Avalanche has seen explosive growth in both user base and token price recently, jumping by over 173% in late August 2021. This growth is in part from its August 18 announcement of a $180 million decentralized finance (DeFi) incentive program. As a part of the campaign, 2 blue-chip DeFi protocols, AAVE and Curve, launched on Avalanche’s blockchain. The incorporation of these reputable protocols aims to bring new users to the platform in hopes that they benefit from reduced fees, fast transaction times and higher throughput.
What is Avalanche?
Avalanche is a Layer 1 (L1) blockchain that was designed to be scalable, cheap to transact and sustainable. The blockchain uses proof-of-stake as its consensus model. This method uses significantly less energy than the proof-of-work mechanism that Bitcoin and Ethereum employ. The Avalanche mainnet launched in September of 2020, and it has since grown to host a number of other tokens and decentralized applications (dApps) on its network.
Another element that has contributed to the aggressive growth in activity on the chain is the launch of the Avalanche Bridge. The Avalanche Bridge is a mechanism that allows users to port funds directly from the Ethereum network to Avalanche’s Contract Chain (C-Chain), its default smart contract blockchain. This effort can be completed in 10 to 15 minutes, and if a user bridges $75 USD or more, they receive a small AVAX airdrop to help cover their transaction costs on the chain. These features leave retail participants with a more seamless experience for onboarding and exiting the network, promoting growth and adoption.
Risks of Investing in Avalanche Tokens
Crypto assets are extremely volatile, and newer projects that experience catastrophic events can lose the large majority of their value. It’s important to understand your personal risk tolerance and investing goals before you allocate funds to any cryptocurrency. Exploits of protocols happen regularly in crypto, often with no recourse for investors. Beyond hacks and exploits, developers themselves can be malicious actors and can “rug pull” a token they created by removing all liquidity, leaving investors unable to exit their positions. The faster an ecosystem grows, and the more money that ends up locked in a system, the more motivated someone might be to try and extract that value in a injurious way.
Types of Tokens on Avalanche
The Avalanche ecosystem hosts a variety of dApps with its own native tokens. The infrastructure of applications is similar to Ethereum or Polygon, with decentralized exchanges (DEXs), yield farming platforms and non-fungible tokens (NFT) marketplaces. Additionally, as is the case with many blockchains, many meme coins exist within this ecosystem.
Best Tokens on Avalanche
- Pangolin (PNG)
- Pangolin is the most popular DEX in the avalanche ecosystem. It uses an automated market maker (AMM) to match orders between buyers and sellers. It offers options to gain interest on your crypto assets by providing liquidity on the platform. You can also find accurate charts for trading pairs within the ecosystem on Pangolin. The ease-of-use factor is strong with Pangolin, and the user interface is inviting for newer investors.
- Trader Joe (JOE)
- Trader Joe is another DEX on the AVAX blockchain that hosts yield farming, liquidity provision, staking and lending. Due to the fact that lending and trading are available in this protocol, an individual can use leverage if they choose. It also has an inviting user interface and strong community that surrounds it.
- Avalaunch (XAVA)
- The Avalaunch platform is one that aims to provide innovative and equitable fundraising on the AVAX blockchain. This means that the platform may execute token generation events, handle vesting and lockup schedules for venture capitalists and help bootstrap future token releases on AVAX.
- Snowball (SNOB)
- Snowball is a dApp with a few interesting features. On Snowball, you can have a dedicated stablecoin swap, auto-compounding yield farming and an NFT marketplace. Governance is already live and active for this protocol, and token holders can guide the project into the future.
- Yield Yak (YAK)
- Yield Yak is a yield farming protocol dedicated to providing auto-compounding farms for 18+ tokens. Auto-compounding allows farmers to generate a higher percent APY without the typical management that would be required.
Where to Buy Avalanche Ecosystem Tokens
Since the Avalanche ecosystem has multiple reliable DEXs, the place to acquire the largest variety of AVAX ecosystem tokens is on Pangolin. Pangolin is a trustless DEX that uses an AMM. In terms of centralized exchanges, Gate.io and KuCoin have an abundance of altcoin trading for AVAX tokens.
How to Store Avalanche Tokens
The primary way to store AVAX-based tokens is by using Metamask, an ERC-20 wallet that supports multi-chain storage. Additionally, Metamask can be configured to interface with a hardware wallet such as Ledger. For more information on how to set up AVAX’s chain on your Metamask wallet, click here.
Cryptocurrency Price Movements
With the recent rise in August 2021 of the price of Avalanche, Solana and Cardano, it’s clear that capital is flowing into L1 Ethereum competitors. As a result of this trend and the rotational elements in crypto, many of the smaller projects within these ecosystems began performing extremely well when their underlying L1 token increased in price.
Additionally, the coins within an ecosystem typically have significantly smaller market caps than their “parent” token, meaning that they may have quicker periods of growth. The crypto market moves quickly, and when money rotates out of an ecosystem, volatility dries up and prices can plummet. It’s important to recognize that early projects are highly speculative and can result in a total loss depending on the circumstances. Knowing your own risk tolerance and implementing risk management strategies are important when trading lower market cap tokens such as these.
Avalanche Tokens vs. Ethereum ERC-20 Tokens
Ultimately, competing L1 protocols provide a playground for developers, market participants and larger players. Avalanche’s core competencies offer fast and cheap transactions while maintaining the same or better levels of composability as Ethereum.
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