Aug 29, 2021
Gas, Mining, Avalanches...
This week is a great example and indicator that NFT season is alive and well. OpenSea hit ATH daily trading volume, topping out at over $209M on Tuesday. This week is also a great example of why Ethereum is regularly non-viable for DeFi activities such as staking, trading, and yield farming. Gas price spiked to 640 Gwei at one point, averaging 84 Gwei over the past 24 hours and 92 Gwei over the past week. This is leaving many DeFi’ers begging for ETH 2.0 to come faster, and more importantly— investigating other DeFi-centric blockchains where transactions are cheaper.
Who is Benefitting?
Other blockchains. Namely, Avalanche (AVAX), branded as, “The fastest smart contracts platform in the blockchain industry, as measured by time-to-finality, and has the most validators securing its activity of any proof-of-stake protocol.” Over the past month AVAX has seen a 300% price increase, the bulk of which occurred in just the last two weeks.
How Do We Know This is DeFi?
Although it is fortuitous for Avalanche that Gwei has been soaring, the timing is not coincidental. On August 18th the Avalanche Foundation announced Avalanche Rush, a $180M liquidity mining program focused on bringing new DeFi applications and assets to the Avalanche network. The program announcement was headlined by Aave and Curve launching on the network, and quickly added SushiSwap to the movement just six days later. Not only did this push the price to ATHs, it ushered in a mass migration of DeFi capital.
That’s over a 600% gain in volume for the blockchain. It’s safe to say that the first phase of the Avalanche Rush initiative was a resounding success.
Why Avalanche?
With the ability to handle > 4500 tps and < 2 seconds transaction finality, Avalanche certainly has a large performance edge over Ethereum which exhibits 14 tps and 6 minute transaction finality. What separates the network from other blockchains that boast lightning fast speeds is the fact that Avalanche positioned itself to be easily migrated to from Ethereum. Avalanche is compatible with the Ethereum Virtual Machine, which reduces the friction in terms of cost and effort for blue-chip DeFi giants like Aave launch on the network. Additionally, the compatibility with Metamask brings the retail user base along with it. Metamask is the most popular Ethereum wallet, and therefore most Web3 users have one and are comfortable using it. Those who went to Polygon during the last gas war are even more familiar with this process. Competing blockchains like Polkadot and Cosmos have these barriers to entry working against them currently.
Everyone Wins
Along with the starlet, the supporting actors saw significant returns at the box office in both TVL and new users.
Aave gained almost $2B in TVL in the first 48 hours from the announcement, sustaining $500M of the growth to-date. Curve experienced a similar growth pattern, gaining nearly $800M in TVL and sustaining $660M of the growth to-date.
SushiSwap also saw great metrics resulting from their announcement to join the liquidity mining program. Initially signaled on Twitter by Co-Founder 0xMaki on 8/21:
In a near instant, the AMM saw an ATH in new users, both per week and in one day (3,001 and 20,998, respectively).
The amount of synergy the event created for everyone involved is impressive. Native DeFi protocols to the Avalanche blockchain saw a trickle-down effect in the week following as well.
Community-driven DEX Pangolin hit ATH trading volume, topping out at almost $179M in daily volume on 8/24 and $1.23B on the week.
NFTs Set the Stage
All the buzz is about NFTs in the Ethereum ecosystem. While NFTs play a pivotal role in the development and utility of Web3, they’ve congested the juggernaut of DeFi blockchains as of late.
The topic of congestion was tactfully political when commented on by the head of Curve in the Avalanche announcement:
“As DeFi becomes more and more popular, it becomes clear that Ethereum blockchain is currently struggling to fit all the activity. Thus, it is important to expand to other chains and L2s. We find Avalanche offering an excellent opportunity with its unique decentralized consensus mechanism, high throughput and low transaction fees,” said Michael Egorov, Chief Executive Officer at Curve Finance.
It’s more than DeFi driving the need for new frontiers though. The overall impact NFTs have had on the Ethereum blockchain are massive, accounting for the majority of all ETH burned.
The top 10 ETH burners account for 50% of all ETH burned ever, and when categorized are very telling.
What was seen this past week was that of a winning formula: A DeFi-focused, EVM compatible, Layer 1 solution launching a liquidity mining program amidst a gas surge brought on by a red hot NFT season.
What Now?
It appears Ethereum is in a holding pattern until the merge, opening the door for competitors to acquire userbase and the capital that comes along with it. By reducing the friction for developers and consumers to come on board, Avalanche has facilitated just that — an avalanche of adoption.
Are you a yield farmer? Liquidity miner? Looking to get involved in your first DeFi venture? Getting on the Avalanche blockchain allows you to leverage your some of your favorite DeFi tokens without transaction fees negating your APY.
— Brandon Goss
