factor of Avalanche’s recent bullish run is the release of the Avalanche Bridge (AB) on the 29th of July 2021. This cross-chain bridging technology, as described by the Avalanche team, enables asset transfer between Avalanche and Ethereum networks.
Surprisingly enough, just 3 weeks after the announcement, Avalanche was successful in transferring close to $100 million in assets between these two networks as the users sought lower fees while carrying out their transactions.
This Avalanche Bridge is a newer and more efficient version of the previous version that was far more expensive. The new AB is estimated to be a whopping 5x cheaper than the previous bridge technology and promises to offer “a better user experience than any cross-blockchain bridges launched to date.”
If Ethereum doesn’t fix the issue of high transaction times and large fees in the near future, it is highly likely that assets and liquidity will continue to move to chains like AB with growing DeFi systems.
Transaction burning improves Avalanche’s Tokenomics
As mentioned earlier, the burning of AVAX tokens that are a part of the transaction fees is another major factor in its growing interest in the crypto world. Its very unique tokenomic design that includes a transaction fee burning protocol reduces the supply value of AVAX over time, increasing the value of the remaining tokens in circulation. This seems to be put in place purely to help the community.
By mid-2021, nearly 163,000 AVAX tokens had been burned as transaction fees. It seems like future updates are expected with Apricot phase three introducing C-chain dynamic fees, which will allow for the addition of a unique time based rolling window fee calculation.
With the surge in interest in NFTs and DeFi systems, investors, developers and stakeholders are all piqued at Avalanche’s network while the token’s value has soared over 247% in April. With a market cap of a whopping $13.9 billion, high visibility, lightning-quick processing times and low fees, it wouldn’t be surprising to see big gains for AVAX in the future.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.