Is Avalanche capable of maintaining its present performance level? As soon as the incentives were announced, an avalanche of DeFi consumers flocked to the site.
The Avalanche DeFi ecosystem’s value has reached USD 1.8 billion, more than doubling in less than a month. This is why. Similar to Binance Smart Chain (BSC) and Polygon’s surge earlier this year, Avalanche’s deposit base has lately seen a huge boost. However, not all analysts are persuaded about Ethereum’s competitor’s long-term sustainability, despite the fact that some feel its indicators are solid.
Capital markets are a subcategory of financial markets. Benqi broke the 1 billion dollars TVL threshold less than a week after its August 19th debut, a business record. By comparison, it took eight months for Aave, one of the earliest DeFi lending protocols, to achieve this level of acceptance on Ethereum, which launched in 2019.
Numerous variables, including an improved token bridge and a 180 million-dollar incentive scheme, were highlighted as contributing to the rise in an interview with CoinDesk by Ava Labs’ DeFi Director Luigi Demeo.
As of the end of July, Avalanche’s DeFi ecosystem was worth USD 180 million; however, it has since risen by more than 1,000 percent, to USD 1.8 billion. Additionally, AVAX’s value has grown this week from USD 13.41 to USD 55.42.
The team has been working incredibly hard for the last six months on a number of initiatives that have resulted in the bridge, loans, a mass motivational campaign, and a variety of other things that have all come to fruition simultaneously. While Mewny, a pseudonymous associate of the angel investment company eGirl Capital, feels the new community is still in its infancy, he believes it is on the cusp of undergoing a correction.
“We’re looking at two separate scenarios,” Mewny told CoinDesk while evaluating the financial climate in the field with a group of DeFi investors. It is possible that the incentives for [liquid mining] may generate a flywheel effect in their immediate environment, or that the excitement will wear off and the money pot will end up in the next best alternative.”
Motives and stimuli are two distinct concepts
Due to the fact that the layer 1 network went live on Mainnet in September 2020 and a functional (though difficult) bridge was available as early as February of this year, it seemed improbable that Avalanche would arise at this time.
Ava Labs’ Demeo voiced displeasure with the user interface (UI). The search took longer and was more comprehensive. That, in my perspective, was a temporary solution. According to him, some “important infrastructure components” were also missing, including oracles, quicker bridges, a lending platform, and stablecoin compatibility.
On July 21, the Chainlink oracles were operational, laying the groundwork for Benqi’s lending platform’s debut by providing the essential infrastructure for price data. AVAX will soon give twenty million dollars in liquidity mining incentives to the money market Aave, and seven million dollars in AVAX liquidity mining incentives to the curve protocol, which enables the implementation of efficient stablecoin swaps.
Additionally, Demeo noted that the new bridge provides complimentary AVAX for future transactions (for deposits above a certain amount). While Demeo notes that implementations of Ethereum-native decentralized applications such as Curve, Sushi, and Aave are running on Avalanche, eGirl’s Mewny believes that Avalanche’s growth has been assisted by the groundwork established by other layer 1s in the Ethereum ecosystem.
To my mind, the work of BSC and Polygon enabled the current AVAX run to take place. “There is no link between the reduction in incentives for liquidity mining and the rapid growth in TVL,” they stated, adding that:
“While this is not a judgment on the technology’s merits, many folks viewed this as an opportunity to profit on the previously claimed advantages of the platforms. Due to the fact that the same core DeFi primitives operate on a different platform, the same approach may be employed (once again).
Potentially new projects
Demeo feels that Avalanche, with its innovative design and consensus-based approach, is well-positioned to compete in the long run.According to the creator, we have allowed for a huge number of subchains to suit any virtual machine or smart-contracting language. This will benefit AVAX’s long-term survival in the long run, as it will enable the firm to more quickly adjust to changing environments and hire a broad variety of developers.
Demeo further informed us that the 180 million dollars Avalanche Rush initiative were designed specifically for consumers. If managed correctly, the cash may be used to incentivise software developers to build new Avalanche platform versions. He emphasized that the first and most critical stage is to build a user base.