According to a recent report from VanEck analysts, Avalanche (AVAX) is experiencing a significant decline in users and activity across all blockchains.
The report reveals that Avalanche lost 34% of its daily active user base in September compared to August, and its fees decreased by 45%, marking the second-worst decline among Smart Contract Platforms (SCPs) tracked by VanEck.
The number of weekly active developers on Avalanche dropped to 28, in stark contrast to Solana's 165 and Polygon's 125. This represents a decrease of 34% on a monthly basis and 70% on an annual basis compared to September 2022.
Despite these challenges, Avalanche recently released updates to its software development kit “Hyper SDK” that allows users to create blockchains capable of processing 143 thousand transactions per second (TPS), according to the report. This figure significantly surpasses Solana's 50 thousand TPS claim and far exceeds Ethereum's estimated 200-300 TPS.
Avalanche's long-term strategy involves creating a multi-blockchain network powered by the AVAX coin. This strategy is based on developing a software development kit (SDK) that encourages others to build blockchains and brings new ideas, users, and fees to Avalanche's growing blockchain network. Ava Labs, which developed the software that runs Avalanche, was expected to earn consulting fees by developing these Avalanche blockchains for other parties.
However, despite achieving financial success with its self-developed Ethereum Virtual Machine (EVM) blockchain, known as C-Chain, in the fall of 2021, Avalanche has experienced a significant decline.
At its peak, C-Chain had more than $10 billion in total value locked (TVL) in its smart contracts and boasted $1 million in daily fees with over 100,000 daily active users. By September 2023, these figures have dropped to $500 million in TVL, $11 thousand per day in fees, and 34 thousand daily active users.
The report suggests that this decline was largely due to the bankruptcy of Avalanche's chief backers, Three Arrows Capital, and the lack of product diversification clearly evident in the bear market.
Although VanEck analysts have great confidence in Avalanche's technical capabilities, they are unsure whether Avalanche can use a strong marketing capability to attract the corporate customers it needs to revitalize its chains.
VanEck analysts say it's hard for them to be bullish on AVAX due to its rapidly shrinking developer base and risk capital moving away from all but the best projects in the cryptocurrency market.
*This is not investment advice.