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Irene Leeet al 1
Research Analyst/
Xangle
Jan 19, 2024

Table of Contents

1. Project Overview

2. 4Q23 Highlights

2-1. Major Events & Updates

2-2. Key Metrics

3. On-chain Performance

3-1. Performance

3-2. Network Activity

3-3. Network Security

3-4. Development Activity

4. Governance, Partnerships & Key Updates

4-1. Governance (ACP)

4-2. Partnerships

4-3. Events and Features

4-4. Key Projects

5. Recap

 

 

 

 

1. Project Overview

Avalanche is a layer 1 blockchain that offers "subnets," which are customizable blockchains. Subnets are independent networks within the Avalanche ecosystem that can have their own token economy, rules, and validators. Avalanche's main network consists of P-Chain, X-Chain, and C-Chain and uses the Snowman consensus algorithm.

2. 4Q23 Highlights

2-1. Major events & updates

Top-down adoption starting with large corporations

  • JPMorgan announces proof of concept for innovating asset and asset management using Avalanche’s Evergreen Subnet through Project Guardian's Onyx project
  • Citi announces it has leveraged the Evergreen Subnet as part of Project Guardian to experiment with foreign exchange (FX) trading and develop an Avalanche-based FX solution.
  • SK Planet's subnet UPTN surpassed 200,000 subscribers as of November and partnered with the famous e-sports team T1.

Ecosystem expansion continues: DeFi growth and ecosystem projects increase

  • Lido wstETX support with LayerZero bridge
  • VNX to support stablecoins pegged to European regional currencies, including the Euro and Swiss Franc
  • Hubble Exchange to launch order book-based DEX
  • Web3 platform Inspect launches support for Avalanche-based NFTs
  • Web3 game studio Mirai Labs announces migration to the Avalanche subnet

4Q key events

  • Avalanche Community Proposal (ACP) proposed
  • AvaCloud supports thirdweb to easily build subnet-based products
  • Snowtrace goes multi-chain, adding feature to expand exploring range from a single C-Chain to multi-chain

2-2. Key metrics


3. On-chain Performance

3-1. Performance


Avalanche achieved a balance sheet turnaround in 4Q with $55.2M in revenue and $20.07M in net income. This was largely due to a significant increase in network activity, including a significant increase in the number of network transactions and new addresses in 4Q.

3-2. Network activity


The average number of transactions on Avalanche C-Chain increased significantly in 4Q, reaching 1.5M, a 450% increase from the previous quarter. In particular, on November 22, the number of daily transactions on C-Chain reached a record high of 6.3 million, mainly due to the increase in inscription transactions based on Avalanche ASC-20 tokens due to the popularity of Bitcoin Ordinals, the increase in trading volume of meme coins such as $COQ, and the increase in token prices of DeFi protocols. On the other hand, the average number of active addresses in 4Q was about 44.3K, down about 15% QoQ, indicating a sluggish influx of new users. Meanwhile, the total number of subnets reached 100 as of 4Q23.

 

Avalanche TVL continued to decline through the last three quarters, but like the network activity trend, it increased significantly in the fourth quarter, reaching $1B by the end of December. This was due to the increase in the price of $AVAX, as well as liquid staking protocol Benqi's token $BI, Trader Joe's token $JOE, and meme coin Coq Inu ($COQ).

3-3. Network security


As of January 5, 2024, Avalanche had a total of 1,617 validators, of which the percentage of validators participating in subnet validation was approximately 14%. The amount of $AVAX staked on Avalanche is 260.54M, representing 59.95% of the total supply. Since Avalanche requires 5 validators to stake at least 2,000 AVAX on the network to validate a subnet, the amount staked increases as the number of subnets increases, which in turn increases the security of the entire network.

3-3. Development activity


Avalanche's development activity saw a noticeable increase in 4Q. The number of smart contracts deployed in 4Q23 totaled 31.4K, a whopping 217% increase QoQ. The number of quarterly commits has also been steadily increasing, indicating that the protocol's ongoing updates are improving its functionality. In fact, the CEO of Ava Labs has stated on X that they are optimizing AvalancheGo to reduce block processing time by up to 90-95% and advance the network with improved libraries and cross-chain communication protocols.

4. Governance, Partnerships & Key Updates

4-1. Governance (ACP)


In the fourth quarter, Avalanche introduced Avalanche Community Proposal (ACP). ACPs are initiated and merged through the GitHub repository, and anyone can propose an ACP. They are categorized into three tracks: standards track, best practices track, and meta track, each of which proposes network interoperability, design patterns for integration, and process changes or new ways of collaboration. The Avalanche Foundation can recommend specific ACPs, but final adoption is up to community members.

4-2. Partnerships

Some key events that are worth mentioning in 4Q include the following:

JPMorgan


JPMorgan's Onyx and Apollo Global have joined the Monetary Authority of Singapore's (MAS) DeFi pilot project, Project Guardian, as part of which JPMorgan recently announced a proof of concept (PoC) for asset and asset management innovation utilizing Avalanche's Evergreen Subnet. The PoC demonstrates a new approach to automating portfolio management and integrating liquid and alternative assets through blockchain technology.

The Evergreen Subnet used is a customized blockchain designed to reflect the specific needs of institutions/enterprises and industry-wide considerations, enabling clients to leverage blockchain features optimized for their services. This provides the benefits of public network development, innovation, and self-integration, while enabling embedded blockchain-level functionality only available on enterprise blockchains. Since the partnership was announced, Avalanche has seen a significant increase in token price.

Citi


Citi Group announced that it has tested foreign exchange (FX) trading utilizing Avalanche's Evergreen subnet. The test was conducted as part of Project Guardian, an RWA development assignment by the Monetary Authority of Singapore (MAS), and primarily targeted spot FX trading contracts for USD/SGD. Citi revealed it is exploring blockchain-based trading solutions that consider transparency, capital efficiency, auditability, and security. Avalanche's speed, scalability, and customization capabilities played a key role in the test, which is seen as an important example of the adoption and innovation of blockchain technology in the financial industry.

In the DeFi space, cross-chain messaging protocol LayerZero will use Lido's wstETH on Avalanche with a bridge, while VNX will support stablecoins based on European regional currencies such as the euro and Swiss franc. Meanwhile, Hubble Exchange announced that it will expand its order book-based DEX to Avalanche.

In addition, Inspect, a Web3 platform that connects social network communities and NFT projects, will support Avalanche-based NFTs, and Mirai Labs, a Web3 game studio, announced its migration from Polygon to the Avalanche subnet, adding multi-chain support and ecosystem migration to Avalanche.

4-3. Supported events and features

AvaCloud supports thirdweb for easier building of subnet-based products

The greatest challenge in launching a new product is the lack of development tools and infrastructure. Thirdweb has greatly improved the ease of development for developers by providing tools and SDKs that make it easy to build and deploy blockchain products. With AvaCloud's support for thirdweb, developers will be able to easily create Avalanche-based products based on Avalanche's high performance and simple development tools.

SnowTrace.io moves to Snowtrace Multichain

Avalanche recently moved Snowtrace, the Avalanche block explorer, to a Routescan-based multichain explorer. The system enables Teleport, a cross-subnet communication protocol, and expands the scope of exploration from a single C-Chain to a multi-chain exploration, allowing users to look up tokens, transactions, and data points. The new Snowtrace will add new features such as Web3-based user account management and .avax domain lookup. Developers can continue to use their existing API endpoints, and the Avascan team is helping to ensure the smooth transition of existing data.

4-4. Key projects within ecosystem

UPTN

UPTN is a Web3 service that aims to increase the versatility of OK Cashbag points and improve profitability, and will launch various services, starting with Road to Rich, to incorporate blockchain into real life. Unlike the PFP project, Road to Rich generates 1) transaction fees in the process of users applying/removing TEM NFTs on Racky, and 2) active secondary transactions in order to acquire desire TEM NFTs. This means, it is less affected by the crypto market conditions, resulting in 1) relatively low revenue volatility and 2) a structure that is favorable for profitability defense.

Shrapnel

Shrapnel is an FPS game built using Unreal Engine 5 and is one of the most anticipated games in the Avalanche ecosystem, with developers from popular games such as HALO, Call of Duty, and Westworld, as well as funding from leading VCs such as Polychain Capital and Dragonfly Capital. Shrapnel is set on Earth in 2044, where players will be able to extract resources and fight in-game battles, while also creating content through an NFT economy system. The team behind Shrapnel said they chose the subnet because of its strengths in customization and security. Shrapnel is expected to launch in 2024.

Off The Grid

Off the Grid is a cyberpunk-based battle royale game being developed by AAA game studio Gunzilla Games. Off The Grid will be integrated into the GUNZ platform, which is based on the Avalanche subnet, to provide an NFT-based digital economy where players have full ownership. Through its partnership with Ava Labs, Gunzilla Games said it aims to "leverage the high scalability and security of the Avalanche Subnet to provide the best possible gaming experience."

DeFi Kingdoms (DFK)

DeFi Kingdoms, a P2E game originally launched on the Harmony chain, began building and supporting the Avalanche subnet with the launch of Crystalvale. As a subnet of DeFi Kingdoms, the DFK chain is the most active of all subnets.

Dexalot

Dexalot is Avalanche's first Central Limit Order Book (CLOB) DEX, which aims to minimize the risk of slippage or custody. It's backed by the Avalanche Multiverse program in exchange for achieving subnet milestones, and launched its subnet in February of this year. Meanwhile, Dexalot has achieved 25 million transactions in just nine months since launch.

Beam

Merit Circle DAO has launched the gaming project Beam using the Avalanche subnet. The Beam subnet operates independently and provides customized services for both gamers and game developers. Beam is using Merit Circle DAO's token ($MC) as its gas and the DAO's governance token. The project offers a variety of games and infrastructure products, and will initially include games such as Trial Xtreme, Walker World, Hash Rush, and more.

5. Recap

Avalanche achieved significant growth in 4Q 2023. Global giants such as JPMorgan and Citi announced subnet launches, and the SK Planet-led UPTN project showed good performance. High-profile gaming projects such as Shrapnel and Off the Grid are nearing launches, and the total number of subnets has surpassed 100. Amidst all this excitement, Avalanche recorded a record 6.3 million transactions in 4Q, with a 162% increase in net profit. 

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