Nansen's Avalanche Quarterly Report

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 be a network operating within another network or a network built on top of a larger network. Avalanche's Subnet architecture offers fast finality, custom Virtual Machine support, and a wide range of configuration parameters to builders.

In Q3 2023, various partnerships, deployments, and initiatives across DeFi, NFTs, gaming, and enterprise sectors have enriched Avalanche’s ecosystem, demonstrating a blend of traditional and decentralized finance, gaming innovations, and enterprise blockchain solutions.

Key Developments: Q3 2023

RedStone partnered with Avalanche Evergreen to facilitate institutional engagement with decentralized protocols through customized data feeds on the Avalanche Spruce Testnet. Avalanche's Evergreen Subnets offer specialized blockchain deployments, blending public network advantages with enterprise features, including KYC management. The Spruce Testnet provides a secure environment for traditional financial institutions to explore blockchain and DeFi applications, bridging the gap between traditional and decentralized finance.
The Avalanche Foundation has launched "Avalanche Vista," allocating up to $50M for purchasing tokenized assets on its blockchain to underscore the value of asset tokenization and promote its role in on-chain finance. The initiative will encompass various asset types, aiming to demonstrate the efficiencies of blockchain in traditionally manual financial processes and to navigate challenges in private market investing by utilizing on-chain asset issuance and administration.
The Avalanche Foundation has teamed up with Sigma Prime to bolster the stability and security of its AvalancheGo codebase. Sigma Prime, known for its extensive expertise in blockchain security and developing the Ethereum consensus client Lighthouse, is creating fuzzers to identify and address potential bugs in AvalancheGo, enhancing network reliability and assuring users and developers of its stability.
Movement Labs raised $3.4 million in pre-seed funding to expand the development and adoption of Move, a smart contract language, and has launched the Movement SDK and M1, a scalable blockchain integrated with Avalanche consensus. The funding aims to enhance Move's security and scalability in smart contract development, offering a solution to common blockchain issues like reentrancy attacks while providing a community-focused blockchain through M1.
Ava Labs unveiled a new C-Chain explorer, consolidating all Avalanche Primary Network chains (P, X and C chains) into the Avalanche Subnet Explorer hub. This platform enhances Avalanche's transparency by offering a comprehensive view of both real-time and historical blockchain data. The C-Chain explorer provides various advanced features and search options, including coordinated transaction information with other chains, staking and delegating details, atomic transaction specifics, and access to Glacier API and Metrics API, among others.
Avalanche launched the Avalanche Academy to educate developers on creating cutting-edge blockchain applications. It offers extensive courses on Avalanche basics, EVM adjustments, Subnet structures, and development tools. Graduates receive certificates upon completing the courses.
The Avalanche Foundation has introduced the 'Ted Yin' Grant Program to support and finance open-source projects utilizing the Avalanche public blockchain. This initiative honors computer scientist Ted Yin for his significant contributions to the Avalanche community.
Ava Labs introduced Firewood, a cutting-edge database designed in Rust for optimized storage of Merkleized blockchain state. Addressing the primary bottleneck of efficient state management for blockchain scalability, Firewood offers a specialized storage stack, surpassing generic key-value stores like LevelDB/RocksDB. Designed for efficient Merkleized blockchain state storage, Firewood promises enhanced scalability across the Avalanche Network, with ongoing development inviting contributions for its advancement.

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 Q3 2023, there were many exciting updates from Avalanche ecosystem projects and protocols, notably:

DeFi

With LayerZero enabling interoperability between Ethereum and Avalanche, Uniswap expanded to the Avalanche C-Chain, enhancing its DEX ecosystem. The move brings Uniswap's significant trading volume and innovative concentrated liquidity model to Avalanche, offering new opportunities for liquidity providers and traders within the platform's growing DeFi space.
Balancer deployed on Avalanche, aiming to enhance liquid staking growth and expand DeFi opportunities by collaborating with four Avalanche Liquid Staked Token (LST) protocols. Utilizing its innovative Composable Stable Pools and Boosted Pools, Balancer intends to efficiently manage yield-bearing tokens and combine liquidity pools with yield markets, thereby optimizing the DeFi tech stack for participants on Avalanche.
Struct Finance launched on Avalanche C-Chain, providing interest vaults and diverse yield strategies. Aiming to democratize financial products, Struct boosts Avalanche's DeFi ecosystem. Liquidity Providers can choose between fixed and variable yields during different volatility phases.
GMX V2 Beta launched on Arbitrum and Avalanche, offering new features for traders, such as additional assets, multiple collateral types, faster execution, and low-fee swaps. Liquidity providers gain from isolated pools and enhanced balancing and swap incentives.
The Avalanche Foundation allocated up to $3 million in AVAX tokens to Dexalot, a decentralized exchange (DEX) on an Avalanche Subnet (Dexalot Subnet), to enhance its decentralized trading capabilities. The funding, part of the Avalanche Multiverse program, will be distributed over 12 months and is milestone-contingent.
Multiswap, developed by CavalRe, has launched on Avalanche, enabling users to swap numerous tokens in one transaction and create pools with any number of tokens. It allows liquidity providers to gain exposure to all pool assets, potentially earning yield from transaction fees, and resembling a decentralized ETF.
Cerchia, utilizing the Avalanche blockchain, has pioneered a direct peer-to-peer insurance risk trade, allowing an insurance buyer to secure storm loss protection directly from an institutional investor. This approach uses smart contracts for automated payouts and tokenized US Treasury bill ETFs from Backed as yield-generating collateral.

NFTs & Gaming

HUG and the Avalanche Foundation's Avaissance collaborated to highlight emerging artists through weekly art challenges and exposure at Korea Blockchain Week. Avaissance artists joined HUG's platform, connecting them with a global collector community.
Solert Games and Ava Labs partnered to create a new Avalanche Subnet, enhancing gaming with a blend of Web2 and Web3 features, and launching the mobile game, Legends at War. Utilizing its gas token, LAW, the Solert Subnet aims to provide a global platform for developers and an innovative gaming ecosystem where players can influence governance and strategy.
Rumble Kong League (RKL) chose Avalanche for its blockchain scaling, prioritizing user-friendly web3 gaming experiences. The transition to Avalanche will be gradual, ensuring a seamless player experience and focusing on in-game actions rather than technical aspects. While all future transactions and interactions will be on Avalanche, RKL aims to maintain inclusivity for various blockchain avatars and will center its mid to long-term objectives on the Avalanche network.
Neowiz, a notable Korean game publisher, joined forces with Avalanche Arcad3 to explore Web3 gaming through its Web3 arm, Intella X. The collaboration, announced at Avalanche House Seoul 2023, aimed to leverage Neowiz's gaming experience and Avalanche’s Web3 capabilities to enhance the Web3 gaming industry. With a focus on sharing Web3 game technology expertise, the partnership aspired to deliver top-tier Web3 games to users.
Hyperspace launched its NFT marketplace and launchpad on Avalanche, introducing features like real-time trading and analytics for NFT collectors. With plans for additional features and APIs in the future, the platform is also launching Dokyo, a notable mint, through its launchpad. This development marks a key step in Hyperspace's multichain journey and enhances the NFT ecosystem on Avalanche.
Dreamus has integrated the Avalanche blockchain into its popular ticketing app, OK Cashbag, to enhance the ticket-purchasing experience for its 21 million users. This move aims to address ticket scalping and counterfeiting issues in the Korean concert ticket industry. Avalanche-backed tickets, supported by a dedicated Avalanche Subnet, are now available for various events, and a blockchain-enhanced secondary marketplace is planned for future release.

Enterprise

Spanish healthcare REIT Manicipi S.A. aims to raise EUR 150m by issuing tokenized shares via Securitize. Securitize plans to commence trading in September and operate within a regulatory sandbox monitored by the Spanish CNMV. They are actively working towards acquiring securities licenses in Spain and the EU, aligning with the trend of on-chain real-world asset tokenization, as seen in initiatives like Avalanche's $50 million fund for tokenized asset issuers.
Loyalty Marketing partnered with PlayThink to bring its "Ponta" rewards program to the blockchain via Avalanche’s Subnet infrastructure, aiming to offer Web3 services to its nearly 100 million users by the end of 2023. The initiative will provide NFT issuance and distribution on a large scale, leveraging Avalanche for its smart contract capabilities and rapid transaction finality. The Subnet will facilitate user engagement in NFT-based rewards and activities without requiring them to acquire digital assets.

Nansen On-chain Data

Daily Transactions on C-Chain

Source: Daily Transactions on Avalanche C-Chain

In Q3 2023, the Avalanche C-Chain fluctuated in its daily transaction count, ranging between 136k and 504k transactions. It signifies a marginal decline from the previous quarter’s 200k to 550k daily transactions. Concurrently, the gas usage within the network also exhibited a similar trend, oscillating between 8.7k and 49k.

Daily Active Addresses on C-Chain

Source: Daily Active Addresses on Avalanche C-Chain

Throughout Q3 2023, Avalanche's C-Chain witnessed a peak of 86k daily active addresses, with the figures fluctuating between 27k and 86k. The network experienced a downward trend in user activity throughout the quarter. Comparatively, the daily active addresses in Q2 were between 22k and a high of 117k.

Average Daily Gas Paid (vs Ethereum)

Source: Average Daily Gas Paid on Ethereum vs Avalanche C-Chain

In Q3 2023, the average daily gas fee on Avalanche fluctuated between $0.04 and $0.17, presenting a stark contrast to Ethereum, where users encountered a more substantial gas fee ranging from $1.95 to a peak of $15. The sudden spike in gas fees may have been caused by a major liquidation event on August 18.

Top Entities by Users and Transactions on C-Chain

Source: Avalanche C-Chain's Top Entities by Users (data excludes unlabelled entities)

Source: Avalanche C-Chain's Top Entities by Transactions (data excludes unlabelled entities)

To gain insights into the dominant participants in Q3 2023, Avalanche's transaction and user activity spotlighted notable participants, as per Nansen's analytics. LayerZero dominated with 7.21m transactions, followed by Stargate and USDC, logging 2.14m and 1.67m transactions respectively. Stargate spearheaded user engagement with 696k users, while Tether and USDC followed closely with 693k and 531k users, respectively.

Closing Thoughts

Avalanche's Q3 2023 demonstrated a vibrant ecosystem, navigating through fluctuating transactional activities and maintaining lower gas fees relative to Ethereum. Strategic partnerships and innovations across various sectors, including DeFi, NFTs, and gaming, have enriched its network, while on-chain data reveals pivotal player dynamics and user engagement.

Moving forward, these insights and developments underscore Avalanche’s potential to further optimize its platform, enhance user experiences, and solidify its position in the blockchain arena, steering towards a future that seamlessly blends traditional and decentralized finance and technology ecosystems.