What is the Future of Avalanche Ecosystem? An On-Chain AVAX Analysis

Avalanche (AVAX) is having an explosive year, according to an independent on-chain analysis provided to Techopedia today.

In a Web3 industry where many decentralized technologies and protocols are looking to carve their niche and find adoption, Avalanche surged ahead in the fourth quarter of 2023 based on the report by blockchain analyst Flipside.

Avalanche experienced two big surges in on-chain activity, peaking at 6.4 million transactions on November 22, 2023 and 6.3 million transactions on December 18, 2023 — both events which led to sustained growth and usage.

We explore the findings, which are available to download here, and ask other analysts for their views.

Key Takeaways

  • Avalanche experienced significant spikes in on-chain activity during the Q4 of 2023, with transaction volumes peaking at 6.4 million and 6.3 million on November 22 and December 19, respectively.
  • The surge in on-chain activity catalyzed sustained growth for Avalanche, with new user growth surpassing active users by more than 17%.
  • The total value locked (TVL) on Avalanche crossed the $1 billion mark and remained above it, driven by high-profile DeFi protocols like Benqi Finance and Trade Joe.
  • Beyond on-chain activity and DeFi growth, Avalanche witnessed other notable trends in Q4 2023, including a rise in the daily market capitalization of real-world assets (RWAs) and significant developments in blockchain gaming and NFTs.

On-chain Spikes Catalyzed Sustained Growth

In the fourth quarter of 2023, Avalanche witnessed two major spikes in on-chain activity, which, according to the report, “catalyzed sustained growth.”

The first spike, which occurred on November 22, 2023, was initiated by the launch of the ASC-20 token standard, which aimed to promote the development of the Avalanche blockchain and increase transaction volume on the network at the time of launch.

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According to Flipside, the attention the ASC-20 tokens received was “immediate and intense — likely bolstered by the interest in Bitcoin Ordinals earlier that month.”

Prior to the launch of the ASC-20 token standard, daily transactions on the Avalanche network stood below 400,000 in early October 2023  —but climbed to 2.35 million on October 19, 2023, and reached a peak of 6.36 million on November 22.

Avalanche: Number of transactions (black), and gas used (red). (via Flipside)
Avalanche: Number of transactions (black) and gas used (red). (via Flipside)

 

The second spike came on December 19, 2023, and was driven by a burst of activity in memecoin-linked accounts.

The report highlighted:

“Daily transactions picked up again by early December, remaining above 1M from December 07 to January 02. This sustained surge resulted from two major factors: ASC-20 activity and memecoin transactions (centered on COQ, HUSKY, SHIBX, RPG, and others).”

Another brief spike on the Avalanche network occurred in mid-December 2023, as the number of daily new swappers briefly surpassed the number of active users on the Avalanche network during the peak of Avalanche’s non-fungible token (NFT) mania.

Active Swappers (black) versus New Swappers (red). (vi Flipside)
Active Swappers (black) versus New Swappers (red). (via Flipside)

 

The data further suggests that new users are “organically arriving and staying active,” with the network gaining traction sustainably  —no dropping back down to previous levels.

Sustained Liquidity, Diverse Protocol Offering & Platform Dominance Capture DeFi Growth

In early Q4, the total value locked (TVL) on Avalanche in USD began to steadily rise and crossed the $1 billion mark on December 6, peaking at $1.53 billion two weeks later on December 21, and remained above the $1 billion mark as of the time of the report’s publication.

Daily TVL on Avalanche (USD). (via Flipside)
Daily TVL on Avalanche (USD). (via Flipside)

 

The surge in Avalanche’s TVL can be attributed to a number of high-profile protocols and decentralized exchanges (DEXs), including Benqi Finance, Aave, Struct, and Delta Prime. In particular, Benqi made up over 40% of Avalanche’s TVL by the time of its all-time high.

In addition, by the end of 2023, Trader Joe’s trading volume had increased by more than 570% and accounted for over 80% of Avalanche’s total decentralized finance (DeFi) swap volume at its peak on December 21.

“That said, the ownership of [Trader Joe’s] overall Avalanche DeFi volume only increased by 4% between the start and end of Q4 2023 – from just below 70% to over 74%. This signals that Avalanche’s DeFi ecosystem is rapidly expanding, including, but also beyond, the chain’s leading DEX.”

Other Growing Trends on Avalanche

Apart from a spike in on-chain activity and a TVL surge, the Avalanche network has seen an array of other growing trends in Q4 of 2023, including an increase in the daily market capitalization of real-world assets (RWAs) and a number of gaming and metaverse projects being deployed on the network.

Avalanche and Real-World Assets (RWAs)

Even though much of Avalanche’s RWA activity is not available for public view, Flipside’s report suggested that RWAs had gained traction in the fourth quarter of 2023 with a notable 44.7% increase in their daily market cap, showcasing a promising trend towards tokenization and trading of real-world assets on the network.

This surge was aided by Avalanche’s structure, which prides itself in high throughput, rapid transaction finality, and low transaction costs.

In addition, the chain’s structure allows for the creation of private subnets that can be customized to meet the specific needs of both investors and regulators.

It is also important to note, that by the end of the quarter, 98.3% of all RWA volume came from EUROC, the Euro-linked stablecoin on the Avalanche network.

Avalanche and Blockchain Gaming

The Avalanche network really benefited from a number of gaming and metaverse projects that either deployed or migrated to it.

Daily user volume had quadrupled since Q4 from 9,994 users at the start of October to 40,497 by the start of February 2024.

The report highlighted:

“In terms of on-chain activity, January’s total daily transaction volume grew by 36.4% relative to last October (19.2M transactions vs. 14.1M). Especially noteworthy, this user and transaction growth is increasingly distributed across new subnets and projects.”

In December 2023 the daily transaction volume of newly deployed contracts had risen to 22.4 million, with most subnets continuing growth into the first quarter of 2024.

Avalanche and NFTs

On top of successes in RWAs and blockchain gaming, Hyperscape, the multichain NFT marketplace on Avalanche, had accounted for 99% of NFT sales as of 7 February 2024, managing to beat some of its biggest competitors in the sector.

The report highlighted:

“Initially, NFT market activity was led by Salvor and Joepegs, which accounted for 60.9% and 22.1% of NFT sales as of Oct 01, 2023. However, Hyperspace surged past the competition on October 17, and its market share of NFT sales hasn’t fallen below 50% ever since, aside from a brief dip in early November.

“Based on on-chain data, Hyperspace can essentially be considered the only major player in this space, as of February 2024.”

The success of Hyperscape could be attributed to it being the first Ethereum virtual machine (EVM) chain on the Avalanche network that opened doors for new cross-chain trading possibilities between Avalanche and other prominent layer-1 chains like Solana and Sui.

Other Avalanche Milestones of 2023 & 2024

Date Event
March 21, 2023

(Community)

Galxe expands to Avalanche, accelerating NFT-based community growth.
March 30, 2023

(Community)

Avaissance is announced to fund and mentor digital artists
April 5, 2023

(Gaming)

Ava Labs announces partnership with SK Planet to launch UPTN subnet.
April 25, 2023

(Ecosystem)

Avalanche completes Cortina upgrade, streamlining operations and introducing several key changes.
May 24, 2023

(Ecosystem)

AvaCloud launches — a web3 launchpad to build no-code ecosystems
May 25, 2023

(DeFi)

Circle launches euro-based stablecoin EUROC on Avalanche.
June 09, 2023

(Gaming)

Avalanche announces Arcad3, accelerating web3 development among traditional gaming studios
July 25, 2023

(DeFi)

The Vista initiative pledges to purchase $50M USD of tokenized assets
August 30, 2023

(Ecosystem)

Avalanche begins testing Teleporter, an EVM cross-chain messaging protocol
September 07, 2023

(Gaming)

Stars Arena launches, driving unprecedented on-chain demand for Avalanche in 2023
September 11, 2023

(Ecosystem)

Testing of Avalanche’s HyperSDK registers 143,000 tps
October 03, 2023

(Ecosystem)

Firewood is unveiled to scale Avalanche’s database system
October 17, 2023

(Community)

Avalanche launches multi-million AVAX NFT incentive program with Hyperspace
November 09, 2023

(Community)

The Avalanche accelerator program Codebase is announced
November 15, 2023

(DeFi)

Citi pilots FX Solution with Avalanche under Project Guardian
November 16, 2023

(DeFi)

JPMorgan demonstrates proof of concept of tokenization on Avalanche
November 17, 2023

(DeFi)

Republic announces its plan to launch the Republic Note on Avalanche
December 07, 2023

(Ecosystem)

Avalanche Enters the top 10 assets by market cap
December 12, 2023

(Gaming)

Mirai Labs ports over to Avalanche, augmenting its growing GameFi ecosystem
January 27, 2024

(Ecosystem)

Scaling solution Vryx is announced, with plans to implement it on the HyperSDK testnet.

Future Predictions and Analyst Comments

Anndy Lian, cryptocurrency expert and the author of NFT: From Zero to Hero, told Techopedia that Avalanche’s recent successes could be attributed to the chain’s “Web3 efforts.”

“Firstly, its NFT Dokyoworld twice became the top traded NFT collection across all chains. Secondly, their gaming sector gained good traction when TSM’s Blitz App Subnet went live, processing transactions for their premium service. They even promised more features to come later in Q1 2024.

“Thirdly, their inscriptions market is also picking fairly well with strong Asian supporters. The increase in activities helps drive their price upwards.”

Lian is bullish on the future of the Avalanche network, noting that its native cryptocurrency, AVAX, could break the $40 barrier in the next two weeks if positive sentiment continues. You can read our full Avalanche price prediction here.

With new users organically joining the network, overall future sentiment for the Avalanche network stands bullish.  Since October 2023, over 12,000 deployers have created over a quarter million contracts, showcasing strong, smart contract development on Avalanche despite fluctuations in on-chain transactions and fees.

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Iliana Mavrou
Crypto journalist

Iliana is an experienced crypto/tech journalist reporting on blockchain, regulation, DeFi, and Web3 industries. Before joining Techopedia, she contributed to a number of online publications, including Capital.com, Cryptonews, and Business2Community, among others. In addition to working in journalism, she also has experience in tech and crypto PR.  Iliana graduated from the City University of London with a degree in Journalism in 2021. She is currently pursuing a Master's degree in Communication.