The cost of AVAX tokens of the Avalanche project just this month has grown by more than 200%. But what caused the explosive growth of this cryptocurrency?
Avalanche is the new Layer1 solution in the cryptocurrency world that has received generous attention from the crypto community lately. Many of them today are looking for an alternative to Ethereum, as the second cryptocurrency is still struggling with high transaction fees and their slow processing, losing out to rivals gaining strength.
A month ago, the value of one AVAX token hit a low of $9.53 on the Huobi exchange. However, today the token has soared above the $48 levels, demonstrating an increase of 403.67%. In parallel, the capitalization of AVAX grew by 34.47% on the day, reaching $8.16 billion, and its daily trading volume exceeded 91.73%. The price of the token on Huobi continues to increase now, breaking the $48.37.
Avalanche ecosystem and DeFi
One of the most high-profile developments for the Avalanche protocol in recent memory has been the $180M Avalanche Rush program designed to boost liquidity. It was announced on August 18 in partnership with Curve and Aave. The Avalanche team said that it will significantly expand the capabilities of the DeFi ecosystem by introducing even more assets and applications into it.
Phase 1 of the program assumes the possibility of using it for three months to increase the production of liquidity for Curve and Aave clients. The Avalanche Foundation has donated a total of about $27M of its AVAX token equivalent to funding Avalanche Rush, also taking into account the additional costs that may arise during Phase 2.
Confirmation of the growth of the DeFi share in the Avalanche network was the increase in the TVL project indicators in various decentralized protocols. Among them are Benqi Finance and Pangolin, which surpassed the 300 million figure.
AVAX-ETH Bridge and Asset Migration
Launched on July 29, Avalanche Bridge is a next-generation bridging technology that allows asset transfers amid the Ethereum and Avalanche blockchains.
According to the Avalanche team, in 3 weeks the volume of transfers among blockchains reached $100 million. The reason for this was the search for lower commissions on the part of asset owners. The Avalanche Bridge saves five times over the previous AEB project bridge among Avalanche and Ethereum.
If Ethereum faces even greater difficulties with transaction fees in the future, the user will have the opportunity to migrate to “neighboring” blockchains. For instance, Avalanche, as they grow in the DeFi ecosystem.
Improving AVAX tokenomics
The unique structure of the tokenomics of the Avalanche protocol has a mechanism for writing off commissions, which after some time reduces the circulating supply.
The fees for Avalanche, according to its representatives, are burned "for the good of the community", and the limited supply of 720 million AVAX in the future is guaranteed to decrease, thereby increasing the price of tokens remaining in circulation. At the moment, the number of AVAX burned has exceeded 163,000 and will only increase with the influx of new network users making transactions within it.
The payment mechanism is also subject to a quick upgrade before the project enters the third phase of Apricot, which prepares dynamic C-Chain fees for the announcement. The result will be the addition of a limited board range of 75 to 225 nAVAX and a blocking throttle limit of up to 8 million units.
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