Cumulative financing of 100 million USD, single-day trading volume increased by over 46%: Is Axelar amplifying the hype around cross-chain?

The advancement of blockchain technology has led to the growth of modular blockchains, Layer 2 solutions, and application-specific chains, rapidly expanding the number and diversity of blockchains. However, this expansion has also brought about a problem: the lack of solutions that allow developers to operate efficiently across multiple blockchain ecosystems. In this context, Axelar has emerged to fill this market gap.

Axelar provides a cross-chain development platform that offers easy access through APIs and SDKs, providing developers with secure cross-chain interaction capabilities. These development tools are designed as plug-and-play integration solutions, aimed at reducing complexity and increasing development efficiency. Therefore, for decentralized application (DApp) developers seeking to quickly build cross-chain capabilities, Axelar has become a suitable choice.

From market data, the development momentum of Axelar is evident. In the past 24 hours, its trading volume reached approximately $34.9 million, an increase of 46.50% compared to the previous day. The current market capitalization is $579 million, while its fully diluted valuation (FDV) is approximately $1.238 billion. These figures reflect Axelar's activity in the market and its popularity as a cross-chain infrastructure option.

Overview of Axelar's Development: Achieving Interoperability with Other Networks through Cosmos Technology, Accumulated Financing of $100 Million

Founded in 2020, Axelar is a blockchain technology-focused company that primarily utilizes Cosmos technology to achieve interoperability with Ethereum and other networks. Axelar's technology is not limited to cross-chain asset transfers but also broadly supports complex cross-chain functionalities. This includes, but is not limited to, cross-network smart contracts and decentralized applications (DApps). Axelar focuses on full-stack interoperability, meaning it supports both asset and information bridging, as well as permissionless overlay programming.

The Axelar community is working hard to expand the number of connected networks, which currently stands at 55. To achieve this goal, Axelar has adopted various strategies, including adjusting the network economic structure, launching Axelar VM to support permissionless connections for projects, and exploring more efficient technological solutions, such as lightweight clients.

The founding team of Axelar has a rich academic background and experience in blockchain development. Co-founder Sergey Gorbunov holds bachelor's and master's degrees from the University of Toronto, conducted cryptography research at MIT, and has served as an assistant professor at the University of Waterloo since 2016. Another co-founder, Georgios Vlachos, completed his bachelor's and master's degrees at MIT and won a gold medal at the International Mathematical Olympiad (IMO). This background provides a solid technical and theoretical foundation for the Axelar project.

In terms of financing, Axelar Network has completed multiple rounds of funding. Specifically, the seed round was completed on November 13, 2020, raising $3.75 million; the Series A round on July 16, 2021, raised $25 million; and the Series B round on February 15, 2022, raised $35 million. Additionally, approximately $50 million was raised through token financing. In total, Axelar Network's funding has exceeded $100 million. These financing activities reflect the market's recognition of Axelar's technology and future development potential.

An Overview of Axelar Token Asset Application Scenarios and Updated Economic Model

With a total supply of 1.13 billion tokens, Axelar Network demonstrates a token distribution strategy that considers multiple stakeholders' interests. Among them, community projects account for 35.96%, community sales account for 5%, while supporters, core team, and company operations account for 29.54%, 17%, and 12.5%, respectively. Notably, the combined holdings of the team and company amount to nearly 30%, and along with the funding for community projects, this portion of funds is directly influenced by the management.

In Axelar Network, the AXL token serves multiple roles:

1. As the primary payment medium for executing transactions on the Axelar platform;
2. Automatically convertible into the required Gas tokens for other networks to pay transaction fees on those networks;
3. Used for staking and delegation in the network's consensus mechanism, providing rewards to participants;
4. Exercising voting rights in Axelar's governance decisions, influencing the future direction of the network.

Launched in 2022, the AXL token is planned to be fully released by 2026. The token issuance plan for different holder groups will begin three months after the token launch, while the issuance of community sale tokens will occur even earlier. Currently, the total unlocked AXL tokens account for 40.57%, which is 405.69 million AXL tokens, while the total locked tokens amount to 594.31 million, accounting for 59.43%.

Axelar has recently made significant updates to the economic model of the AXL token, aiming to enhance the token's functionality and value while expanding the network. This update may lead to a deflationary trend for the AXL token in the long term. The model introduces a key change: adding a new step in the Gas transaction process, implementing Gas burning between the Gas recipient and the network. The updates to the economic model are as follows:

1. Continuously reducing the inflation rate:

Previously, Axelar provided an additional reward of 0.75% for each new supported chain to encourage more chains to connect, resulting in a total inflation rate of 11.5%. The new AXL token economic model proposes to reduce the additional reward for each chain to 0.3%, a proposal that has been passed through on-chain voting and is being gradually implemented. After full implementation on December 8, 2023, the annual inflation rate is expected to drop from 11.5% to 5.2%.

2. Introducing a new Gas burning mechanism:

In the new model, Gas fees paid with AXL will no longer be solely allocated to validators and stakers but will partially be used for burning, resulting in a deflationary effect on the total supply of AXL.

3. Introducing new connections to the Axelar network:

Currently, adding new chains to the Axelar network requires support from developers and validator voting. Axelar is developing a more open connection pathway aimed at increasing the market demand for AXL tokens. The Interchain Amplifier feature will enable developers to easily connect new chains through smart contract templates, including setting up AXL-funded reward pools for early validators.

As the Ethereum ecosystem expands, Axelar is positioning itself as a crucial permissionless connection component in this trend. If the expansion of the L2 space and Axelar's strategies succeed, this will be a key factor driving the demand and value of AXL tokens.

Axelar Aims to Achieve Broader Cross-Chain Interoperability, but Its Development Journey Is Not Without Challenges

Axelar Network is implementing an ambitious strategy to expand its network services from dozens of chains to hundreds or even thousands of chains. This initiative particularly focuses on L2 solutions and modular Ethereum networks to achieve broader blockchain interoperability. The strategy encompasses optimizing the current AXL token economic model to reduce inflation rates and increase deflationary pressure, as well as mid-term strategic development of the Axelar Virtual Machine (AVM) to support permissionless connections for new chains.

Axelar's technological innovations include features like the Interchain Amplifier, which will automate the technical processes required to connect new chains. Additionally, Axelar plans to focus on the development of lightweight clients in its long-term strategy to further reduce reliance on external validators, shifting the focus to the incentive mechanisms for relayers, as information transmission still requires their participation.

However, there are also challenges in the cross-chain space. With the development of L2 technology, Ethereum's performance issues have been somewhat alleviated, leading to a relatively reduced demand for cross-chain technology. As a project based on the Cosmos SDK, Axelar Network may face technological innovation gaps compared to some competitors, but its success is partly attributed to its flexible strategic transformation, particularly in the development of L2 cross-chain technology as well as DEX and tools.

The development momentum of Axelar Network reflects its potential and market recognition in the field of cross-chain technology. Compared to industry giants like DOT and Cosmos, Axelar demonstrates its unique position in the cross-chain solutions market. Although it may not fully reach the level of industry leaders, Axelar still has room for growth and development, reflecting its potential value in this rapidly evolving technological landscape.