When it launched back in July 2020, Avalanche (AVAX -3.24%) immediately gained the attention of the crypto world for its lightning-fast speeds and near-zero transaction fees. Some mainstream media publications even called Avalanche an "Ethereum-killer" for its potential to rival market leader Ethereum (CRYPTO: ETH). Despite being down significantly from its all-time high, Avalanche is still up 447% since its initial launch.

Until now, though, investors primarily bought Avalanche because of what it could do one day. Well, that day seems to have arrived a lot sooner than many expected. On Aug. 8, Avalanche surpassed an important milestone when the number of daily transactions on Avalanche exceeded the number of transactions on Ethereum. This comes after a summer in which key metrics for Avalanche appear to be looking better and better. So are we starting to see a snowball effect for Avalanche?

Daily transaction volume

Transaction volume matters so much because it is one of the best metrics that crypto investors have for determining exactly how much activity is happening on a blockchain. As billionaire investor Mark Cuban has pointed out, the more activity that happens on a blockchain, the more valuable it becomes. If developers build a blockchain, you want to make sure that people are actually using it.

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Now it looks like Avalanche is seeing a surge of new transaction volume. The nearly 1.5 million transactions on Aug. 8 were an all-time high for Avalanche. And as the co-founder of Avalanche pointed out, this volume was not just higher than the total transaction volume on Ethereum -- it was also higher than the total transaction volume of Ethereum and its top two Layer 2 scaling solutions combined. So this is obviously a very important milestone for Avalanche. It is also part of a growing trend that Avalanche has been seeing since June, when it reported all-time highs for both daily and monthly transaction volume.

From DeFi to GameFi

Another reason to buy Avalanche is the growth of GameFi, which is essentially just a form of online gaming in which users earn crypto rewards for playing games. In 2021, the story about Avalanche was all about decentralized finance (DeFi). But now it appears that a good portion of the new daily transaction volume is coming from gamers, thanks to new high-profile games such as DeFi Kingdoms that are choosing Avalanche for its fast speeds and low fees.

As Avalanche moves more heavily into GameFi, transaction volume could build quickly, and this is not by accident. This is the direct result of the unique architecture of the blockchain, which now features "subnets." You can think of each subnet as a modular scaling mechanism for Avalanche. What makes this subnet architecture unique is that it is perfect for adding a huge number of app-specific blockchains very quickly. And all of this is fully compatible with Ethereum. So it is quite likely that more blockchain and metaverse games are going to be coming to Avalanche soon because it is relatively easy to add them to the main blockchain. 

Total Value Locked

Finally, one important metric for Avalanche's future success is Total Value Locked (TVL). This is a measure of how much of a crypto is "locked up" and unable to be traded because it is earning interest, rewards, or tokens somewhere else. While the absolute TVL figure of any crypto is a shorthand way to see how vested people are in a crypto, a more important figure is the ratio of total market capitalization to TVL, which tells you how overvalued or undervalued a crypto might be. This is the crypto world's version of price-to-book ratio. The lower the number, the more undervalued a crypto is.

Right now, there is $2.2 billion TVL on Avalanche, which ranks No. 5 overall among all blockchains. It also has a price-to-book ratio of 3.4, given Avalanche's current market cap of approximately $7.5 billion. Interestingly, Avalanche now has a higher TVL figure than rival blockchain Solana (CRYPTO: SOL), which has $1.59 billion in TVL. Solana also has a price-to-book ratio of 8.9, suggesting that it is overvalued compared to Avalanche. This could be an early signal that Avalanche has already passed, or is close to passing, Solana on its way to unseating Ethereum as the market leader, which ranks No. 1 in TVL with $38.2 billion.

Snowball effect

A lot of exciting things appear to be happening for Avalanche right now. The overall macro investment thesis -- "Avalanche is the new Ethereum" -- is quite compelling by itself. But a nuanced reading of the underlying numbers, whether it is transaction volume or TVL, is even more compelling. We may be witnessing a snowball effect in 2022 as Avalanche rapidly gains in attractiveness to both users and developers. If you are thinking about investing in Avalanche, these numbers certainly look promising.