Getting Started with DeFi at Avalanche Network

Dubbed as the “Ethereum Killer”, Avalanche (AVAX) is the latest booming chain for DeFi, after the recent boom at Solana (SOL).

We feel that the momentum is shifting from Ethereum to Avalanche lately due to the faster transaction execution and much lower transaction fees at Avalanche (AVAX). Unlike Solana which recently has its network suspended for almost a day due to DDoS attack, Avalanche has been quite robust from our experiences thus far. Unlike the current version of Ethereum which still relies on proof-of-work consensus (just like Bitcoin), Avalanche (AVAX) is highly eco-friendly.

Avalanche (AVAX) has been around for several months. You may wonder why the boom is happening now, not earlier. We believe that there are three main reasons:

Better integration of its C-Chain with the existing Blockchain ecosystem

Probably just one month or two ago, it is still difficult for an ordinary person to get started with Avalanche (AVAX). One needs to have AVAX in his/her wallets to pay for the gas fees of any transactions. However, getting AVAX in the C-Chain hasn’t been easy in the past. You could not directly transfer AVAX directly into the wallets (e.g., Metamask) that can interact with DeFi from any centralized exchanges. One needs to first install a AVAX wallet and send the AVAX to a separate chain first and then use the AVAX wallet to move it to the C-Chain. Afterwards, you can send the AVAX wallet to your Metamask wallet. Sounds tedious, right? However, since around one month ago, you can directly send AVAX from Binance to your Metamask wallet through the C-Chain. So now, the user experience is the same as other networks out there. At the same time, its official Avalanche Bridge that allows users to transfer asses from Ethereum to Avalanche (AVAX) started to airdropping users a small amount of AVAX whenever they move more than $75 (subject to change) worth of tokens over to Avalanche (AVAX).

Avalanche incentive programs to boost DeFi

The Avalanche Foundation announced “Avalanche Rush” on 18 August. It is a $180m liquidity mining incentive program that will onboard the cream of the De-Fi crop to Avalanche (AVAX). Because of this, new lending protocol based on Avalanche (AVAX) BENQI has been able to lock over $1 billion funds within a day or two after launch. Both Curve and AAVE have indicated their interests to be on board but their Avalanche products haven’t been officially launched yet in mid-September. Kyber DMM has also launched on Avalanche under the incentive scheme.

Continuously lowering gas fees in the network

When we first started with Avalanche (AVAX), the minimum gas price was 225. Taking into the price of AVAX, the transaction cost was slightly higher than the Binance smart chain (BSC). After a few months, the minimum gas price was lowered to 75, 1/3 of the original minimum gas price after more technological advancements. Just a few days ago, the minimum gas price was yet lowered to 25, 1/9 of the original minimum gas price! We are not sure if there are further rooms for decrease, but lower the transaction cost is essential for a wider adoption and sustainable growth of the chain. In contrast, other low-cost chains have seen an increase in minimum gas price. For example, HECO has a minimum gas fee of 1 at the start. Now it is raised to 2.25, an increase of 125%. Most of the HECO ecosystem players have poor execution capabilities, getting into a death spiral of ever-decreasing token price.

At this point, we believe that Avalanche (AVAX) stands out as the one of the primary chains for both institutional and retail participation in the DeFi space in the not so distant future. We envision that the future DeFi will be run on multiple chains, as it will not be possible to have one chain that dominates while simultaneously catering to all kinds of services and user needs. Eventually all chain technologies will run into bottlenecks in some aspects, especially when the use load is high.

How do you get started with yield farming on Avalanche (AVAX)?

There are several ways.

Buy AVAX

First, you need to get some AVAX into the C-Chain connected to wallets (e.g. Metamask). C-Chain is used to interact with the smart contracts in DeFi applications. The easiest way is to buy AVAX from a centralized exchange (CEX) that can send the AVAX directly into your C-Chain wallet. Not long ago, Binance started to support the withdrawal of AVAX into the C-Chain. In other exchanges, we haven’t been able to find this option yet (other exchanges usually sent AVAX to another chain — then you need to create an AVAX wallet and move it to C-Chain).

Once you have AVAX in the C-Chain, you can convert AVAX to any other tokens that are supported supported in the Avalanche ecosystem. Currently most major mainstream tokens are supported on Avalanche.

Bridging Assets from other Chains

If you want to move other tokens from other chains, you can use a variety of bridges.

1. The official Avalanche Bridge can help you to transfer asses from Ethereum to Avalanche (AVAX) started to airdropping users a small amount of AVAX whenever they move more than $75 (subject to change) worth of tokens over to Avalanche (AVAX).
2. Use the cBridge from Celer Network. The fee for a 3000 USDC transfer is around 6 USDC from Binance Smart Chain (excluding BNB gas fees). A bit expensive. We’ve tried it and the process is reasonably fast. This bridge actually supports many networks. Besides Binance Smart Chain and Avalanche, it also supports MATIC, Ethereum, xDai, Fantom, HECO, Arbitrum, OKEC, Optimism. The bridge also generally supports USDC and USDT. The support for other tokens are specific to each bridging route.

3. Use AnySwap Router. It is by far the cheapest transfer method, with the cost of 0.9 USDC for 3000 USDC transfer. This cost appears to be fixed no matter how much USDC you are transferring. The transfer speed may be slightly slower than the Celer Network. Similar to Celer Network, AnySwap Router also supports multichains.

Avalanche bridging fees at AnySwap Router

4. Use the Synapse Protocol. For a 3000 USDC bridge from BSC to Avalanche, you will get 2992.8 USDC in Avalanche. You may also receive 0.05 AVAX airdrop. For those without AVAX in C-Chain, this may be a good way to get started. However, we haven’t tried using this protocol yet. So we cannot confirm whether the airdrop is automatic or if you need to claim it somewhere. By the way, Synapse Protocol is basically Nerve Finance.

Avalanche bridging fees at Synapse Protocol

Yield Opportunities

Lastly, you may be wondering what the recommended yield farms at Avalanche are.

Currently, the biggest AMM DEX and yield farms in Avalanche include:

1. Pangolin (first mover in Avalanche, slightly lower yield)
2. Trader Joe (up-and-coming, slightly higher yield)

The only native lending protocol in Avalanche is BENQi. However, its token price (Qi) has been staggering. AAVE and Curve are supposed to launch soon on Avalanche. These are trustworthy names in DeFi and are highly recommended for beginners.

Other honorable mentions include:

Lydia Finance, Penguin Finance, Canary Exchange

Please do your own research. Exploits (e.g. ZUBA) and rug pulls do happen and will happen at Avalanche.