Competition in decentralized finance (DeFi) among blockchains with support for smart contracts continues to grow. Ethereum has already lost over 40% of its market share since January 2021, giving way to cheaper and faster solutions. And now Avalanche is forced to give its best to maintain interest in the network.
Avalanche, like most other Ethereum competitors, is based on the Proof of ownership (PoS) protocol, but with its own distinctive features. For example, proprietary subnets are used to increase speed: X-Chain manages assets, C-Chain is responsible for smart contracts, and P-Chain coordinates validators. As a result, according to the developers, Avalanche has the highest transaction completion rate – less than 2 seconds.
However, speed alone was not enough to demonstrate a steady increase in the use of blockchain.
In DeFi, the amount of blocked funds (TVL) shows a negative trend: the peak in December 2021 was $13.7 billion, whereas now it is only $10.6 billion. For comparison, over the same time, TVL in Terra grew by 50% to $30.7 billion. A similar situation is observed in decentralized applications, where the number of active network addresses decreased by 16% in March.
The reduction in demand for solutions from Avalanche has led to a decrease in the internal AVAX coin. From its peak in November 2021, it is trading at a discount of 33%. For comparison, the LUNA coin of the aforementioned Terra blockchain updated historical records in March and April.
To reverse negative trends, the Avalanche Foundation last month announced the launch of the Avalanche Multiverse investment program, under which $290 million will be allocated to stimulate developers of blockchain-based games and applications. In addition, part of the funds will be used to create a Defi Kingdom subnet with an integrated KYC policy (know your customer).
According to the company, this will increase the interest of institutional investors. Valkyrie Investments adheres to the same assessment, calling the Avalanche subnet with KYC “a big step towards institutional adoption.”
And what do you think, will the allocation of grants for the development of new applications on Avalanche lead to an increase in the popularity of the network and its coins? Write to us about it in the comments!