For a long time, Ethereum has been the platform that reigned supreme.
Although it’s still the #2 Cryptocurrency, it’s fair to say that 2021 has seen several contenders rise to compete with the original smart contract platform for development activity and investment.
Some of the bigger competitors have been in development for several years now – Cardano and Polkadot are the two most obvious examples – and only now are starting to see the fruits of their multi-year roadmaps.
However, Avalanche is something of an exception.
This was relatively unheard of before 2020, when developer Ava Labs emerged with the academic weight of Cornell University researchers and the financial weight of $ 60 million initial backing from top VCs, including Galaxy Digital. .
Despite a relatively late entrance, Avalanche made its mainnet debut in September last year, launching full smart contract and application functionality ahead of the competitors still working through their own roadmaps.
Over the past few months, Avalanche’s rise in the crypto leaderboards has been meteoric, posting gains of nearly 4,500% to reach its most recent all-time high in late November.
However, unlike its current table-neighbors SHIB and DOGE, the price increases have been driven out of real news, as Avalanche proves itself to be a legitimate rival to Ethereum in the burgeoning DeFi segment.
Why is the avalanche attracting so much attention?
Why are people flocking to Avalanche? Well, Zhu Su, CEO of Singaporean hedge fund Three Arrows Capital, quite possibly succeeded when he tweeted undiluted criticism of Ethereum’s mind-boggling transaction fees in late November.
Although he quickly backtracked on the most negative parts of his comment, he did state that
“I know that for the millions of new users arriving, they shouldn’t be ashamed to go to other ecosystems. Developers shouldn’t be ashamed to rely on them either.
Prior to this, Zhu had already thrown his financial weight behind Avalanche, as Three Arrows Capital was one of the investors in an ecosystem development fund for Avalanche.
Called Blizzard, the fund is worth over $ 200 million and has also secured investments from other big investors, including Polychain Capital and Dragonfly Capital.
It was the news about Blizzard that appears to have kicked off the AVA tokens epic November bull run.
Arguably all crypto markets had a good start to November as Bitcoin rose to its latest all-time high, around $ 69,000.
But AVA managed to defy the markets even once BTC moved into bearish territory, thanks to another injection of good news.
In mid-November, Emin Gun Sirer, founder of Avalanche, announced that Ava Labs had established a partnership with Big Four consulting firm Deloitte to improve the security, timeliness and accuracy of Federal Emergency Management Agency funding.
Deloitte plans to use the Avalanche blockchain to build more efficient disaster relief platforms.
Community Funding
Avalanche’s month of good news didn’t end there. Just at the end of November, news broke that Colony, a community-driven ecosystem accelerator, had raised an additional $ 18.5 million as part of an investment round led by the Avalanche Foundation.
But the interesting element of this news story is that Colony isn’t a private VC fund closed to all but accredited investors.
It is a decentralized fund powered by its own CLY token, which means anyone can participate.
Colony exists for four main purposes, all of which are aimed at furthering the Avalanche ecosystem.
It provides seed funding for projects and liquidity for DeFi protocols. It also participates in staking for the Avalanche platform and its various subnets, and finally, it purchases a basket of selected Avalanche-based project tokens to form an index.
Of course, each of these activities is designed to generate returns, either in the form of staking rewards, liquidity rewards, or appreciation of project tokens, which are funneled back to CLY holders.
CLY holders also have full governance rights to determine how colony funds are distributed to various projects.
Decentralized Funding and Governance for the Long-term Focus
The Colony model is designed to address a central challenge of the regular VC funding model, which focuses on an exit strategy for a project rather than on the long-term future of the ecosystem.
By giving governance to a community with long-standing growth in mind, Colony aims to overturn the traditional model.
In doing so, it introduces a new concept called “Ecosystem farming,” which addresses a key challenge for newcomer investors to the DeFi space – which projects to invest in? Many people feel they missed out on early DeFi token opportunities like Uniswap’s UNI or Sushiswap’s SUSHI.
But the risks of going too early can be serious, and it’s difficult for individual investors to discern which projects are a good bet in the long run.
Colony’s CLY token offers the opportunity to diversify across a wide portfolio of projects and strategies.
In addition, the decentralized governance process reduces the risk that one person or a small group of people decides how funds are spent.
