Avalanche, a smart contracts platform, now has its first DeFi protocol with $1B in total value locked.
The protocol, Benqi Finance, launched just four days ago on Aug. 19 and has been distributing $3M in AVAX tokens to users. AVAX tokens are from Ava Labs, the company that created Avalanche, and the distribution is part of its recent announcement to offer $180M in liquidity mining incentives to DeFi apps built on its blockchain.
Benqi is also running its own liquidity mining program, distributing 20M of its QI tokens during the first 90 days after launch. Benqi is similar to Compound Finance in that it allows users to supply and borrow against assets.
The stacked AVAX and QI rewards have certainly attracted users — Benqi is Avalanche’s first unicorn in TVL terms. And users don’t appear to be just dumping QI either — the token is up over 390% to $0.28 since launch and boasts a $100M-plus market cap, according to CoinGecko.
“There is incredible innovation happening across the Avalanche community,” Emin Gun Sirer, the founder and CEO of Ava Labs, told The Defiant. “The new Avalanche Bridge launched a few weeks ago was a breakthrough in cross-chain interoperability, and now Benqi has added lending and borrowing into the toolkit for Avalanche DeFi users.”
From 0 to 60
Avalanche launched in September 2020 after raising $60M selling its AVAX token. Since then, though, the blockchain project hasn’t garnered huge amounts of attention.
Over the past couple weeks, the project has garnered significant attention and use. Avalanche’s AVAX token is up over 145% to $47.79 on the week. Its announcement of liquidity mining rewards has lured a significant number of degens over to the blockchain.
Avalanche saw its TVL explode to over $1.6B from about $250M in mid-August. Avalanche’s DeFi ecosystem now boasts $1.55B in TVL, according to open finance dashboard DeFiLlama.
When asked whether he was worried that degens would leave after the incentive program ends, Gun Sirer said “not at all. We’ve seen from other chains that liquidity is quite sticky and tends to stick around long after incentive programs have expired.”
The Next Polygon?
Avi Felman, co-portfolio manager at crypto investment firm, Blocktower Capital, implied that Avalanche may follow a similar pattern as Ploygon and become a popular DeFi chain.
Polygon’s TVL increased tenfold in a little more than two weeks in April, while token rocketed to an all-time high less than a month later. A $40M liquidity mining program with Aave started on April 14 played a major role in Polygon’s growth. Avalanche has a similar program with Aave. It’s offering $20M to those using the Avalanche-deployed version of Aave.
Although with Benqi already seeing such big growth, Aave has stiff competition on Avalanche. It’ll be interesting to see how much Aave helps push DeFi forward on Avalanche and whether Defiers stay with the protocol long term.
Gun Sirer isn’t worried: “We’ve seen from other chains that liquidity is quite sticky and tends to stick around long after the incentive programs have expired. And more importantly, the platform is so fast and easy to use that it is genuinely difficult to leave it for slower chains.”