Total AVAX staked was up 6% QoQ to 254.5 million AVAX. This increase in AVAX staking was driven by initiatives like the Icebreaker Program and Coinbase adding staking support for Avalanche.
Despite the broader market pullback, DeFi TVL in AVAX was up 11% QoQ to 30.8 million AVAX. New protocol launches like Clearpool, a credit protocol, benefited the ecosystem.
Stablecoins were also a bright spot in Q2, increasing 13% QoQ to $1.7 billion. USDT was the biggest individual gainer and accounts for 64% of all stablecoins on Avalanche.
ACP-77: Reinventing Subnets was introduced in Q2. The governance proposal aims to rework how subnet validation works, resulting in cheaper startup costs for subnets on Avalanche.
Primer
Avalanche (AVAX) is a Proof-of-Stake (PoS) smart contract platform for decentralized applications. Avalanche differentiates itself by creating and implementing a consensus family known as "Avalanche consensus."
Following years of research, the Avalanche mainnet was launched in September 2020 and featured the release of a multichain framework utilizing three chains: the P, X, and C chains. Each chain plays a critical and unique role within the Avalanche ecosystem while providing the same capabilities of a single network, often called the Primary Network. Avalanche consensus and the Primary Network are designed to support sovereign, interconnected blockchains known as subnets.
Subnets are subclasses of Primary Network validators that run the same Virtual Machines (VMs) with their own rules. Subnets enable different properties of reliability, efficiency, and data sovereignty. They provide the ability to create custom blockchains for different use cases while isolating high-traffic applications from congesting activity on the Primary Network.
After rallying for two straight quarters, AVAX corrected in Q2. By the end of the quarter, its market cap was $11.6 billion, down 43% QoQ. Despite this correction, AVAX’s circulating market cap is 157% higher YoY ($4.5 billion at the end of Q2’23). By the end of Q2’24, its market cap amongst all tokens dropped by 1 spot from 10 to 11.
Revenue, which measures all gas fees collected by the network, fell in Q2. Revenue in AVAX decreased 46% QoQ from 176,700 to 96,200, while revenue in USD also decreased 53% QoQ from $7.5 million to $3.5 million. Revenue in AVAX has been in a gradual downtrend since Q4’23. Notably, however, revenue in AVAX was heightened in Q4’23 due to inscription-related activity. Revenue on Avalanche should begin to pick back up once onchain activity rebounds across all smart contract platforms.
Supply Dynamics
All revenue on Avalanche is burned. Validators and stakers are instead rewarded with newly minted tokens. AVAX currently has a fixed supply of 720 million tokens.
Half of these tokens are distributed as staking rewards, with a dynamic schedule depending on the amount staked and time staked. As more users stake AVAX for longer periods of time, more AVAX is issued as staking rewards. The annualized inflation rate for Q2 was 5.2%, down 4% QoQ from 5.4%. Additionally, eligible supply staked was up 5% QoQ from 54.4% to 56.8%.
The other 360 million tokens were allocated to various buckets at launch. Genesis supply liquid measures the percentage of these tokens that have unlocked.
At the genesis block, 360 million AVAX was minted. This genesis supply was distributed to various allocations over differing vesting periods. Year to date, the liquid genesis supply increased by 6%, from 81% to 86%. The genesis supply is projected to be fully vested by 2030. In Q3, an additional 9.5 million AVAX will be vested in both the team’s and foundation’s allocation. Q3’s token unlock will be the last major unlock. A full breakdown of vesting schedules for AVAX can be found at Messari’s Token Unlock Screener.
Network Overview
C-Chain
Usage
Average daily transactions fell by 57% QoQ from 470,000 to 201,500 in Q2. This downtrend was likely due to the broader crypto market slowing down after a highly active Q1. Average daily active addresses also trended lower, finishing Q2 down 21% QoQ from 58,600 to 46,500.
Despite the daily average of total transactions falling in Q2, some protocols experienced QoQ increases for daily transactions. Tether (USDT) experienced the largest quarter increase in average daily transactions, going from 21,200 to 30,000 (up 41% QoQ). Additionally, GMX experienced growth from 3,400 to 4,200 (up 26% QoQ).
The protocol that generated the second-highest transaction activity in Q2 was Trader Joe, finishing the quarter with a daily average of 14,700 transactions (down 61% QoQ). After Trader Joe, the protocol with the third-highest transaction activity was Circle (USDC), ending Q2 with a daily average of 8,600 transactions (down 28% QoQ). Collectively, Tether, Trader Joe, and Circle accounted for 61% of all transactions that interacted with a protocol, up 15% QoQ from 53% last quarter.
Similarly to transactions, daily active addresses interacting with protocols decreased in Q2. Tether became the top protocol by average daily active addresses this quarter, increasing by 20% QoQ from 9,600 to 11,600. 37% of active addresses that interacted with a protocol in Q2 interacted with Tether. Another notable gainer was LIFI, a DEX aggregator that saw its average daily active addresses increase by 69% QoQ to 829. As for last quarter’s top protocol, Trader Joe, average daily active addresses decreased by 50% QoQ, falling from 8,600 to 4,300. Overall, daily active addresses interacting with protocols have been on a decline since Q3’23. However, part of this decline is due to active address metrics being inflated last year due to LayerZero airdrop farming, which airdropped its ZRO token in June.
Security and Decentralization
Avalanche uses a Proof-of-Stake consensus mechanism known as “Avalanche Consensus.” Avalanche’s P-Chain is responsible for validator coordination and staking operations. Both C-Chain and X-Chain utilize the entire P-Chain validator set for consensus. To determine if a transaction is valid, validators on Avalanche use repeated sub-sampling voting of a small, random subset of all validators. Consensus occurs once a sufficient majority of validators agree over a consecutive number of rounds. Both the necessary majority and consecutive rounds are configurable. Additionally, the more tokens staked/delegated to a validator, the more influential that validator is in the consensus process.
Active validator count decreased for the first time in a year, as active validators fell by 7% QoQ from 1,683 to 1,558. Active validators on Avalanche are up 28% YoY (1,221 in Q2’23), a healthy sign for the decentralization of the network.
Despite the pullback in active validators, AVAX staked increased in Q2, up 6% QoQ from 239.6 million to 254.5 million. The Avalanche Foundation sought to improve AVAX staking metrics in Q2 through the launch of its Icebreaker Program, an initiative aimed at improving Avalanche’s onchain ecosystem. As a part of the first phase of this program, 500,000 AVAX was contributed from the program to several liquid staking solutions on Avalanche. AVAX staked was also partially bolstered by Coinbase, which launched native support for AVAX staking in May. As for AVAX staked in USD, it fell by 42% QoQ to $7.5 billion, due to price of AVAX falling in Q2. Compared to other PoS networks, Avalanche had the 5th most dollar value of funds staked by the end of Q2’24.
The Nakamoto coefficient is the number of node operators that collectively control more than 33% of the network. The higher the coefficient, the more resilient a network is to attacks and bugs. Avalanche’s Nakamoto coefficient decreased by 8% QoQ to 23. Despite this decrease, Avalanche remains above the median of other PoS networks.
Technical Developments
Last quarter, Avalanche successfully underwent the Durango upgrade, which enables any Avalanche network to natively communicate with one another by asynchronously calling smart contracts on EVM-enabled chains within Avalanche. Last quarter's report provides more details regarding the Durango update.
In Q2, several optional upgrades for validators were released, including:
Durango 4 (April 9) - Fixed issues relating to P-Chain block indexing, MerkleDB memory optimization, and validator sync times.
Durango 5 (April 30) - Optimizes validator bootstrapping by reducing fetch times by 80% and also includes consensus engine fixes.
Durango 6 (May 23) - Improves C-Chain’s state synchronization reliability, reworked staking keys, and fixed connection tracking.
Durango 7 (June 5) - Fixed a bug related to C-Chain synchronization and reduced the DB compaction rate.
Durango 8 (June 12) - A metrics-focused release that replaces custom namespaces with labels.
Although no ACPs were implemented in Q2, several were introduced for discussion:
ACP-77: Reinventing Subnets - This ACP replaces ACP-13 and aims to rework how validation for subnets works. Currently, each subnet validator must first become a P-Chain validator, which requires staking 2,000 AVAX ($60K at Q2 end). Since the average subnet utilized 7 validators in Q2, the approximate cost for initiating a validator set for a subnet in Q2 was 14,000 AVAX ($400K at Q2 end). This proposal will remove the P-Chain validator requirement, thereby separating subnet validators from P-Chain validators. Instead, subnets will pay a dynamic fee to P-Chain validators.
ACP-75: Acceptance Proofs - Enables subnets to prove the acceptance of blocks through consensus, improving fault isolation and preventing network stalls.
To join the Avalanche architecture, every subnet must provide at least one validator to the Primary Network (staking 2,000 AVAX). For its own consensus, each subnet utilizes anywhere from three to all P-Chain validators. There were 24 indexed Avalanche subnets that produced a block in Q2 including:
Similar to Avalanche C-Chain, transaction activity was down in Q2 for most subnets. Across all subnets, Q2’s daily average transaction count was 978,300, down 23% QoQ from 1.3 million. However, not all subnets experienced QoQ declines. Notable gainers included Dexalot (up 5% QoQ to 259,700) and UPTN (up 100% QoQ to 46,500). UPTN benefited from various incentive campaigns that aimed to onboard users through referral incentives. As for other subnets. DFK was the main driver of transaction activity, accounting for 53% of all subnet transactions in Q2. Despite its large market share, daily average transactions on DFK declined by 2% QoQ , to 520,200. Finally, aggregated subnets outside of the top six decreased daily average transactions by 10% QoQ, from 55,700 to 50,400.
Active addresses on subnets were down in Q2, with both the median (down 35% QoQ from 208 to 136 active addresses) and mean (down 20% QoQ from 993 to 795 active addresses) decreasing. The vast majority of active addresses continue to come from gaming subnets, with three of the top four subnets by active addresses being gaming-focused. DFK, Beam, and PLAYA3ULL Games accounted for 49% of all active addresses in Q2. However, all three of these subnets experienced QoQ declines in active addresses. The only subnet within the top six to go against the trend in Q2 was Meld, which saw its daily average active addresses increase 118% QoQ from 403 to 880.
Ecosystem Overview
DeFi
Avalanche TVL denominated in USD decreased from $1.5 billion in Q1 to $903.9 million, a 40% QoQ decrease. This ranked Avalanche as the 7th highest chain by TVL denominated in USD by the end of the quarter, flat QoQ. However, TVL denominated in AVAX increased QoQ by 11% from 28.1 million AVAX to 30.8 million. This dynamic indicates that the TVL decrease in USD was driven by AVAX price depreciation, not capital outflows.
The top three protocols by TVL continued to represent the bulk of TVL on Avalanche in Q2. AAVE, the largest protocol by TVL on Avalanche, decreased 25% QoQ from $531.3 million to $398.9 million ($132.4 million QoQ decrease). Of this TVL decrease, $35.9 million was driven by a decrease in borrows (27% of the QoQ increase), suggesting that the majority of TVL losses were mainly driven by falling asset prices rather than a decrease in the demand for borrowing or leverage. By the end of Q2, AAVE’s TVL dominance was 44% (up 25% QoQ from 35%).
Benqi, the second largest protocol by TVL, also saw a decrease in TVL. Its TVL fell by 45% QoQ from $442.2 million to $243.0 million. As for its TVL dominance, it decreased by 9% QoQ from 29% to 27%.
The third largest protocol by TVL, Trader Joe, saw a sharp decrease in TVL, falling 65% QoQ from $265.7 million to $93.8 million. Part of this decrease was due to the sharp decline in prices of various memecoins on Avalanche, which constituted over $100 million of Trader Joe’s TVL in Q1. By Q2 end, Trader Joe represented 10% of TVL on Avalanche.
In total, AAVE, Benqi, and Trader Joe accounted for 81% of DeFi TVL on Avalanche, a QoQ decrease of 1%. Outside of the top three, Clearpool, an onchain credit marketplace protocol, had a strong Q2. On April 2, Clearpool launched its first Credit Vault on Avalanche. By the end of Q2, Clearpool was able to attract $15.8 million in TVL.
Average daily DEX volumes on Avalanche C-Chain continued declined in Q2, falling 65% QoQ from $160.7 million to $63.7 million. Onchain activity was heightened on Avalanche in Q1 due to a “Memecoin Mania.” Volumes related to memecoins largely dried up on Avalanche in Q2, playing a role in Q2’s decrease.
By the end of Q2, there were 31 different DEXs on Avalanche. Despite the increased competition, leading DEX Trader Joe still remained the dominant DEX on Avalanche. The average daily DEX volume on Trader Joe decreased 64% QoQ from $128.4 million to $45.9 million. For Q2, the top five DEXs by average daily trading volume were:
Trader Joe - $45.9 million (72% of Avalanche DEX volume)
Dexalot - $4.4 million (7% of Avalanche DEX volume)
In Q2, stablecoins on Avalanche reached their highest market cap since 2022. By the Q2 end, stablecoin market cap reached $1.7 billion, up 13% QoQ from $1.5 billion. Compared to other chains, Avalanche had the 7th largest stablecoin market cap. Fiat-backed stablecoins like USDT and USDT represent 92% (flat QoQ) of the stablecoin supply on Avalanche. USDT increased by 10% QoQ from $994.1 million to $1.1 billion (64% of Avalanche stablecoin supply), while USDC increased by 6% QoQ from $448.0 million to $475.5 million (28% of Avalanche stablecoin supply).
One interesting stablecoin product on Avalanche is Stable Jack’saUSD. Stable Jack is a marketplace platform for volatility and yield related to both cryptoassets and real-world assets such as stocks and bonds. As a part of Stable Jack’s product offering is aUSD, a yield-bearing stablecoin backed by various AVAX LSTs. Launched on June 20, $612,100 aUSD had been minted by quarter’s end.
BTC.b is one of the largest assets on Avalanche besides AVAX and stablecoins. BTC.b is a token that represents Bitcoin on Avalanche and can be automatically bridged in Core. Compared to other natively bridged Bitcoin assets, BTC.b allows users to freely transfer native Bitcoin without relying on custodians. The supply of BTC.b finished down 14% QoQ, from 4,173 to 3,580 BTC.b. As for WBTC on Avalanche, its supply decreased by 22% QoQ from 500 to 390 WBTC.
Enterprise and RWAs
One of Avalanche’s main initiatives for 2024 is to onboard institutions and enterprises onto the network. Last year, in Q2’23, Evergreen subnets launched, allowing anyone to create a subnet with customizable KYC/AML requirements and unique privacy capabilities. Since the launch of Evergreen subnets, Avalanche has onboarded several enterprises through partnerships, including J.P. Morgan, Citi, and Republic.
In Q2, Avalanche announced the following updates related to Evergreen and other enterprise and RWA adoption initiatives:
Homium (April 16)- Homium has introduced a novel financial product by launching tokenized home equity loans on the Avalanche blockchain. This platform allows homeowners to access their home equity without monthly payments by committing future appreciation of their property. Investors benefit from tokenized assets that track the appreciation of a pool of these home equity loans. This initiative, supported by Avalanche’s technology and a partnership with Securitize, aims to make home equity more accessible and address housing affordability.
Morning Line Club (April 17) - Morning Line Club (MLC), a compliant marketplace for racehorse ownership and breeding, announced an ecosystem partnership with Avalanche in April. As a part of the partnership, MLC aims to leverage Avalanche's speed, security, and scalability to streamline racehorse ownership, making it more accessible, inclusive, and transparent.
Stripe Integration (April 29) - Avalanche announced an integration with Stripe to facilitate crypto onramping through the Avalanche C-Chain, allowing users to purchase AVAX directly. Stripe's fiat-to-crypto onramp is now "embedded into Avalanche dApps, such as DEXes, NFT platforms, and digital wallets." Core, Avalanche's native ecosystem wallet developed by Ava Labs, incorporates this Stripe onramp, enabling users to fund their wallets using ACH, debit, and credit cards.
Re (May 14) - RWA Platform Re launched a tokenized reinsurance fund on Avalanche, backed by a $15 million commitment from Nexus Mutual. This initiative aims to integrate traditional reinsurance with blockchain technology, allowing investors to gain exposure to real-world assets through tokenization.
Wine Capital Fund (May 16) - In collaboration with Oasis Pro, Wine Capital Fund has created a platform that makes fine wine an investable onchain asset class. This initiative tokenizes fine wine, allowing investors to easily trade and invest in wine-backed assets on Avalanche. By leveraging this technology, the platform aims to democratize access to fine wine investments, previously reserved for high-net-worth individuals, and introduce more liquidity to the wine investment market.
Misyon Bank (June 5) - Misyon Bank has launched a new tokenization solution on Avalanche. This initiative enables the bank to tokenize traditional financial assets, such as bonds, funds, shares, and real estate, enhancing accessibility and liquidity for a broader range of investors.
NFTs, Gaming, and Culture
Avalanche’s NFT market experienced a downturn in Q2, with average daily NFT volume decreasing by 65% from $878,800 to $310,900. Average daily sales also dipped by 78% from 1,400 to 300. NFT activity decreased in Q2 due to the end of Hyperspace’s AVAX incentive program, which ran from October 11, 2023, to June 26, 2024. In Q2, rewards were distributed for Seasons 5-7, totaling 105,500 AVAX in incentives. With the Hyperspace incentive program winding down, the Avalanche Foundation launched a new $1 million incentive program with Salvor in May. Salvor is a peer-to-peer NFT lending platform on Avalanche C-Chain that allows users to use NFTs as collateral for loans in AVAX.
Q2 was a busy quarter for gaming on Avalanche, with the following notable events:
Funtico (May 8) - Avalanche and Funtico are collaborating to revolutionize Web3 gaming by launching an incentivized gaming platform with robust rewards and a lineup of 10 games, including major titles like "Formula Funtico" and "Heroes of the Citadel." Funtico's platform leverages Avalanche's scalable blockchain technology, aiming to attract both Web3 and traditional gamers by offering a seamless gaming experience with minimal friction, supported by the TICO token.
LiveDuel (May 10) - LiveDuel announced that they are launching a sports betting platform on Avalanche. The platform will feature quick transaction settlements, customizable betting markets, and incorporate DeFi elements like automated market makers and liquidity pools. Users can engage in peer-to-peer betting with reduced reliance on intermediaries, benefiting from transparent odds and community governance.
Gamestarter Introduces ‘GameChain’ (May 20) - Gamestarter has introduced "GameChain," a gaming-focused subnet built on Avalanche launching later this year. GameChain aims to simplify blockchain integration for developers with an intuitive SDK and cross-bridge functionality for seamless asset transfers. The platform is designed to reward node holders with a share of transaction fees and token distributions.
Elixir Games & RoboKiDen (May 23) - Elixir Games has announced the acquisition of RoboKiDen and a strategic partnership with Ava Labs. This partnership will leverage Avalanche's blockchain technology to enhance Elixir Games' platform, offering improved scalability and integration for Web3 gaming. The acquisition of RoboKiDen, a game that blends AI and NFTs, aligns with Elixir's goal to expand its portfolio and deepen its presence in the Web3 gaming space.
Konami Digital Entertainment (June 20) - Konami Digital Entertainment has unveiled "Resella," a new NFT solution developed in collaboration with Ava Labs. Resella is designed to enable users to trade NFTs within the Konami ecosystem, enhancing the gaming experience with unique digital assets. Leveraging Avalanche's blockchain technology, Resella aims to offer fast, secure, and environmentally friendly transactions, making it easier for gamers to buy, sell, and trade NFTs associated with Konami's popular titles.
Ecosystem Growth
After private crypto markets bottomed out in the latter half of 2023, Avalanche ecosystem funding has picked back up in 2024. Five projects building primarily on Avalanche announced funding rounds in Q2, totaling $24.6 million raised. The rounds include:
One of Avalanche’s major ecosystem growth strategies for 2024 is Avalanche Codebase. Codebase is a 12-week accelerator program that aims to support early-stage Web3 projects building on Avalanche. On March 30, Avalanche announced the initial cohort of projects selected. A list of the initial cohort of projects can be found in last quarter’s report. In May, Avalanche hosted the AVAX Startup House Demo Day, which featured teams from Avalanche Codebase. In total, $400,00 in prizes were awarded:
At the end of last quarter, the Avalanche Foundation launchedAvalanche Community Grants in collaboration with Gitcoin. The first round of funding, which began on April 18, featured 25 finalists chosen for community consideration. Over the course of a week, the Avalanche community had the opportunity to contribute to these projects, with their contributions influencing the allocation of matching funds from the Avalanche Foundation. This round saw impressive community engagement, with 355 unique contributors participating and raising $17,700 in community contributions. The results of this inaugural funding round were announced on May 15, and the funds, combined with the matching pool from the Avalanche Foundation, will be distributed among the 25 final round projects. More detailed information about each project and the final results are available in a forum post.
Closing Summary
Q2'24 was a dynamic quarter for Avalanche, marked by strategic growth and innovation. Despite some market corrections, the network saw a significant increase in AVAX staking, driven by initiatives like the Icebreaker Program and Coinbase’s native support. Avalanche’s DeFi ecosystem demonstrated resilience, with TVL in AVAX terms increasing by 11% QoQ, indicating strong underlying activity despite broader market challenges. The network also continued to expand its institutional and enterprise partnerships, with notable integrations like Stripe for crypto onramping and the launch of tokenized assets through collaborations with major financial institutions.
In the gaming sector, Avalanche made significant strides with new projects and partnerships, including collaborations with Konami and Elixir Games, further establishing itself as a leader in Web3 gaming.Overall, while Q2 presented challenges, Avalanche’s continued innovation, growing institutional adoption, and active development in key areas position it well for future growth.
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AJC is a Research Manager at Messari for the Enterprise team. His primary focuses are on Bitcoin and Consumer. Prior to joining Messari, AJC wrote an independent crypto blog.
AJC is a Research Manager at Messari for the Enterprise team. His primary focuses are on Bitcoin and Consumer. Prior to joining Messari, AJC wrote an independent crypto blog.
