Avalanche (AVAX) Crypto Continues to Grow, But the Market Doesn’t Care

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Avalanche (AVAX-USD), once the darling of the crypto community, has fallen on hard times since the market experienced a drastic cooling in 2022. Once hailed as a key part of the Solunavax trio — Solana (SOL-USD), LUNA and AVAX – scalable layer 1 blockchains, the hype is not quite there anymore. Despite continued secure partnerships and new launches, AVAX is still far from its previous highs.

Unlike its brethren, the AVAX community has never had to deal with dramatic shocks. With LUNA completely imploding in 2022 and SOL suffering from the revelations of the FTX fraud, AVAX escaped relatively unscathed. It saw the demise of one of its biggest supporters, Three Arrows Capital, but the fund didn’t impact the ecosystem as much as FTX did Solana, for example.

From a high of around $151 in November 2021, AVAX is currently trading at $13.17, a decline of nearly 92% fairly close to SOL -93%. Ethereum (ETH-USD), by comparison, was only down about 65% over the same period.

The value proposition of Avalanches comes primarily from its subnet model, where the Avalanche network is actually a mesh of semi-independent blockchains called subnets. Anyone can build and deploy a subnet and hire AVAX validators to secure it with a Proof-of-Stake model (a mechanism where validators stake their cryptocurrency to secure a network).

Avalanche also has several built-in chains, most notably the C chain. This is what most people associate with the AVAX network, as an intelligent platform compatible with EVM (Ethereum Virtual Machine) contracts where most of the user activity. Custom subnets will also typically be independent EVM environments.

C-Chain was battered by the bear market, losing nearly 95% of its total locked value, a measure of assets provided to chains by various DeFi and NFT protocols.

Nonetheless, the market has slowed everywhere, so Avalanche remains in a respectable 7th place among all networks at $650 million, easily triple Solanas TVL.

Active integration and development efforts

The Avalanche team has not been idle and continues to secure key partnerships and integrations to drive the network forward.

For example, he recently joined Loco Legends, an e-sports streaming platform in India that launched an NFT marketplace subnet.

Another announced integration involves SK Planet, a subsidiary of South Korean telecommunications conglomerate SK Telecom. The company is set to launch its own subnet called UPTN, which is expected to be integrated with the company’s consumer-facing products, such as OK Cashbag, an online cashback and loyalty platform.

Ava Labs also launched AvaCloud, a no-code subnet deployment platform that makes it easy for anyone to start their own network by leveraging Avalanche’s blockchain validation process.

Finally, another partnership that made waves in early 2023 is with Amazon Web Services, which would simplify the deployment of subnets for cloud platform users. However, some critics argue that this is just a paid service disguised as a partnership and that anyone can technically become an AWS Partner like Avalanche.

This event brings to light some unpleasant facts about the Avalanche network, which could be the main cause of the current underperformance of its tokens.

Fundamentals seem weaker than marketing

Digging deeper into the Avalanches subnets, there are some discrepancies between how it’s supposed to work and how it actually works right now.

The central idea behind Avalanche is (or was) that primary network validators are leased by subnet operators. This means that subnets borrow some of the security from the mainnet so they don’t have to pay as much in staking yield.

In practice, however, the exact opposite is currently happening. As shown by the Avalanche Subnet Explorers, Subnet Teams are fully responsible for their own chain. Defi Kingdoms, by far the most active subnet, is supported by 8 validators run by its own team.

Subnet validators must also validate the main string, which is the opposite of what you would expect. Other than additional staking yield, a dedicated subnet validator has little economic incentive to secure what is effectively an unbound blockchain. There is little or no public information on why this principle was adopted.

Finally, the activity on these networks of subnets is somewhat disappointing. Outside of Defi Kingdoms, with over 18,000 active addresses, other subnets have much smaller numbers: Dexalot has less than 200 active addresses, Step Network has just under 600, and DOS has fewer. of 25. This all compares to C-Chains 150,000 addresses, a dominant figure on custom networks. In another blow, Crabada recently migrated its subnet-based platform to C-Chain.

With the bear market, people and investors are becoming more aware of fundamentals and are not as easily swayed by marketing claims, which helps explain AVAX’s current position.

Nevertheless, the Avalanche network remains an impressive technological feat, and its performance and cost are much more attractive compared to competing networks like Ethereum. Moreover, the platform still has a number of innovative and active projects that may well make a key difference in the future. . For now, though, it’s unclear whether the Avalanche teams’ efforts will pay off.

Disclosure

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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