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Nansen's Avalanche Quarterly Report - Q1 2023
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Disclaimer: Nansen has produced the following report as part of its existing contract for services provided to Avalanche (the "Customer") at the time of publication. While Avalanche has the right to review and provide feedback to Nansen, Nansen maintains full editorial control over the publication of this report. All views expressed are the independent opinions of Nansen's research analyst(s) who are the author(s) named in this report. This report is intended for informational purposes only and does not serve as investment, financial, professional, or other advice. For more information, please refer to the disclaimer at the end of this report, as well as our Terms of Service.

Overview

Avalanche is a smart contract platform designed for scalability, with a multichain framework consisting of Subnets that scale the network. The primary network includes P, X, and C chains. The P-Chain manages validator and Subnet-level functions, the X-Chain manages Avalanche Native Tokens (which is a digital representation of real-world assets), and the popular C-chain is an implementation of the Ethereum Virtual Machine.

Subnets on Avalanche refer to a subset of nodes or validators that work together to achieve consensus on transactions related to one or multiple blockchains. A Subnet can either be a network that operates within another network or a network built on top of a larger network. Avalanche's Subnet architecture offers faster finality, custom Virtual Machine support, and a wide range of configuration parameters to builders.

In Q1 2023, the Avalanche network's C-Chain saw significant transaction activity due to USDC temporary de-pegging, with daily active addresses also increasing. Despite the surge, the average gas paid on Avalanche C-Chain was much lower than Ethereum. Ava Labs has launched various products, releases, and partnerships to push more user adoption into the web3 space.

Nansen's previous reports on Avalanche can be read here.

Key Developments: Q1 2023

  • Avalanche introduced the HyperSDK, a framework for building high-performance Virtual Machines from scratch on Avalanche, providing developers a foundation to build the fastest blockchains in the world.
  • The latest Avalanche Ledger and Ledger Live apps were launched this quarter, with a new design that focuses on getting users quickly to their desired action while keeping crypto assets secure. The update also improved the experience for signing P, C, and X-Chain transactions, validation and delegation, and connecting to Subnets.
  • Core, the wallet built by Ava Labs, had two releases this quarter:
    • The first release was Core iOS, Core Mobile Wallet for Apple iPhone users. With around ~27% market share in mobile operating systems, this release will reach wider audiences.
    • The second release was the Cross-Chain Transaction Signing feature. This innovative addition helped users sign transactions smoothly across multiple chains, including all EVM-compatible chains and Subnets, by eliminating the need to switch networks. With this, Core is significantly moving towards unifying the UX across different chains.
  • Avalanche launched the Glacier API in beta, providing developers with enriched blockchain data from Avalanche and Ethereum for explorer and wallet services, token transfers, and more. The Glacier API is the official API service that indexes Avalanche Subnets and powers the Avalanche Subnet Block Explorer and Core Wallet, providing balances, transfers, and associated metadata for native assets, ERC-20 tokens, and NFTs.

Ecosystem

Avalanche hosts a large ecosystem of dApps and protocols on its C-chain and Subnets, which users can explore on the Avalanche Ecosystem page. In Q1 2023, there were many exciting updates from Avalanche ecosystem projects and protocols, most notably:

DeFi

  • Dexalot Subnet went live this quarter after a few months of testing on the Fuji testnet. Following the fallout on FTX last quarter, users have been consistently moving towards using decentralized exchanges. Dexalot’s users can deposit and withdraw assets through the Dexalot app on the Avalanche C-chain, and then trade on the Dexalot Subnet, which offers reduced slippage in trade execution and security of user assets via decentralized custody.
  • Delta Prime, a highly anticipated DeFi dApp that aims to promote capital efficiency and simplify portfolio management.
  • Deepwaters, a new centralized exchange on Avalanche, aims to create a level playing field for all users by eliminating bots rife in DeFi, such as; front running, MEV, sandwich attacks, order internalization, reordering, or order flow privileges.
  • KuCoin Wallet integrated with Avalanche C-Chain, providing users with easy access to all Avalanche native assets on both mobile and PC platforms.

NFTs & Gaming

  • The Avalanche Foundation has launched Avaissance, a groundbreaking NFT initiative that showcases the work of a diverse group of artists. Avaissance includes two signature components: an Artist in Residence program (AIR) for 50+ artists, and the Mona Lisa Initiative (MLI), which is a digital art curation collaboration that will jump-start the next generation of Avalanche art. The initiative also incorporates charitable giving, as a portion of the proceeds from Avaissance NFT sales will go to various charities selected by the artists.
  • Shopify merchants can now use Avalanche NFTs through Venly, which allows them to design, mint, and sell NFTs with just a few clicks, expanding their offerings to customers.
  • BBVA, Mexico's largest financial institution, launched an NFT collection on Avalanche to celebrate its 90th anniversary, featuring designs inspired by Mexican traditions.
  • The Avalanche Park x Ed Balloon concert series was held on February 23 in Downtown Los Angeles with a performance at WisdomeLA, an entertainment park that offers immersive art experiences through geodesic domes with 360-degree projection capabilities. The concert featured artists such as Ed Balloon, JPEGMAFIA, Clipping., and Witch Prophet, showcasing raw, underground music culture. Attendees of the February 23 kickoff event received a free Avalanche Park NFT upon arrival.
  • Ready Player DAO, a Web3 gaming guild, made a major push into Avalanche gaming by creating content and deploying its own node to onboard more users into the world of Web3 gaming.
  • Rune Seeker announced its plan to build a next-generation strategy card game on Avalanche, offering players the ownership of their cards, alongside enjoying the game.
  • DOS Labs launched an Avalanche Subnet, that aims to create a rich ecosystem for players and game developers, with plans to support an exchange, asset management tools, and more.
  • Loco, an esports and live-streaming platform, raised $42 million to build a custom Avalanche Subnet, partnering with gaming publishers like Krafton, Activision Blizzard, and Riot Games.
  • Stardust added Avalanche C-Chain and Subnet compatibility to integrate NFTs into games seamlessly with just a few lines of code.
  • TSM and Blitz announced that it will leverage Avalanche to create a seamless user experience in purchasing, storing, and trading digital assets, as well as building its own Subnet.

Enterprise

  • AWS and Ava Labs partnered to help enterprises, institutions, and governments scale blockchain adoption. The collaboration aims to make it easier for customers to build and deploy blockchain applications using Avalanche while leveraging AWS's global infrastructure and services.
  • Tencent Cloud partnered with Ava Labs to support projects and developers in the Avalanche ecosystem. They will provide rapid node deployment and explore Avalanche Subnets for enterprises to accelerate the adoption of Web3 technologies across conventional businesses.
  • Intain Inc., a prominent platform for structured finance, introduced a marketplace for tokenized asset-backed securities called IntainMARKETS, which has been developed as an Avalanche Subnet. Through the Subnet, IntainMARKETS would be able to specifically address regulatory and other application-related requirements. The launch of IntainMARKETS would also improve investors' overall experience by delivering real-time transparency into every single loan backing an investment, as well as the ability to collect returns on a more timely basis.
  • Luxembourg-based digital securities platform, DEFYCA, planned to launch a protocol on the Avalanche public blockchain to provide market participants and DeFi protocols with access to real, securitized yield from the private debt market, which is typically reserved for institutional investors. The private debt market currently has a record $1.6T in assets under management. DEFYCA's protocol tokenizes traditional debt securities and loan portfolios, bridging institutional and decentralized finance to tackle volatility issues in on-chain finance and enable higher trading activity velocity in traditional markets.
  • Turkish EV manufacturer Togg, partnered with Ava Labs to develop smart contract-based services for autonomous mobility and improved vehicle functionality. The initiative aims to provide secure digital wallets, bank-level security, quick vehicle service history access, part tracking, carbon footprint, insurance claims, and more.

Upcoming Event

Ava Labs will hold Avalanche Summit II on May 3-5, 2023, in Barcelona. Avalanche Summit is a premier annual conference for Avalanche’s decentralized technology investors, enthusiasts, and builders. Participants can discover the newest updates and innovations on Avalanche and beyond, as well as network with fellow like-minded individuals who are shaping the future of Web3. The speakers at the event include Emir Gün Sirer (Founder and CEO, Ava Labs), Jeff Hasselman (AWS Global Head Web3 at Amazon), and Bryan Pellegrino (Co-Founder and CEO at LayerZero Labs).

Nansen On-chain Data

Daily Transactions on C-Chain

The daily transaction count on Avalanche C-Chain during Q1 2023 varied significantly, fluctuating between ~90k and 200k transactions, except for a peak on March 11. On that day, the transaction count surged to almost 290k, mainly driven by Trader Joe, USDC, and two unlabelled addresses.

The first address 0x4fb... was first funded on Ethereum by nathanw.eth, an MEV engineer, which indicated that this address might be an MEV Bot. The second address 0xbaa... was untraceable back to any entity, but it might be an MEV Bot as well. These two bots’ high activities suggest that multiple players took advantage of the market panic caused by USDC's momentary de-peg on that day.

The average gas paid followed a similar pattern to the transactions, except for January 1, where it surpassed 40,000 despite no significant increase in the number of transactions.

Daily Active Addresses on C-Chain

Based on what was seen on the Avalanche C-Chain’s daily transactions chart above, the daily active addresses also saw a spike on March 10 and 11, with over 120k active addresses on each day. It indicated a significant increase in the number of unique addresses transacting on the network during that time period, which could be attributed to the surge in transactions.

Average Daily Gas Paid (vs Ethereum)

In Q1 2023, the average daily gas paid on Avalanche C-Chain was significantly lower when compared with Ethereum. On Ethereum, the lowest daily gas paid was $2.43 on Jan 8, while the highest was $16 on Mar 11. Meanwhile, users on Avalanche C-Chain only paid between $0.07 to $0.32 for gas. Despite the sudden spike in transactions on both chains on Mar 11, the average gas paid on Avalanche C-Chain is still 76 times lower than Ethereum.

Top Entities by Users and Transactions on C-Chain

Nansen's list of labels provides a comprehensive way to analyze the top entity interactions on Avalanche based on the number of users and transactions. XEN Crypto remained the top entity for  the number of users this quarter, despite a 50% decrease in user counts compared to the previous quarter. On the other hand, Trader Joe consistently ranked at the top of the list for the number of transactions each quarter.

This suggests that while XEN Crypto may have more users, they may be engaging in fewer transactions, while Trader Joe was driving a high number of transactions from each user. By analyzing entity interactions in this way, we can gain insights into the behavior and trends of different entities on the Avalanche network.

Top Liquidity Pools on C-Chain

This quarter, the temporary de-pegging of USDC has caused a great deal of uncertainty in the cryptocurrency market. Fortunately, investors can use a variety of tools from Nansen to analyze token movements and make more informed investment decisions.

Using Nansen Query, for instance, one can see that the top liquidity pools in Avalanche are those that involve the native AVAX or Wrapped AVAX tokens, and stablecoins such as USDC or USDT. These pairs have generated the most volume and offer stable APY. For those interested in exploring further token movements, products like DeFi Paradise and Token God Mode can provide additional insights.

Closing Thoughts

Coming into 2023, Ava Labs continued building for the future and launched several products and innovations for users and developers such as Core Cross-Chain Transactions Signing and HyperSDK. It’s also planning for the 2nd annual Avalanche Summit in Barcelona to invite Web3 enthusiasts from around the world to connect in a 3-day conference.

Avalanche’s ecosystem also continued to build new products and launched partnerships, including AWS,  Tencent Cloud, Intain, DEFYCA and Shopify to promote blockchain adoption across various industries. It has also initiated Avaissance, which aims to spur Avalanche NFT growth and features artist residencies for 50+ digital creators.

USDC’s temporary de-peg caused a surge in transactions and active users on Avalanche, with Nansen’s suite of products, investors can make more informed investment decisions in events like this.

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Disclosure: The authors of this content and members of Nansen may be participating or invested in some of the protocols or tokens mentioned herein. The foregoing statement acts as a disclosure of potential conflicts of interest and is not a recommendation to purchase or invest in any token or participate in any protocol. Nansen does not recommend any particular course of action in relation to any token or protocol. The content herein is meant purely for educational and informational purposes only and should not be relied upon as financial, investment, legal, tax or any other professional or other advice. None of the content and information herein is presented to induce or to attempt to induce any reader or other person to buy, sell or hold any token or participate in any protocol or enter into, or offer to enter into, any agreement for or with a view to buying or selling any token or participating in any protocol. Statements made herein (including statements of opinion, if any) are wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader or any other person. Readers are strongly urged to exercise caution and have regard to their own personal needs and circumstances before making any decision to buy or sell any token or participate in any protocol. Observations and views expressed herein may be changed by Nansen at any time without notice. Nansen accepts no liability whatsoever for any losses or liabilities arising from the use of or reliance on any of this content.