Layer-one blockchain networks like Bitcoin (BTC) and Ethereum (ETH) form the foundation of the cryptocurrency ecosystem and enable smart contract functions that have enabled the creation of new industries like decentralized finance (DeFi) and non-fungible tokens (NFT).
Avalanche (AVAX) is a relatively new layer-one solution, the price and acceptance of which have increased significantly recently as the dominant smart contract platform (Ethereum) continues to struggle with high transaction costs and slower processing times than its competitors.
Data from Cointelegraph Markets Pro and TradingView show that after hitting a low of $ 12.24 on August 3, the price of AVAX rose 205% to a multi-week high of $ 37.42 than its on August 20 24-hour trading volume rose to more than $ 1.4 billion.
Three reasons for AVAX’s significant price growth are the rapidly growing DeFi ecosystem, the release of the Avalanche Bridge to Ethereum, and the protocol’s unique token design, which offers dynamic fees and a token burn mechanism.
Avalanche Rush expands the DeFi ecosystem
One of the biggest developments for the Avalanche Protocol was the announcement on August 18 of Avalanche Rush, a $ 180 million liquidity mining incentive program launched in partnership with Aave and Curve that aims to get more applications and introduce assets into its growing DeFi ecosystem.
Experience the power of #Avalanche. Welcome to #AvalancheRush, the $ 180 million liquidity mining incentive program partnered with leading DeFi dapps – both inside and outside of Avalanche – starting with @aaveaave and @curvefinance. And that’s only phase 1! https://t.co/YGrrVB7Uqc
– Avalanche (@avalancheavax) August 18, 2021
Phase 1 of the Rush program is slated to begin in the near future and will allow AVAX to be used as an incentive for liquidity mining for Aave and Curve users over a period of three months.
A total of $ 27 million in AVAX was provided by the Avalanche Foundation to fund the incentive program, with additional allocations planned for Phase 2.
The program was designed to demonstrate the Avalanche Foundation’s commitment to scaling DeFi on the network and helping to “create a more accessible, decentralized, and cost-effective ecosystem”.
Evidence of DeFi’s growth on the Avalance network is the increasing Total Value Locked (TVL) in protocols on the network such as Pangolin and Benqi Finance, which recently exceeded a TVL of $ 300 million.
Ethereum Bridge makes it easy to migrate assets
A second reason for the bullish growth of the Avalance ecosystem in recent weeks is the release of the Avalanche Bridge (AB) on July 29th. This “next generation cross-chain bridging technology” enables the transfer of assets between the Avalanche and Ethereum networks.
The Avalanche Bridge (AB) only started 3 weeks ago.
Today, AB officially transferred over $ 100 million in tokens to and from Ethereum.
Interested in using powerful DeFi apps with low transaction fees? Transfer your wealth and try #Avalanche DeFi! https://t.co/UAY69mSUgW pic.twitter.com/FrN69Ev7pA
– Avalanche (@avalancheavax) August 19, 2021
As can be seen from the tweet above, in the three weeks since launch, the AB has transferred more than $ 100 million in token value between the two networks as holders seek lower fee environments to conduct their transactions.
The AB is estimated to be five times cheaper than the previous Avalanche-Ethereum Bridge (AEB) and is said to offer a “better user experience than any previously introduced cross-blockchain bridge”.
If Ethereum can’t get its high transaction costs under control in the near future, there’s a good chance assets and liquidity will continue to migrate to chains like Avalanche as their DeFi ecosystems grow in size and value.
Related: Avalanche (AVAX) in the “overbought” area after 100% profit in one week – correction imminent?
Burning transactions improves AVAX tokenomics
A third reason for the increased interest in the Avalanche Network is the unique tokenomic structure of the protocol, which includes a mechanism for burning transaction fees that helps reduce circulating supply over time.
#Avalanche burns all transaction fees.
See how much has been burned so far! https://t.co/LpxU9dtyXy
– Avalanche (@avalancheavax) August 20, 2021
As mentioned in the tweet above, all Avalanche fees will be burned for the benefit of everyone in the community as the limited supply of 720 million AVAX is guaranteed to decrease over time. This could help increase the value of the remaining tokens in circulation.
At the time of writing, more than 163,000 AVAXs have been burned, a number that is growing faster as more users transact on the network.
The network’s charging mechanism will also be updated to Apricot Phase 3, which will introduce dynamic C-chain charging on August 24th.
⭐Aprikose Phase 3: Dynamic C-Chain Fees
Apricot Phase 3 Upgrade will be activated on Tuesday, August 24th at 7 a.m. EDT (11 a.m. UTC) on the @Avalancheavax Mainnet
More information: https://t.co/XDS91iR4jD#Avalanche $ AVAX pic.twitter.com/eJV0pVPbf3
– AVAX Daily (@AVAXDaily) August 16, 2021
The new integration enables the addition of a time-based, rolling window charge calculation, a limited charge range of 75–225 nAVAX and a block gas limit of 8 million gas.
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