If you’ve ever managed to leave your mom's basement and spent some time in the mountains you may have learnt how the cycles of nature work. During the long cold winter, the snow accumulates on the mountainside. As spring creeps in and everything starts to warm up this snow begins plummeting down the hillside crushing everything in its path. You see where I’m going with this…
We have now entered crypto spring and it’s becoming clear to all involved that Avalanche season has arrived!
Up almost 400% from its crypto winter bottom, AVAX is gathering steam and gaining attention. From its early days of being just another layer 1 “ETH killer” that would never amount to much, it is now becoming clear that Avalanche is paving its way across the crypto landscape and starting to find its market share.
So what makes Avalanche special?
For those new to the Avalanche ecosystem, the low-level overview is it’s an open-source platform for building decentralized applications. What separates Avalanche from its competitors is its almost instant transaction finality, high degree of security, and its scalable nature via the use of subnets.
To get slightly more technical, Avalanche is a heterogeneous blockchain network that enables the creation of separate chains for different applications to build on top of.
There are three main chains on the primary network. First is the contract chain (C-chain) where the execution of smart contracts takes place. Then we have the platform chain (P-chain) that covers all the platform-level operations like staking, creation of new subnets, and so on.
Finally, we have the exchange chain (X-chain) that is responsible for the digital smart assets called Avalanche Native Tokens such as $AVAX.
Subnets, what’s the deal?
What really makes Avalanche special is its use of subnets. These subnets allow for ultimate scalability of the Avalanche ecosystem without sacrificing speed or security. A subnet can be thought of as an independent network of its own, it can define its own token economics, fees, and rules using virtual machines.
Because these subnets operate independently, the performance, or lack of, on one subnet will not affect other subnets in the ecosystem. This means if there is a major event like a large NFT mint happening on one subnet causing congestion, this will not make any difference to the performance of other subnets. Starting to see the advantages yet?
Each subnet can also decide its rules around validators to guarantee optimal performance. Things like the location of validators, specific license requirements, and more can be baked into the cake to make sure there are no dodgy validators to cause disruptive issues.
Anyone with enough brain power can create their own subnet, set the rules they want, launch a native token, and add value to the Avalanche ecosystem. This is done using the Subnet-EVM, which implements the Ethereum Virtual Machine, supports Solidity smart contracts, and pretty much all other Ethereum functionality.
Avalanche's edge in the competitive landscape
There is an overarching issue in the crypto world right now and that is liquidity fragmentation. We have a ridiculous amount of general-purpose ecosystems in the form of layer 2s, so much so that it's hard for a degen to know what to throw his money at, let alone a developer wanting to build something new.
This over-saturation of jack-of-all, master of none L2 ecosystems is pulling liquidity away from the more expensive-to-use Ethereum mainnet and spreading it thinly across a million different Dapps. Not only is this negative for the price of said dapps and the L2s themselves but is also being reflected in Ethereum's lacklustre performance over the past months.
What makes Avalanche different is its design and the use of subnets. This gives it a very different look than that of Ethereum. When building out a subnet, the Avalanche C-chain remains the central point of liquidity and the one general purpose point of the ecosystem while the subnets themselves are application-specific and can communicate with each other for ultimate interoperability. This means that we see less value escape occurring on the main network.
This subject was beautifully covered in this episode of the Still Early Podcast by Avalanche’s head of all things DeFi, Luigi D’Onorio Demeo. If you aren’t a frequent listener of Still Early then you are doing yourself a real disservice, as we have covered some real hot topics within the Avalanche ecosystem with much more to come.
Alright, enough about the tech… The real question is how does a simple ape benefit from all this?
Hot Narratives on Avalanche
There are a few very strong narratives taking form in the Avalanche ecosystem that should definitely be on your radar.
The first of these is GameFi.
Gone are the days of gamified DEXs like DeFi Kingdoms (although how good is logging back on to listen to that theme music…. Ahhh the nostalgia). The crypto gaming scene is getting serious and the projects launching are really impressive even when compared to the traditional gaming sector.
The play-to-earn aspect of crypto gaming makes the hours spent grinding it out in your favorite gaming world actually worth your time. No more being told to turn off the console when you're making more than your family's household income shooting bad guys in a virtual world.
The global gaming industry is worth hundreds of billions and is constantly growing. If crypto gaming platforms like Avalanche can capture even a small percentage of overall gaming revenues then the potential will be huge. The key to doing this will be building games that people want to play.
So what are these gaming projects?
To start with we have Shrapnel. These guys have built the first AAA game on the Avalanche chain and could easily become a multi-billion dollar franchise with their awesome graphics and exciting gameplay.
The Shrapnel team is full of experience with ex-employees of companies like Microsoft and Sega, many have also been involved in mega gaming franchises like Madden and Star Wars. When we look at the revenues that cult games like Counter-Strike bring in every year the potential of Shrapnel becomes crystal clear.
Another project to look out for is DomiOnline. Domi is a multi-player online RPG game where players can infinitely upgrade their characters and fight it out for supreme domination. The team at Domi are also not new to the world of gaming with projects like Runescape, League of Legends, and Power Rangers in their list of previous successes.
The gaming sector on Avalanche looks to continue to grow at a rapid pace and all this innovation will drive value back to the Avalanche ecosystem as a whole. To keep tabs on all the latest in gaming excitement, check out gamingonavax.com.
For the latest alpha on another up-and-coming gaming gem, jump in on the latest Still Early episode with Theodore Agranat from Gunzilla Games who are helping build out the next AAA masterpiece called Off The Grid here.
The next highly discussed Avalanche narrative is Real World Assets (RWAs).
The idea behind this is a simple one, take asset classes that currently only exist off-chain and bring them on-chain. This has many advantages such as fractional ownership, ease of transfer between parties, and access to assets that were previously unavailable to most.
Companies like Republic Note offer access to private equity portfolios that retail normies like ourselves wouldn’t have been able to get our hands on in the past.
Other big names such as Citi Group are also getting involved and are building blockchain-based institutional-grade solutions on the Avalanche blockchain.
Funnily enough, even the man who recently claimed to want to kill crypto off, Jamie Dimon, is getting involved in the RWA sector. JP Morgan has launched their Evergreen subnet on Avalanche which facilitates subscriptions and redemptions for funds offered by Wisdom Tree Prime.
This platform named “Onyx” is a digital asset tokenization protocol that enables financial institutions to unlock utility for their financial assets. This will enable the big dogs to do things like use their financial assets as collateral against intraday financing and post them as margin without making market moves. What a bloody hypocrite, eh!
Another hot sector on the Avalanche blockchain is NFTs.
Yes, it appears that jpegs are back on the menu and volumes on Avalanche are certainly proving this point. When we think about the future of the NFT in relation to the previous narrative of RWAs things start to get a lot more interesting. NFTs, like the rest of the crypto world, are still in their infancy and maybe this cross-section of RWAs in NFT form will be the final use case for on-chain jpegs. Think of collectors items like baseball cards, or collections of other valuable assets that could be bundled together in NFT form and then used as collateral for loans and other financial products. Use cases galore!
On Avalanche there is one NFT project that has been stealing the show and in late November became the most traded NFT collection on any blockchain. We are talking, of course, about the Japanese-inspired NFT project Dokyo. Dokyo’s floor price currently sits at 45 AVAX, which is pretty impressive considering the NFT scene has been pretty silent of late.
Once again we got you covered in this episode of Still Early where Dominic Carbonaro, Avalanche’s head of NFTs, gives the alpha on all things Avalanche artwork. If you aren’t already catching on to the fact that being a regular listener of Still Early is an edge of its own then there is probably no hope left for you.
Of course, you can’t end a discussion on hot narratives without talking about memecoins.
Just like every other chain, Avalanche has its fair share of memecoins. Of course, every chain needs its own dog coin, and Avalanche has $HUSKY. Currently, at a marketcap of $5.2 million, don’t be surprised if this dog has its day.
Apart from the dog coins, we have other animals. Ethereum had the frog $PEPE but Avalanche has chosen the chicken as their animal of choice with $COQ. Over a 10-day period, it has gone up 12,700% and now sits at a handsome marketcap of $144M. The people seem to love the $COQ.
The future of Avalanche
A major focus that continues to surface time and time again within Avalanche is onboarding the masses that are not already deep in the crypto weeds. The core team is heavily focused on providing products that will appeal to the average user and will help drive value to the ecosystem by their sheer numbers, not necessarily the capital they have.
If we look a little more objectively at the narratives covered in this article we start to see a big picture take form. GameFi, RWAs, and NFTs all have aspects that symbiotically benefit each other and maybe this is the way Avalanche carves out its niche in the highly competitive crypto landscape.
A testament to the strategy working can be seen by their recent success with network activity going through the roof. Gas fees reached levels that we are used to seeing on Ethereum Mainnet, but with that, we have seen a ridiculous amount of AVAX get burned. Could AVAX become the next deflationary coin this market sees?
Avalanche aims to be a chain of chains and believes the future of crypto will be a multi-chain world. These guys never stopped building throughout the entire bear market and it is great to see all the hard work starting to pay off.
Red coin definitely = good coin.