Overview of the Aurora Ecosystem
One of the main narratives of 2021 was the growth of alternative Layer 1 or “Ethereum killers”. The launch of large incentive programmes combined with Ethereum’s high gas fees, allowed alternative blockchains to attract significant capital. Although Near Protocol announced one of the largest incentives programmes in 2021, it did not see the same exponential growth as some direct competitors such as Solana or Avalanche.
Near’s fast growth was somewhat limited by two factors — its tokenomics and the fact that it is a non-EVM compatible blockchain. Near’s vesting schedule is relatively aggressive compared to other smart contract platforms. Early investors who are in significant profits are seeing their tokens unlocked, which increases the circulating supply and adds selling pressure to the Near token. The team has also been selling tokens to fund investment in the ecosystem.
Smart contracts in the Near blockchain are programmed in Rust — the same language used by Solana — which is not as widely used as Solidity. Deploying new dApps on non-EVM blockchains usually takes longer as developers can’t just fork an existing protocol. This explains why the Near ecosystem has significantly fewer dApps than EVM compatible chains such as Fantom or Polygon.
In May 2021, Aurora launched on the Near Protocol aiming to address this challenge. Aurora is an Ethereum Virtual Machine (EVM) sidechain that aims to provide an “Ethereum Layer-2 Experience” to its users. It has been implemented as a smart contract on the NEAR blockchain, allowing EVM contracts and decentralised apps to deploy in their ecosystem. Aurora doesn’t position itself as an Ethereum killer but as an Ethereum scaling solution.The relationship between Near and Aurora is to some extent similar to Kusama and Moonriver, the latter being the EVM-compatible sidechain that allows Solidity smart contracts on Kusama.
The Aurora ecosystem:
The Aurora Labs team — led by its CEO Alex Shevchenko — has partnered with very well-known organisations across the crypto space such as ConsenSys, DragonFly Capital and Pantera Capital to fund and integrate critical infrastructure into the ecosystem.
Since Aurora has no utility token, users are meant to send ETH to pay for gas fees. Users sign an Ethereum transaction with their wallet, which gets wrapped into a NEAR transaction and sent to the Aurora contract. While for the user it is paid in ETH, in the back end the token used for fees is actually $NEAR. Currently, gas fees are free to encourage users to try the ecosystem but fees will be switched on later this month. The expectations are that fees will cost just a few cents and the network will be able to process 1,000 transactions per second. The $AURORA token is a governance token which does not accrue value from transactions.
From a user perspective, the onboarding experience is generally seamless. Aurora allows using different wallets including Metamask and Near Wallet, and in addition to their native Rainbow bridge, the Aurora network has been included into battle-tested bridges such as Allbridge, Synapse and Celer Network.
In just a few months, the Aurora ecosystem has grown rapidly and it is already the 20th largest blockchain in terms of TVL with over $650M locked, with most of the growth happening in December. The number of wallets has also increased significantly, from under 10,000 in November to over 80,000 in early January.
There are a number of dApps that have already been deployed into Aurora and have grown significantly as the Aurora ecosystem attracted capital in late 2021 — here is a list of the main dApps so far:
- Trisolaris: is the main DEX in Aurora — a Uniswap fork backed by DragonFly Capital which currently holds over 60% of all Aurora’s ecosystem TVL. For now this is the DEX with the largest volume of daily transactions given their large liquidity and low slippage. The Trisolaris team just launched a new UI in early 2022.
- WannaSwap: second largest DEX in Aurora — a SushiSwap fork launched in late 2021 which holds just under $100M in TVL. The team announced an airdrop to $WANNA stakers that will be distributed in late January.
- NearPad: while it is also a DEX, it is mainly known for being the first launchpad in Aurora. Some protocols have already announced that they will be launching on NearPad over the next months. NearPad will also launch a v2 of their DEX in Q1.
- Rose: built by the seam team of developers who created NearPad, it is a stableswap protocol similar to Curve which is also planning to launch their own stablecoin that can be minted by using interest bearing assets as collateral — similar to Abracadabra.
- Vaporwave: the first autocompounder in the ecosystem although it hasn’t gained much traction yet.
Team and Community:
Aurora Labs consists of a 25 people team led by Alex Shevchenko (CEO) and Arto Bendiken (CTO), both with a wide working experience in the crypto space. Alex Shevchenko holds a Ph.D in Physics and Mathematics and founded the Exonum Platform before starting working in Aurora. The team is active on social media — Alex shares a weekly update in Aurora’s Youtube Channel, whilst other members of the team are very active on Telegram and Discord.
In terms of the different protocols, the Trisolaris community has grown significantly over the last month as the DEX locked more value and $TRI’s price appreciated. NearPad/Rose and WannaSwap also have very engaged communities considering how new and small these protocols are.
However, despite the rapid growth in TVL over the past month Aurora is nowhere near the crypto spotlight yet. Searches in Coingecko remain low compared to other blockchains and no large account on YouTube or Twitter has covered it yet. It seems that so far Aurora Labs has focussed on developing the ecosystem and hasn’t prioritised marketing yet.
The Near and Aurora communities are less US-centric compared to other smart contract blockchains such as Solana. In fact, the Near and Aurora tokens are not listed in any major US Centralised Exchange as they could be considered securities by the SEC due to their lack of decentralisation.
What is next?
One of the main catalysts for an “Aurora season” could be the launch of an incentive programme. The team confirmed in Q4 2021 that Aurora Labs will propose to the DAO the approval of a liquidity mining programme in 2022. However, this is not the only potential incentive programme — the Terra community has approved a proposal to share LUNA rewards to Trisolaris and Rose’s liquidity pools to incentivise the demand for UST.
Another catalyst for a potential “Aurora season” in 2022 could be the Near incentive programme. Despite it being announced in 2021, the majority of the funds haven’t been released yet. The growth of the Near blockchain would indirectly benefit Aurora given the strong connection between both teams and ecosystems. Yields in EVM blockchains with incentive programmes have been slowly decreasing during 2021, so it would not be surprising to see yield farmers rotating funds into other blockchains as they release their new liquidity mining programmes. 2021 has shown that capital is not loyal to any specific chain and market participants will seek the highest yield and risk reward opportunities, which is a great opportunity for both Near and Aurora.
Aurora’s roadmap doesn’t include only incentive programs. In the past, the lack of a reliable oracle and technical restrictions created by the absence of gas fees have caused difficulties deploying a money market in the ecosystem, but this is expected to change in Q1 2022 as two lending protocols will launch in the Aurora network; Burrow and Pret. The team has also confirmed that they expect a new NFT marketplace, an orderbook DEX and a liquid staking protocol to launch between Q1 and Q2 2022.
One of the main benefits from being an EVM-compatible chain is the possibility of attracting some DeFi blue chips. So far AAVE, Curve and SushiSwap amongst others have confirmed their plans of deploying in Aurora later in 2022. The launch of these protocols combined with the beginning of the liquidity mining programs could mean a boost in Aurora’s TVL similar to what we saw in 2021 with Polygon or Avalanche.
In the long term, Aurora Labs’ main priority is horizontal scaling. The main feature of Near Protocol is sharding and the ability to scale the blockchain, so Aurora aims to deliver this to the Ethereum ecosystem — which is why Alex Shevchenko insists in being an Ethereum scaling solution instead of an Ethereum killer.
Finally, in terms of transactions Aurora will allow users to choose which coin they want to use to pay gas fees amongst different ERC-20 tokens (e.g. USDT or DAI). This is expected to be implemented in Q1 2022 once gas fees have been switched on.