If you would like to view the full recording of the live Crowdcast event, you can find it on our YouTube channel. You can also read the full Quarterly Report by James Trautman here.
Participants:
- James Trautman – Messari research analyst
- John Nahas – Ava Labs
- Ed Chang – Ava Labs
- Luigi DeMeo – Ava Labs
- Nick Mussallem – Ava Labs
Jim Trautman (0:06): Okay, I think we’re live. We’re gonna get a check. Good thumbs up, good to go. All right. Perfect, all right. So good to see some of you again. Nick and John, we’ve had a chance to meet once before. Luigi, welcome. I’m going to just kind of set the stage for why we are here in case we have some new folks joining us for the first time. Really, the purpose for us being here is that Messari has been working on quarterly reporting, similar to what we see in a traditional world especially in traditional finance when evaluating companies and these sorts of things but at the same time very very different. You know, it’s like there’s nothing traditional about what we’re doing here, especially when it comes to reporting. The point is that capturing events and capturing data in different time series allows us to evaluate you know really how things are going whether that be through certain data, certain trends or simply you know strategies that any endeavor is putting into place and that could be companies involved, it can be enterprises utilizing the technology, as well as the community itself driving it forward. Really that’s why we are here and we are revisiting now the first quarter of 2022. Subsequent to having covered the last quarter for 2021, which was a pivotal quarter for Avalanche. A lot is going on, so the first quarter of this year is no exception. It’s the same story, we’re not going to boil everything in an hour. There’s a lot to cover so hopefully we cover everything. We’re going to try to have a conversation that if it’s the first time to this call or your first time kind of looking into what the Avalanche ecosystem is and what’s going on, we want to be able to provide some insight there all the way down to really, really deep into the community and hopefully we can provide some insight at a deeper level so you know that’s why we’re here. Today we’re really going to talk about you guys, introductions, a high overview of what we’re seeing over the first quarter, and that involves the network at a high level of what’s going on with the network. Specifically, forms of usage, daily transactions, and these sorts of things. That’s more quantitative and then it’s sort of trying to tie that then to the actual ecosystem and sort of bringing it back to more qualitative manners that fundamentally we can start to think about the value that’s actually coming to this space. It’s easy to look at price, market cap, and be like “oh it’s valuable” and see this data but, what we’re trying to do is really flesh out what’s the driver. What’s fundamentally happening here that’s driving everything and what are the efforts that everyone that’s involved, and how is that driving. That’s ultimately why we’re here. I’m a research analyst with Messari and have the honor to cover the Avalanche network and ecosystem and cover it on a quarterly basis. So that’s about me but from there let’s just start with a quick introduction of who you guys are, who Ava Labs is, what is Avalanche for those that are just completely unfamiliar, and your relationship with the Avalanche network.
John Nahas (4:34): Nick, you want to kick it off with introducing yourself, and then I’ll go.
Nick Mussallem (4:40): Sure. James thanks for having us back. Nick Mussallem, I’m the head of product at Ava Labs and so my teams are really focused on the road mapping strategy, product strategy, and competitive analysis, and then we have a project management team that leads the execution of those. We have a very talented design team that takes that strategy and makes it visual and considers the user experience. And then we also have a product analytics team that really kind of tells us how we’re doing once we take things out to market. That’s a summary of me and our teams.
John Nahas (5:17): John Nahas, Vice President, Co-Head of BD, I oversee the BD team at Ava Labs covering five verticals: DeFi, GameFi, culture, and social. So NTF’s, institutional capital markets, as well as exchanges and wallets. We’ve got Luigi here from the DeFi team and on GameFi so I’ll let Luigi introduce himself.
Luigi DeMeo (5:43): Thanks, John. Hey guys, Luigi DeMeo head of DeFi here at Ava Labs. I apologize in advance for the video and audio quality, but I span across BD and the strategy of all of our labs for DeFi and help grow this ecosystem as much as possible.
John Nahas (6:08): Can we get Ed in here?
Jim Trautman (6:10): I’d say not yet. We’ll dive into that a little bit more. We’ll let Ed in when we can. We’re limited to the number of folks that we can have on the call so we’ll have to bring people in as we get into the deeper dives into specific topics. So I guess pretty quickly to any of you, what is it and what is Avalanche. We’ve discussed this before, but again for anybody that’s new, what is it and what is Ava Labs’ relationship to it?
John Nahas (6:45): Absolutely. So Ava Labs, where we all work, is the firm that created the Avalanche blockchain. Now Avalanche is an open-source, Layer One blockchain so Ava Labs is a service provider to the Avalanche Foundation. We help with BD, with marketing and development on the protocol level, as well as a lot of other work that we do with enterprises and partners. Avalanche, as most of you know, is a new Layer One blockchain launched in September of 2020. Avalanche utilizes a novel new consensus which is the Avalanche consensus which allows us to achieve speed, high throughput, and the entirety of the network is actually very eco-friendly. Based on a recent expert study, the entirety of the Avalanche blockchain utilizes 46 U.S. households worth of carbon which is really low in the proof-of-stake family relative to some others in our group and infinitely more green than the proof-of-work chains of course. Avalanche is a multi-chain architecture. We have an X-Chain where you’re able to create, mint, and burn assets with limited business logic. We have a P-Chain where validation delegation occurs, but also the ability to create permissioned or permissionless chains, what we call subnets, which I’m sure we’re going to dive into a little bit later. And then of course our C-Chain which is our EVM compatible smart contract chain. That’s where a majority of the action that you see in DeFi and NFT’s is occurring so think of us as an L1, but in some capacities, you can even think of us as a Layer Zero allowing for a true Web3 economy to grow and to see the transfer value continue.
Jim Trautman (8:25): Great sense. Okay, thank you for the introduction. Let’s kind of just move into why we’re here and really set down Q1 of this year. So I’m going to share my screen. Hopefully, we might see all of us for a moment. Just let me know when you see this sort of report in front of you. Good on that?
Nick Mussallem (9:08): Yeah, we can see it.
Jim Trautman (9:25): Okay great. All right, so as I mentioned we are now more or less tracking in a 90-day interval the development and progression of the Avalanche ecosystem, the Avalanche network. Sort of very quickly revisiting the fourth quarter of 2021 because while we can always just look at a snapshot of the last three months or the quarter, there’s always a relationship to the prior quarter that we need to bring into the discussion and one thing that we’d asked last quarter because it was an explosive quarter at the end of the day and all given fronts of every metric that you can evaluate and every partnership and everything that was going on in terms of any given growth strategy, we asked why. Some things are not in this report and John you had mentioned the importance and we spoke about it at length last quarter about one of the things that is important to anyone that will engage with the Avalanche ecosystem is the eco-friendly carbon footprint that the blockchain leaves. In this quarter there was actually more data that came out about that and it’s not in this report because it’s not easily tied to the data that we’re evaluating. I just wanted to call that out and then it is a big reason for folks to want to use this particular platform. That said, there were many partnerships executed and things that were basically in the works as we headed into the first quarter of 2022, and the narrative really that I took away from this first quarter is that there was continued growth. What I’m kind of showing here right now, and we’ll step away from this is what the report is all about and I just want to share with the audience what we’re trying to do is give any reader key takeaways of the quarter and provide data, provide some background on Avalanche itself and ultimately tie it back to anything qualitatively going on. So just a preview of the report itself. Let’s see, let’s focus more so on the data that’s within the report itself. We want to make sure you all can see this. That the state of Avalanche Q1 2022, is it visible to you all?
Nick Mussallem (12:28): Yeah, James we can see we’re on the Avalanche key metrics summary page.
Jim Trautman (12:31): Perfect, okay. So as I mentioned we did see continued growth and in the report, I refer to it I think in one spot as modest growth, but that’s really compared to the fourth quarter when you see network usage and network financial metrics growing at 500% or 600% and so on and so forth and I think in some cases into the thousands of percentage points. In Q1 we saw continued growth, but not like we saw in Q4, but calling out that it’s still growth. What stood out to me was continued growth in active daily addresses. So just regular interaction with the network. We saw a 33% increase in that metric as well as daily transactions. One of the other ones that stands out to me again is we knew we saw a 72% increase in revenue and from an evaluation point of view, that actually put downward pressure on what we call the price-to-sales ratio which suggests, you know, it’s not perfectly vetted from the financial perspective on the complete meaningful point that this metric has, but relatively when you look at it across the space there is some insight from it. And what we’re leading to is again, there’s always a question as to why. Here’s the Avalanche address group and of course, we see over the fourth quarter amazing growth and then we get into the New Year and it was actually in January that we saw an all-time high of active address growth and there was a statistic in there that the first week of January actually consisted of more activity than all of October, but since then we’ve sort of stabilized. So that’s the other narrative. A lot of times what we see in other networks is a lot of growth, and then it subsides. It reverses course and it’s volatile. And while there’s some volatility here, we’re still seeing some stability in that. Well, actually, I shouldn’t say some, but quite a bit of stability in activity. Similarly, it’s the same with daily transactions. We’re seeing an upward trend there and we have plotted here against that transaction fees. So I wanted to kind of start with that. As we think about why the continued growth in activity, daily transactions, and also interestingly enough what’s going on with these transactions? So I’ll come back to that but, in my findings, and you guys can speak to this, but as we crossed over into the New Year there was the really the launch, the unleashing of the custom EVM subnets. I think that’s part of what we were seeing here. Also, I had seen some releases of Apricot. But first, if I may ask, what is the importance of the EVM subnet? And there was a JSON file that was also released that I believe made it very easy for folks to develop and create their own EVM custom subnet. Can you explain a little bit about that shift and what that means?
John Nahas (16:33): James, I’ll turn this over to Nick and then to Luigi to add on to the subnet, but real quick just want to recap some of the important things that you highlighted. We’ve seen sustainable and consistent growth to your point. There’s usually a burst and then it tapers off. We’ve seen the doubling of transactions, we’ve seen continued usage, we’ve seen continued growth with new applications continuing to grow, new innovation on the chain, new projects, new teams building. So that initial kick that we got from Q4 has really continued into Q1 and I know we’re going to discuss a lot of the things that we have coming that came about in Q1 that are really going to propel us in Q2, but I think it’s a really important metric, to highlight that there’s a consistent and sustainable growth in users and transactions and in partnerships across the board. But to your point on the EVM subnets, Nick, do you want to jump in?
Nick Mussallem (17:34): Sure. So we’re at a very exciting time where we start to see GameFi really start to explode on-chain and with the advent of any kind of high transaction high throughput application you’re going to need to be able to horizontally scale, and subnets of course are our horizontal scaling solution. It’s been a very exciting quarter as we’ve launched DeFi Kingdoms onto that subnet. So as we start to do this we’re starting to tackle a lot of the questions around subnets are they’re ready to be used. You can deploy them very easily. There’s a ton of documentation on them but there’s a whole satellite of utilities that need to be there in order to properly support subnets which is while we’re moving into the development of Core and which is our wallet experience which is going to have support for all subnets which we’ll be launching very soon as well as explorer support. Each and every subnet needs to have its own explorer. So we’re building out the mechanism to launch these subnets. But when you launch them, you also need to launch the utilities rim which also includes things like API’s and our endpoints that are needed to successfully run them. So that’s what we’re seeing around subnets. We’ve got the baseline technology there and we’re starting to see rapid usage of it in very innovative ways so we keep making it smoother and easier for the builders and also for the users to access them and engage with them and really leverage other kinds of utilities to get the most out of them. That’s the focus in Q1 and then going into Q2 as well.
John Nahas (19:20): Luigi, do you want to touch upon the importance of EVM subnets of course in regards to DeFi and everything else?
Luigi DeMeo (19:23): Yeah, I’d be happy to. So I think Nick touched on it well. Subnet EVM allows you to deploy a subnet in one line of code. It’s an EVM-based subnet so what this allows is it allows applications to deploy on the Avalanche C-Chain where a lot of our activity sits. Once they get to a certain level of activity and require more transactions and throughput, they can easily divert into their own subnet once they build the community and kind of naturally horizontally scale the network. What that does is two things: it allows the transactions on the main chain or the C-Chain to go down and fees go down, but it also allows overall network throughput to go up. This is just a way of horizontal scaling. Just to touch on the address chart a little bit just to give a little context, I think it’s important to look at those numbers from a relative perspective. Crypto in general topped at the end of November and since then we’ve sort of seen it across the board, whether it be Bitcoin, Ethereum, alt chains, Coinbase earnings across the board, we’ve sort of seen a stagnation since that time period. What’s important for Avalanche is Avalanche was able to experience explosive growth and usage and retain all that usage during this time period. I think that’s the key. People came for new incentives, especially as it relates to Avalanche Rush and DeFi and they stayed and I think that’s the important component to think about from that standpoint.
Jim Trautman (20:59): Yeah definitely. That’s again one of my takes, and by the way as an analyst with Messari, I’m really not in the community. I’m not as far down as everybody else probably is when it comes to the Avalanche ecosystem. My job is simply to look at data, try to understand it, look at trends, see what’s going on there and let it drive the discussion. The takeaway primitive where Q1 was again, continued growth and what I am referring to as stability and I see it as a potential foundation for the next potential wave of growth whether that comes through NFT’s, DeFi, GameFi, enterprise or commercial uses. We’ll see, but that was my takeaway so I echo your sentiment about that stability. One of the things I wanted to talk about a little bit more was vertical scaling but we probably don’t have time to go that far into that topic in particular. But really quickly, I do want to revisit what we see here in the past in a lot of volatility with the daily transactions on average up until the point where there was a release of Apricot. After that point, that was right here, what we saw is I think an actual impact from that release and I think that’s very interesting to see. I would call this period of time very stable compared to what we saw in the past. Especially at a time when daily transactions on average are going up. A couple of statistics about daily transactions by the way; on average Avalanche is approaching about 74% of Ethereum’s daily transactions on average. There were times when it reached about 90% or more, roughly a little bit more than what Ethereum was processing on any given day. Meanwhile, transaction fees are stabilizing. There is still a little bit of an uptrend that’s moving in tandem with network users and transactions. This is all happening now at the same time as subnets are rolling out. So should we expect to see daily transaction fees continue to stabilize and even if anything, reverse course as more subnets are launched?
Nick Mussallem (23:53): Yeah, so James I can jump in there. Absolutely. I think what you’re seeing a lot in the increase of transactions has a lot to do with GameFi and just the nature of the bulk of what comes through there. The kind of horizontal scaling work that’s done as a part of Apricot in the five phases really focuses on those things, which is how do we take the original mainnet launch and how do we make it faster? How do we reduce the fees? How do we make it more stable? How do we improve liveness? That’s the focus and we’ll continue to focus on that, but as we start to see other projects that come in and say need their own subnet because they want to have specific functionality that maybe is around lower fees higher throughput and they’re starting to use things like pre-compiles that are specific to gaming. That will allow them to achieve these things very easily and when those games start to move into the subnets you’ll start to see congestion on the mainnet drop and then you’ll start to see fees drop. In summary, the continued focus on Apricot in the horizontal scaling of the mainnet implementation plus the advent and the maturity of subnets will have both of those effects. Faster transactions, lowering fees, and also providing scaling solutions.
John Nahas (25:24): I think it’s important to add on to Nick’s point. As you mentioned, fees have gone down. They are ticking a little bit up as usage ticks up but I think Avalanche as a platform prioritizes safety and liveness above any and all things. So in this respect, we are taking a very conservative approach. We would rather have a little bit higher fees, but have the network continue to run without any interruption, without any downtime, without any issues, because ultimately that’s the goal. You need to be on 24/7/365 to keep up with this existing market. If we were to be a little too aggressive, we could end up having some issues as we’ve seen across the board with others and that’s just not the attitude or the stance that we would like to take. We’d rather be on the cautious side, on the conservative side, and work to bring down the transaction fees gradually to a comfortable spot that doesn’t affect network usage.
Jim Trautman (26:40): Yeah that makes perfect sense. And look, I think with any of these networks there are always these trade-offs and there’s a responsible way of rolling them out that doesn’t just happen overnight. So there’s a strategy to make it work with a long-term vision. That’s what we’re going to track again and that’s why we’re doing what we’re doing. We’re going to be able to, next quarter, continue on with this trend and see with the number of subnets that launch, how much activity from each, and what sort of impact that has. But at the end of the day, we still know that vertical scaling and horizontal scaling is underway and what we’re seeing now is more of a stable trend.
And then, of course, a strategy is in place, so I found this very interesting. I found this chart and data very interesting. Now, really quickly, I do want to dive into what it means in terms of revenue. Some folks out there are concerned if the transaction fees go down, then that means there’s less revenue to the protocol. But I don’t think that’s necessarily true. I think that’s a bit to be determined, but I do call in this analysis there’s clearly a relationship between the value of the network versus the revenue. So if daily revenue were to go down as a result of subnets, and there is a relationship that holds the value of it in the short term, I’m concerned that the value of the network is going to go down. But the benefits of the subnet, correct me if I’m wrong, are of course in addition to being able to scale and thinking about it long-term it opens up not only use cases, but it will allow for the ecosystem to expand in other ways that will drive additional value. One of those other pieces that I think about is the infrastructure itself. Every subnet will participate in validating the network so I would expect that while transactions need to go down or stabilize, however that will look, we’re going to see an expansion of the network itself. The number of validators going up the distribution of stake, further moving it, and being more diversified. Is that is that fair to say in question one? Then question two is if that is fair to say, what does that mean about the value of the network in your opinion?
Nick Mussallem (29:36): Sure so John why don’t I kick this off and then you can. So I think strategically we don’t feel like we want the cost of using the network to have to go up in order to drive underlying chain revenue or the value. So our goal is always going to be to make the chain affordable. As we make the chain affordable we also want to be able to scale it. These are the hard parts, right? How do you scale horizontally? How do we achieve that? We’re achieving that with subnets. So we really will just keep scaling the network horizontally, providing the necessary utilities for builders to get to market affordably and quickly, and easily. With things like explorers, wallets, RPC endpoints, and interoperability between subnets to subnets, and subnets to mainnets, and subnets to other chains. So if we feel that we can provide all of that value in an easy-to-use package then we’re going to be giving the users what they really want which is a very affordable chain that also scales.
Jim Trautman (30:48): Got it. Okay well, I think we got into that enough. It’s an important trend that we’re seeing. It’s an interesting thing. There’s a lot of chatter in the world in and outside of the community. Of course, other communities that will point these sorts of things out and have concerns but it’s not if you just take a step back. Think about it, to determine what is actually happening here, it’s really interesting, in my opinion on that front, so and I think everything that you said right there makes sense on the direction of usage and where its value will come from and its ability to scale.
Nick Mussallem (31:40): James, I’ll just throw real quickly there that every validator that validates subnets has to be validated. The kind of magic number is no less than five. Each validator has to stake a box right and we didn’t want to have to enforce that every subnet use AVAX as its native token because that’s taking flexibility away from the builder which would have been an obvious choice in order to increase the usage of the underlying token. But we think that there’s a bunch of other kinds of network means from having subnets that will increase the utilization of AVAX and the underlying tokens that are launched on these subnets and so that is a whole growth system.
Jim Trautman (32:22): Yeah for sure and I think part of that will show up in the development and decentralization aspect as an overview in our reports as well. So it’ll all be tied together and be really interesting to see. We’ll probably talk about it more next. Okay, thank you for that. That’s kind of like getting into the network overview aspect of what we’re looking at quarterly. We could spend the entire hour discussing all of these things and going even further but since time’s ticking, I do want to move into the ecosystem itself and developer activities. Then I think from here we’ll end up diving a little bit further into DeFi and GameFi and we’ll bring our GameFi folks on to the call. But really quickly, I just want to point out that over the course of Q1, we did see a pretty significant increase in core developer activity. I suspect that it has everything to do with everything that we just talked about including EVM custom subnets and as well. I think some new incentives are in play here. And two of those incentives will be referred to as the Multiverse Fund or Multiverse Incentive Program and the Culture Catalyst Program. Can you guys sort of just give a high level of what each of those programs really represents and what you’re going after there and sort of the outcome that we’ve seen so far? Any partnerships that have come out of those programs and where there’s some traction?
John Nahas (34:27): Absolutely, so I think as we remember from Q4, Rush is really what started a lot of the push for us to grow. That was a DeFi incentive program. We’ve now moved on to both the Multiverse Incentive Program which is about $290 million worth of incentives to support the growth and expansion of subnets as well as a Culture Catalyst, which is a $100 million to support artists and creators of build or grow their fan base and launch assets on Avalanche. A key caveat here to keep in mind, something that Avalanche focuses on, or that we focus on, is incentivizing the user. A lot of people give out grants. A lot of people do a lot of things. Our core belief, and the way we look at growing adoption, is we want the best teams to come and deploy their products and projects on us. We want people to build on us, and if they do so we’ll incentivize the user to come and try it. And then those incentives start to wean off as we’ve seen with Rush. So that brought DeFi to the fore. Multiverses is focused on increasing the growth of subnets. So that’s either incentives for users to come and try a specific subnet as we’ve seen with DeFi Kingdoms which is doing about a quarter-million transactions a day right now. We’re also building out an institutional subnet for DeFi. You might have seen some of the participants there. Jump, Wintermute Golden Tree Asset Management, Valkyrie Securities, amongst many others that are also coming into that group. What the point there is that we’re going to really look to provide TradFi players who want to work in DeFi with a regulated kind of permission chain where they can do the things they would do in DeFi, but with trusted and KYC counterparties. If you’re a financial institution you cannot be providing liquidity to a market or borrowing when you don’t know who the other counterparty is or if that other person could be from a sanctioned country or on a no-fly list or anything of that nature. Now, in a permission DeFi subnet, you don’t know who the counterparty is, but you know that all the parties in there have gone through the necessary checks so whether it’s institutional DeFi, whether it’s enterprise, whether it’s GameFi, the multiverse is there to help support these people by either giving them incentives to stand up their own validators so that they can run their own subnet and that’s in the form of AVAX. We’ll give them some AVAX and get that back once they’re set up on their feet. We’ll do incentives like we did with DeFi Kingdoms to get users in there. So that’s really the crux of multiverse, to really expand the usage and allow builders to really come and not have that overhead to launch a subnet. We’ll help them out initially until they get up on their feet with that and then we’ll get back what we need and let them kind of grow on their own. On the Culture Catalyst, I’d love to get Ed to jump in on this as well. What we’re really doing is spurring creators and artists. So we’ve partnered with a great team at Op3n that’s O-p-3-n, so it’s an app that’s akin to a Spotify for artists, creators, and musicians to really have a fan base. NFT’s that are more than just art but that link to communities that have fan access and engagement and I’ll let Ed talk about the first one. The first project there that we announced at our summit in Barcelona and give kind of a high level as what we see coming down the pipe there.
Ed Chang (38:08): Yeah thanks, John. So like John said, we’ve set aside a co-funding opportunity for up to $100 million for this program. It’s called the Culture Catalyst. We are working with Op3n and they have the pulse on all things entertainment so you know the direct line to musicians, and you know film producers and IP and influencers. So everything we’re going to be doing is really about jump-starting that NFT community on Avalanche and really fostering the growth there and bringing in more of a retail audience as well. The first project that we had announced at Summit is with Grimes the singer, the producer, and the director. She’s actually, now with the birth of her second kid, looking to put together kind of an NFT children’s book based around crypto. There’s going to be a music video around that. Kind of a new song she’s launching that’ll be the first one that we announce. There are a few other really exciting ones in the pipeline geared around the film and music industries that we’re really excited about. Think about NFT’s as membership NFT’s as your calling card to deeper access with some of these artists and apparel and other things that it unlocks. So we’re really excited about what we’re doing there.
John Nahas (39:22):Ed while once you jump in a little bit and talk about just multiverses and its impact on GameFi the growth that we’ve seen in GameFi this quarter because I think that’s really really stuck out the most.
Ed Chang (39:33): Yeah, so you know my core focus here has been on the GameFi side and we’ve seen a lot of growth over the last two quarters. We’ve gone from this narrative of a lot of these casual-like, idle games built, moving forward into more core double a triple a experiences we’ve announced partnerships with a lot of these really new games. Here, looking at the launch of subnets, the first two subnets that are going to be launching. DeFi Kingdoms already launched and we’ve got Crabada really close behind them following with the launch of battle mode. So, when we look at the pipeline of the different games out there, it’s looking really healthy in terms of the games that we’ve announced and that are in development right now. As well as some of the games that are kind of stealth right now that are waiting to be announced in this quarter and the latter half of this year.
Jim Trautman (40:32): Yeah, that makes sense. And again I think we can see that impacting all the activity as again, we started with this discussion around some developments and DeFi Kingdoms. We knew that was coming and that it went live right at the end of the quarter. There’s more to say about it, but in the window of Q1, it was right at the end. I think it was the day or two before, and we actually did start to see data rolling in through various explorers as it relates to DeFi Kingdoms. So yeah, that’ll be, I think, a hot topic for the next quarter. The other one is Crabada. Is that how you say it correctly?
Ed Chang (41:16): Yeah, Crabada, nailed it.
Jim Trautman (41:18): And again, DeFi Kingdoms is part of the multiverse program at this point. Obviously, there’s going to be some incentive there to continue to develop a little bit. Can you just give us a real high level of what it is Crababada and this is generating a lot of activity on a test net right now. Can you just kind of give us a high level or is that where we bring in our expert on Crabada?
Ed Chang (41:55): Yeah, so Crabada is one of the early games in the ecosystem. At any given moment they’re taking between 15-40 percent of the gas on the c-chain. People love the crabs. It’s effectively like an idle game that you need three of these crab NFT’s to play. They are moving towards more of an Axi-type battle mode game and they’ve got other things planned on their road map that they’ve teased out. People are always running looting missions and mining missions and getting tokens from that and there’s this whole economy and community built around that. So this is kind of their core game that they’re launching their subnet on called the Swimmer Network. The vision here, the reason they’re not calling it the Crabada subnet, is because they’re looking to be more of a publisher of games. So they’re going to be launching their idle game there, they’re going to be launching their battle mode game and then they’re looking to potentially bring on other titles who are looking to be on the subnet to capitalize on that community. So you can see where the economics get really interesting. Where they have an inflationary token called TUS, similar to Axi’s SLP but it drives more value. And now they have another mechanism that they can burn a lot of that TUS and they can also take some of that and go reward their validators. And if more and more games are using that in their marketplace for their games, there’s that additive value being driven to the token and the network itself.
Jim Trautman (43:25): Makes sense. I was able to dig up some initial data on the Crabada subnets again, seeing it very quickly grow so collectively as we see more and more of this occur, we’ll try to tie it back to the growth strategy that’s in place as well as translates into the activity and the data that we’re collecting along the way. I think DeFi Kingdoms and Crabada are examples and I know it’s impossible for us to exactly pinpoint what is driving every aspect of the activity, but when you start to sort of timeline things and time stamp and look at how the network is reacting to it, I think it’s pretty clear that that there is an impact from the rollout of subnets and really the introduction of GameFi into the Avalanche ecosystem. So anything else on the DeFi front? We’re already 10 minutes to the hour so?
John Nahas (44:32) I’ll just add Luigi’s been having connection issues. But, I’ll just add on the DeFi front, I think what you really saw, and this was part of our ambition and our goal that we set for ourselves in Q4 and that really played out in Q1, was that you know, with Rush, we brought blue-chip DeFi protocols on like Aave, Curve, Sushi etc. That gave people comfort coming to use it and then we saw existing native Avalanche applications grow. We saw new Avalanche native applications grow, but what we saw really in Q1 is really the launch of new novel projects on Avalanche that previously didn’t exist or were tried to be built somewhere else. We saw some teams that were native to Ethereum such as Alpha Labs launch their Alpha X product on us first. The speed of the chain, and the lower cost made it easier for people within other communities to develop applications that have been launched on Avalanche and for the developer community within Avalanche to grow whether it be Platypus, which was just a single-sided stable swap. We recently had Yeti launch. We’ve seen the Platypus wars akin to the Curve wars. Now we’re starting to see the Joe wars akin to that as well so we’re really starting to see a native community of builders and developers grow build projects on Avalanche to continue that growth in DeFi, in terms of development and new contracts. So you know all the metrics that matter have definitely been trending in the right way so we are really excited to see the community continue to grow, and to innovate as the network grows.
Jim Trautman (46:23): Yeah for sure. A few quick bits that I gathered on the DeFi front is that Platypus Finance is the fastest growing DeFi protocol over the quarter. There was what is referred to as the long tail, so the number of protocols that have a million or more in TVL, stabilized. So kind of look at that as a greater distribution of TVL so I think that’s a sign of health in the DeFi space. You know of course Rush has a little bit to do with that and you know all sorts of things that also then translates into developer activities so we saw a greater number of growth in contracts deployed over the quarter and that’s all tied into that. We’d love to dive a little bit further into that and try to boil the ocean inside of an hour here. But let’s just take a few quick minutes to like one or two high-level events that stand out to you. To me the Summit stands out to me. I was there and didn’t have a chance to meet you all but gathered a lot of information. I guess a few of the top-of-mind sort of partnerships or efforts that you guys are working on. Maybe it’s Grimes or maybe these other things and again I’m talking about a minute because I want to leave the time for some questions, as well as what’s ahead. I could mention Core, we know that that’s on the way, and user experience is on the way. So yeah, putting it on you to like two minutes more or less, what’s exciting to you as of recent developments in terms of continued development, and what’s ahead, what can we expect, if you can, whatever you can show?
John Nahas (48:15): So I’ll kick this off and then I’ll turn over to Nick to talk on the product side. I think instead of two I’m going to give you three things. I think one, what you saw was a continued growth on the BD side of the infrastructure level and that kind of the pipes and the roads that helped to build out an ecosystem so you saw USDT launch after USDC launched natively at the end of Q4, but you’ve seen both of those start to grow. You’ve seen an expansion in exchanges whether it be FTX or others. You’ve seen exchanges now on onboard USDC and USDT native to Avalanche. All these things, custody, staking, and wallets, just continue to grow so we’re reaching more people. The pipeline in and out of the network is getting easier. Fiat on-and-off ramps and everything there. So that really is the foundational layer that’s been growing that allows the builders to come in for the users to try the network and to grow from there. I think the second thing of course is the Culture Catalyst and Multiverse to really drive continued growth with subnets across GameFi, DeFi, enterprise. I think you saw with enterprise last quarter I know he touched on Deloitte, but of course, Ava labs is a partner with Mastercard Star Path program and working with them to kind of put together some pretty cool POC’s hopefully in the future as well as Lemonade right an Insurtech insurance provider to work and create a proof-of-concept Parametric Insurance Program that can be rolled out globally to those that are underserved in the insurance markets but hopefully one day can lead to the inclusion of smart contracts from blockchain technology into traditional insurance. That’s the second thing and I think the third thing to culminate the quarter was truly the Summit. I think it was more a culmination of several years worth of work for us to arrive at that point. It was fantastic to see so many people. I’m pretty sure we could have had a lot more but we’re really looking forward to continuing that trend. That was our first Summit, our first inaugural Avalanche event and I think it was a great illustration of the diversity of this community whether it be builders, partners, investors, friends, and everything across the board. I think what you’re gonna see this coming quarter is really the multiverse expand, the growth of subnets and Culture Catalyst really take a leading role going from there. I’ll turn it over to Nick to talk on the product part.
Nick Mussallem (50:45): Sure. I’ll be real quick because I know we want to take some questions. So I think we’ve talked about scaling and that’s a huge priority for us. We’re attacking that with subnets and then the second goal is to really make crypto on Avalanche more accessible to everybody. How do we leverage this great technology and that solution is in Core. So Core is really this curated Web3 operating system that allows users to really access the best parts of crypto in a way that they can understand everything’s native to Avalanche itself so you’re not having to know how to add custom tokens or deal with smart contracts directly. It’s really designed to really give people a comfortable experience to be able to interact with the chain and then two other things is the Bridge, so the addition of Bitcoin support to the Bridge so the ability to natively bridge bitcoin across. You’ll be able to do that through the Core extension so we’ll have bridging embedded into the extension itself to make it as easy as possible. And then finally make it easier for the builders to get to market and that really is expanding our partnership with AWS and starting to look to ways to deploy and manage blockchain and specifically manage subnets.
Jim Trautman (51:59): Perfect, thank you. I know we’re speeding up here in terms of all the concepts and discussions to get into, so really quick I’m going to wrap it up in like 30 seconds to try to field a couple of questions and we’ll move on. Again, continued growth, and stabilization of the network across metrics and across the ecosystem. We saw the EVM custom subnets kind of roll out things that we didn’t mention partnerships with other protocols like Terra partnerships with enterprises, Wildlife Studios, DeFi Kingdoms launching Crabada launching, a lot going on so you know I guess for the folks that aren’t terribly familiar here, take a look at the quarterly report to get more detail you know as well as all the resources that are out there available to the community. All right, so quickly going to try and take at least one question if I can figure out exactly where they are.
John Nahas (53:08): Yeah, let’s grab some questions.
Jim Trautman (53:28): How about that? I’m still sharing, aren’t I? Here we go. Let me squeeze into that. We might go a minute or two over. All right, let’s see. “I think Terra is one of the main competitors for Avalanche. How does Avax plan to compete with Terra and especially its stable coin? Does Avalanche plan to release its own stablecoin?”
John Nahas (54:04): Can you repeat it one more time James? You cut out for me in the beginning.
Jim Trautman (54:06): Sorry about that. So I just mentioned Terra. “I think Terra is one of the main competitors for Avalanche. How does Avax plan to compete with Terra and especially its Avalanche plan to release its own stablecoin?”
John Nahas (54:25): So that’s actually a great question for the simple reason that you know there’s a narrative out there that L1’s or the other L1’s have to be competitors and we don’t see Terra as a competitor. We’re all in this to grow this pie in this industry and this entire ecosystem together. That’s why we partnered with Terra. We partnered with Terra as you might have seen in the news, and AVAX is going to be backing UST through that purchase. Luigi can jump in and get some more color on that partnership but we don’t have any plans on launching a stable coin. Why would we when there’s a great one out there that we can partner with and help solidify? So Luigi, do you want to jump in and talk a little bit about that?
Luigi DeMeo (55:00): Yeah sure. Sorry for the issues again from before, but yeah I mean we obviously had this very large announcement with respect to Terra and you know Terra’s main goal is at least for my conversations with Do [Kwon] and that team is to grow UST adoption. Terra is a zone of Cosmos that is the chain that they do and LUNA is the staking token of that zone which helps secure the network. So that inherently drives some value to that token which helps to secure it for the stablecoin. From our standpoint, we have one of the most robust DeFi ecosystems out there which is obviously attractive for a decentralized stablecoin. So the partnership really makes sense from both sides. The DeFi ecosystem that needs a decentralized stablecoin and then the decentralized coin that wants to be integrated within a very robust and diverse DeFi ecosystem which Avalanche has at this point. So I think it’s just a natural fit from that lens.
Jim Trautman (56:04): Makes sense. I mean you mentioned last quarter John that you know it’s really not about competition. I think even in my report I called out a competitive analysis that’s more of a traditional way of evaluating this. It’s more of like a peer group, everybody has their own place and it’s all about driving things forward and of course a lot of the credit goes back to Ethereum and the Ethereum community. So, we are out of time. I wish that we could ask more questions but I know that you guys are super busy and I want to be respectful of that so next time I will be a better moderator and try to leave a little time in the end for questions and of course, I would say to you all and the community and all the audience I’m wide open to feedback on any metrics that aren’t in this report. Anything that you would like to see, questions that you would like you to know, we’re wide open to that and we’d love to continue evaluating and just continue evaluating and continue the conversation going forward. So with that, thank you all. Thanks, everybody for joining. Thank you team for joining us. It’s always a pleasure chatting with you guys. So that’s where I’ll leave it. If you have any last words, you have another event that you’d like to invite us to, let us know.
John Nahas (57:40): I did wrap up the last broadcast by inviting everyone to the Summit so I wish we had another summit coming up right away or else I would. But we actually will be doing a pretty big activation in July around the Formula E race in New York. It’ll be in Brooklyn. We are New York-based. We’re Brooklyn-based, so we will be doing some really cool activations around that date so stay tuned for an Avalanche House in July in New York. Hope to see you all there. Thanks, James.
Jim Trautman (58:07): Awesome. Thank you, guys. Take care
Nick Mussallem (58:09): Great. Thanks, guys.
