Axelar is a proof-of-stake blockchain that allows developers to build apps on top of native cross-chain infrastructure, allowing projects to focus on developing the application layer. Early applications integrating Axelar include XDEFI, Kado, and Trust Wallet, and there are various native cross-chain DEXes such as Satellite and Squid. Circle also recently announced a partnership, focusing on composable cross-chain liquidity for USDC. Axelar have raised $100m to date from leading VCs such as Dragonfly and Polychain, and in December launched a $60m ecosystem funding program.
The key technology is Axelar’s General Message Passing (GMP), which allows a dapp to call a function on any connected chain. The function is called on the source chain, then verified by Axelar’s validator set and finally executed on the destination chain. On top of this sits Axelar’s Cross-Chain Transfer Protocol which is an application-level protocol allowing developers to connect dapps and perform cross-chain requests.
This uses API calls rather like GET/POST requests in HTTP, which can transfer assets cross-chain, update states if certain criteria are fulfilled and perform cross-chain requests between dapps.
This lends itself to a number of use cases beyond traditional token transfers, such as using liquidity across chain, e.g. using native ETH as collateral to borrow AVAX on another chain but without having to bridge the underlying ETH. Similarly, NFTs could be utilized across chain, either as ‘NFTfi,’ i.e. borrowing against NFTs, or say using in-game items on a native chain in other games.
To date there have been over 300k transactions and $1.8bn in total volume, and ~$100m in the last month. There are currently over 30 networks integrated, with the majority of volume across ETH-OSMO. Recent on-chain data is encouraging after a quiet Q4, with a significant pickup in daily transactions and daily active addresses since late January, with the recent Polygon integration driving much of this.
AXL token is used for governance, gas and staking. Gas is paid once and typically transactions cost ~$10-15 but the fee covers native chain gas, AXL gas/fees to validators and destination chain gas, which simplifies and abstract away complexity for the end users. Currently the fees to the AXL network are fairly limited, with the majority of the fees used to pay gas on the source and destination chains.
There are currently ~70 validators, which is in line with some of the larger Cosmos chains (Osmosis 150, RUNE ~80), though governance is determined by quadratic voting, which limits the governance power of single actors, or even a colluding group. Validators are subject to slashing fines, which are designed to prevent malicious actors and there are other safety measures such as using rate limits to cap transactions.
Fully diluted market cap is currently just over $700m, and vesting is relatively high with only ~16% of tokens currently in circulation. Delegators are able to earn ~20% from underlying fees and inflation, and there have been discussions around potentially burning the token at some point in future which could make the token deflationary.
Axelar is one of the first movers in the cross-chain infrastructure space, and as a blockchain the approach offers superior security versus pairwise bridges using a multisig approach. As the number of integrations grows, the value of the Axelar network to developers also grows through network effects and we believe dapp proliferation and TVL growth should follow.
— For further market color or to trade with Cumberland, please email: rm@cumberland.io —
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