Avalanche (AVAX) Could Provide Economically Sustainable Ecosystem for DeFi, Gaming: Report

Avalanche is one of the “most promising” L1 protocols in the general crypto ecosystem, according to an update from its community of developers and contributors.

It was created in 2020 by Ava Labs and has since “become a popular choice for DeFi developers due to its high transaction throughput and low transaction fees.”

According to its supporters, 2022 was “a great year in terms of developments and experiences.”

The protocol “saw great [adoption] rates and increased user base while new protocols are continuing to emerge.”

As noted in a blog post, Avalanche saw “an emerging ecosystem under its umbrella in 2022.”

There were several projects “launched on Avalanche that made a huge impact on the ecosystem.” Thanks to these projects, the team witnessed “an innovation hub under the Avalanche DeFi ecosystem.” On the other hand, even though there are several promising gaming and NFT projects under Avalanche, we are still “yet to see massive adaption in these sectors.”

Trader Joe, BENQI, Platypus, Avascan, Avalaunch, Pangolin, GMX, Degis, Hashflow, Yield Yak, Vector Finance, and Colony “made great contributions to the ecosystem.”

It should be noted that Trader Joe “leads the whole ecosystem in terms of innovation, attraction, and community.” Their existence in the ecosystem is “a huge boost for the Avalanche protocol.”

On the other hand, there “are also several DeFi projects ready to make a huge impact in the ecosystem such as Savvy DeFi, DeltaPrime, CIAN Protocol, Enclave Markets, Steakhut Finance, Dexalot, and Hubble Exchange.”

The supporters of Avalanche also noted that it is clear “that in the near future we can see more native projects like Trader Joe and Pangolin becoming multichain.”

It is a good development for the respective projects, and it “can be beneficial for Avalanche if these projects also attract users to the AVAX ecosystem.” However, this trend can also be dangerous “for the future of Avalanche.”

Avalanche’s share of TVL in the whole ecosystem “decreased from around 6% to 2% last year due to the rise of L2 protocols.” Even though TVL is an old concept and does not capture the whole picture, it is still “an important parameter to consider.”

The reason for this fall “can be the lack of gaming and NFT ecosystem on the Avalanche.”

Unfortunately, the Avalanche ecosystem is also “affected by the LUNA crash and 3AC bankruptcy as there was major FUD around the ecosystem.”

Throughout the year, “due to the intensification of the bear market, daily active users in the ecosystem have dropped significantly while daily transactions growth [slowed] which is a great sign for future growth.”

Moreover, the number of unique contracts “deployed skyrocketed last year which also proves that developers believe in Avalanche.”

During 2022, the ecosystem has “reached 500 million transactions while 2 million AVAX has been burned.”

As mentioned in a blog post, Avalanche “has one of the best DeFi ecosystems in the general crypto ecosystem.”

With the rise of several projects, we “see real adoption in the DeFi space.”

As noted by its developers:

“I believe that one of the main reasons for this is the leadership’s vision for the future of Avalanche which is to beat Wall Street. That means Avalanche aims to be a competitor of Wall Street, not other L1 protocols, thus, making DeFi a focus point for the Avalanche leadership.”

With Avalanche Rush programs, several projects “joined the Avalanche ecosystem and native projects have emerged.”

Avalanche has “a wide range of DeFi products across the ecosystem such as revolutionizing AMMs, FEX, CLOB, liquid staking, perpetuals, incubation protocols, indexing, insurance, undercollateralized lending, non-liquidating lending, DeFi automation tools, yield aggregators, launchpads, and many more.”

The developers added:

“I believe that at this point Avalanche DeFi ecosystem is superior to all of its counterparts except for Ethereum. However, the main potential of the Avalanche DeFi ecosystem is that it can thrive exponentially under the regulations compared to other chains as Avalanche’s unique subnet technology allow permissioned dapp specific chains so that institutions who want to utilize blockchain technology while following the regulations can easily adapt.”

They also mentioned:

“However, on the other hand, Avalanche needs to attract more option protocols to have a complete DeFi ecosystem. Moreover, the one of the main points to consider for the Ava Labs team should be on keeping native projects happy and satisfied as until this point, some of the protocols have been helpful to the success of Avalanche, so without them, this success may not be long-term/sustainable.”

According to the update, gaming is “one of the key areas in which crypto can attract millions of people.”

However, until now, the general ecosystem “could not develop solid and sustainable projects. One of the major problems regarding crypto gaming is high transaction fees.”

But thanks to subnet technology, gaming projects “will have lower costs and also can use their tokens as gas fees.”

Thus, Avalanche “creates an economically sustainable playing experience for gamers and a revenue stream for projects.”

For more details on this update, check here.

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