Avalanche Network’s daily transactions grow by 85% in the fourth quarter of 2022

2023 seems to be off to an excellent start for AVAX, the native token of the Avalanche Network, which has been on the rise since the beginning of the year.

The data shows that as of January 1, when it was trading at $10.67, the token surged to a 90-day high of $21.68 on January 28, representing a gain of 103%. However, as of February 1, AVAX was trading at $19.32, down 10.88% from its peak.

Messari’s latest report on Avalanche Network’s latest quarter performance provides a comprehensive view of the network’s progress.

Despite alleged involvement with FTX and turbulent price action, the report reveals that the network and ecosystem is growing and remaining strong. These are some of the headlines.

Network and financial overview

The fourth quarter saw some impressive growth for the Avalanche Network. Despite initial roadblocks caused by FTX, raw network data (including P, X, and C chains) as well as Avalanche’s seven subnets showed some impressive numbers.

The number of active daily addresses averaged 48,023 in the fourth quarter, up 3.2% from the third quarter, while daily transactions averaged an incredible 2,881,207, a whopping 84.6% increase from the previous quarter.

There was a significant increase in transactions per second as well, going from 18 in the third quarter to 33 in the fourth quarter. Moreover, an even more impressive result was seen in the average transaction cost – which fell 26.8% from $0.14 in the third quarter to $0. 10 in Q4.

Also, despite the disruption caused by the FTX crash, daily active addresses on Series C saw a spike in October due to an increase in NFT minting.

While daily active addresses remained stable, Avalanche Network continued to see an increase in average daily transactions, closing the year with about 2.9 million transactions per day.

When looking at the market performance of Avalanche Network and its AVAX token, there was a clear divergence between the current price-to-sales ratio and what we are used to seeing.

In Q1 2022, the price-to-value ratio was 91x, and increased to 846x in Q4 2022, indicating that the network and the token may be significantly overvalued compared to their previous levels.

However, traditional P/S ratios may not be the best metric for evaluating blockchain assets. Enter the demand predicted security paradigm – a new approach to the value of blockchain assets. This model assumes that aggregate security demand, both current and future, is what drives value in the blockchain network.

Although the price-to-price ratio has increased, AVAX’s fully diluted market capitalization has seen a significant decline. From a peak of $73.1 billion in the last quarter of 2022, the market capitalization decreased by 89.3 percent to just $7.8 billion in the fourth quarter of 2022.

Now, it will be interesting to see how the future of this network unfolds with such a radically different approach to valuation of blockchain assets.

An overview of the avalanche network ecosystem

For the avalanche ecosystem, the final quarter of 2022 presented a turbulent environment due to a shift in market sentiment and a drop in incentive programs.

As such, TVL (Total Value Locked) decreased significantly; For the US dollar, the drop was a staggering 92%, while the drop for AVAX was not that severe, only down 25.5% year-on-year. This data indicates that the decline in TVL when denominated in USD is more dependent on the decline in AVAX than the utilization of crypto-assets in DeFi (Decentralized Finance).

Moreover, the decline in TVL has not only translated into DeFi, but also the emerging NFT market in Avalanche. The volume of secondary sales decreased by 18.4%, the decrease in unique buyers was 39.3%, and the number of unique sellers increased by 10.6%.

But even with the downside, Avalanche is still showing signs of progress in the NFT sector. For example, Joepegs, an NFT marketplace launched during the second quarter of 2022, secured a $5 million deal led by Avalanche and FTX Ventures, despite the collapse of the latter.

This investment allowed Joepegs to expand, giving them the opportunity to collaborate with dealers, projects, and artists.

OpenSea has also opened its doors to Avalanche, giving them full access to the NFT market. Therefore, although the fourth quarter of 2022 presented various challenges to the avalanche economic ecosystem, the latest developments are a promising glimpse into their ecosystem and future.

Staking and decentralization overview

Developer participation in the Avalanche Network has not caught up with the rest of the ecosystem’s developments, as evidenced by a 23.7% drop in unique smart contract validations QoQ, and the most significant drop of 59% year-on-year. .

Despite the continued rise in address and transaction activity on the DFK and Swimmer networks, this downward trend continues.

But amidst the unfavorable metrics, one bright spot across Avalanche’s key stats was the health of its grid. Takaful and Decentralization operations remained strong, with an average share of 62% and an increase of 2% on a quarterly and year-over-year basis, respectively.

Meanwhile, Nakamoto’s Avalanche Coefficient — a measure of decentralization — is hovering around a solid 30, with a slight uptick of 32 at the end of the fourth quarter. This is a steady improvement over the average scores of other Layer 1 networks.

competitive analysis

Architecturally, Avalanche might be more comparable to Cosmos and Polkadot. However, the comparison is less clear regarding the current state of DeFi activity and the manner in which the different classes compete for traction.

Messari tried to shed some light on this by evaluating the main Avalanche metrics against the top four chains (Ethereum, BNB Chain, Polygon, and Fantom), which currently host several DeFi protocols, and the total value locked.

Unfortunately, the Avalanche was the least lucky of the bunch, as the fourth quarter saw TVL drop by 51.5%. Moreover, the decline was mainly representative of the decline in the value of AVAX’s assets rather than the actual utilization of the original coins.

Average transaction and daily transaction fees on C-Chain also fell, with Polygon and Fantom being the least affected by the market shift.

Currently, Avalanche seems to be lagging behind its peers in terms of DeFi adoption, which can be largely attributed to the economic performance of the original asset. It remains to be seen if the Avalanche can try to catch up with the top players in the industry.

Qualitative analysis

Messari’s Avalanche report also highlights some key highlights and developments.

In particular, the functionality within the network has been significantly improved through upgrades related to the Avalanche subnets. This has enabled the introduction of a wave of new DeFi protocols and the emergence of an expanding NFT landscape, with integration with OpenSea being a notable example.

Avalanche has also brought gaming to the blockchain with the introduction of GameFi, and an increasing number of unique use cases have been identified.

Moreover, accessing the Avalanche network has also been made easier with the listing of USDC on Coinbase, one of the most dominant stablecoins in the space. With Avalanche now ranking second in the amount of USDC minted on the platform, the benefit of this stablecoin within the Avalanche ecosystem is pretty straightforward.

Avalanche Forecast (AVAX)

2022 was a turbulent year for the cryptocurrency industry, with market uncertainty seeing triumphs and tragedies.

The year started on a tumultuous note, as January brought a bear market, followed shortly by the collapse of LUNA and UST in the spring and the failure of FTX in the fourth quarter. However, amid fluctuations, the Avalanche Network and Ecosystem (AVAX) showed impressive resilience and growth throughout the year.

Their platform has matured with the introduction of significant subnetwork upgrades, comprehensive partnerships with strategic partners, and their deeper penetration into the DeFi, NFT, and GameFi spaces.

Meanwhile, Avalanche’s DeFi protocols are expected to drive a financial revolution that could change how people interact with their money. At the same time, the scalability of the Avalanche platform will be an attractive draw for developers.