Colony Lab - Investment Opportunity in the Avalanche Ecosystem
- Colony Lab is the first community-driven funding platform designed for the Avalanche ecosystem. Along the spectrum of startup project maturity, Colony concentrates on the nascent phase: “the Seed Stage”. Their mission is twofold: to help early-stage projects build on Avalanche; and to deliver attractive seed investment opportunities for its community.
- The Colony Lab Ecosystem is composed of 4 distinct products: Early-stage program and liquid vesting, validator program, Colony Avalanche Index, and liquidity provision program.
- In 2021, Colony Lab has raised $21 million USD from notable investors such as Blizzard Fund by Ava Labs.
- After successfully weathering the storm of the 2022 and 2023 bear market, Colony Lab emerged with a robust financial position, positioning themselves as one of the most promising projects in the Avalanche ecosystem for the upcoming bull market. A tangible demonstration of this is the treasury supporting the token, which currently stands at $25,000,000 (530,000 AVAX along with various other assets) as of this writing—an amount surpassing the initial raised capital: https://app.colonylab.io/dashboard
- The CLY token is at the epicenter of the Colony Lab ecosystem as staking the token is essential to participate in early-stage investment opportunities. Furthermore, stakers receive rewards through airdrops, node validator rewards, platform fees, and much more.
- Colony Lab represents a strategic bet on Avalanche because it allows for participation in the development of the ecosystem and enables exposure to early-stage projects built on Avalanche.
- All investors in the Colony vault in the SwissBorg app will be eligible to participate in any future Alpha deals, secured by Colony Lab.
Overview of Colony Lab
A Dual Mission
Colony Lab is the first community driven funding platform built especially for the Avalanche ecosystem. Its vision is to help build a world where financial inclusivity is not just a slogan but a reality through its two missions:
1. Empowering Early-Stage Projects
Colony Lab serves as a catalyst for early-stage Avalanche projects by providing them with crucial support. These include securing critical early capital, holistic ecosystem support, organic early exposure, and a vibrant community of investors and future users. In such, this surpasses traditional VC support.
2. Unlocking Opportunities for the Community
Simultaneously, Colony Lab ensures that its community gains access to unparalleled seed investment opportunities and diverse yield-generating products in the Avalanche ecosystem. This means that the community is able to secure the same deal as early-investors in a fair, inclusive and on-chain manner.
Colony Lab’s set of products is not like the typical crypto project and some of their features are unique in the space.
Early Stage Investment Process
This is probably the most important feature of the platform where CLY stakers gain exclusive access to early stage Avalanche projects before their Initial DEX Offering (IDOs) through Seed and Private sales.
Here is the typical path of an early stage project:
1. Deal flow
In this section, CLY stakers access the different projects launching on Avalanche with brief description. Based on that, the community is able to vote, and comment on preferred projects using ANT, a token acquired through CLY staking. The impact of community members scales with their CLY stake, allowing for larger commitments to favoured projects by big stakers. Only if a project generates enough interest can it move to the “Analysis” phase.
In the analysis section, community members conduct due diligence and rank projects based on following criteria: Product/Innovation; Development Stage; Team; Partners; Marketing; Tokenomics. This process serves as a collaborative community analysis, during which members commit their USDC allocation interest in projects. To move onto the next phase, a minimum grade and total USDC committed are required.
3. Investment Committee
Here, the final terms of the deal are set, reviewed and secured prior to validating the funding.
4. Colony Lab Portfolio
In this section, users can view their allocations in different projects, as well as the entire allocation to the Colony Lab community. It is at this phase that users will finally be able to claim their allocations and trade their locked tokens on Colony Lab’s DEX, thanks to their Liquid Vesting solution.
Liquid vesting is a unique feature in the crypto space and is one of the biggest competitive advantages of Colony Lab. It allows seed investors to trade locked tokens before the TGE (Token Generation Event), during the cliff period, and throughout the vesting schedule, thanks to a special token named ceToken. This feature provides investors with greater flexibility throughout the project life cycles and enables the tradability of locked tokens.
Colony is also involved in securing the Avalanche chain by running node operators. At the time of writing, more than 500,000 AVAX are being staked. A significant portion of the staking rewards is channeled back to the CLY staker. This ensures a mutually beneficial ecosystem for all.
Colony Avalanche Index
Another product from Colony is CAI. It allows the community to invest in an Avalanche ecosystem benchmark that tracks leading applications on the platform. This is similar to an ETF in traditional markets or a Thematics on SwissBorg. Currently, the total market cap of CAI is $2.27 million with 4 different assets in the portfolio: JOE; sAVAX; AVAX; XAVA.
As an ecosystem accelerator, Colony helps DeFi initiatives on the Avalanche blockchain by offering protocols liquidity boost to amplify their TVL (Total Value Locked). The resulting rewards are distributed among CLY stakers.
Team & Investors
Under the guidance of co-founders Elie Le Rest, Wessal ER and Aurelien Ynden, Colony Lab has attracted a qualified team and managed to raise $21 million from notable investors such as Ava Labs, Shima Capital, GBV, Hashkey Capital, and Bixin Ventures. Further industry leaders such as Trader Joe, Benqi, and Yield Yak show support to the project.
CLY token is built on Avalanche C-Chain with a supply capped at 150 million.
One thing is for sure, the CLY token is at the epicenter of Colony Lab’s product offering and the utility of the token is designed to incentivise long term commitment to the project.
Staking is required to invest in early deals
Firstly, staking CLY is required to participate in the early stage investment opportunity and the allocation to different projects is proportional to the amount of CLY staked. Hence, if a user wishes to invest a sizable amount in a lot of different projects, he is required to stake a lot of CLY. This acts as a positive supply mechanism to the CLY token and as a result, more than 60% of CLY supply is staked. Remarkably, 80% of CLY stakers have maintained unwavering loyalty, never executing any unstake actions since joining Colony Lab two years ago. This underscores a dedicated and robust community committed to supporting the project's long-term vision.
Different reward are redirected to CLY stakers
In addition to that, CLY stakers are also rewarded effortlessly and have a natural exposure to various facets of the Avalanche blockchain. Here are the different ways where CLY stakers can gain rewards:
- APY (Annual Percentage Yield) of 8.20%
- AVAX rewards from Colony Lab Validator Program
- Platform fees in the form of CLY (Staking / Unstaking fees)
- Airdrops from early-stage projects in which Colony has invested
- CAI fees generated by Colony Avalanche Index
- Special rewards stemming from Colony’s DeFi liquidity positions
Initial Token Distribution
Vesting Schedule & Fundraising Numbers
- Seed: 8.33M CLY at $0.12 USD - $1,000,000 USD
- Private: 87.5M CLY at $0.2 USD - $17,500,000 USD
- IDO (Initial Dex Offering) on Avalanche: 6.66M CLY at $0.3 USD - $2,000,000 USD
- IEO (Initial Exchange Offering) on MEXC: 1.25M CLY at $0.4 USD - $500,000 USD
Total raise: $21,000,000 USD
Main takeaways from this data is:
- Current market price is around the same price as Private sale offering and below IDO and IEO
- Both seed and private sales vestings are over which means that there is no additional selling pressure coming from these early-investors.
- Team and advisors vesting has only started in 2024 and will last until the end of the year
An Interesting Market Opportunity
First and foremost, Colony Lab is a bet on the Avalanche ecosystem as this project is a way to:
- Participate in the development of this ecosystem
- Gain exposure to early stage project building on this blockchain
Analysing the state of the Avalanche blockchain can help us understand the case for Colony Lab.
How is Avalanche different from other Layer 1?
Avalanche was launched in the 2020 by Ava Labs and the unique features of the blockchain enabled it to raise $42 million in its ICO (Initial Coin Offering). Let’s explore the different features of this blockchain:
Consensus on Avalanche is one of the fastest among blockchain. Built on Proof of Stake (PoS) foundation, consensus is sought by soliciting a subset of validators rather than seeking vote from every validators on the network. This enables greater throughput since every node is not recording every single transaction.
Subnets can be thought of as small networks inside a larger network. Their existence makes it possible to build unique individual blockchain that can be tailored to specific use cases and allow for greater flexibility for developers. Further, it also increases scalability and transaction per second. This makes Avalanche a versatile chain capable of accommodating a wide range of different use cases.
This is similar to the thesis behind Layer 2 (L2) on Ethereum where different dApps built on top of L2 leverage the security of Etheruem’s Layer 1 (L1) in a cost effective manner. However, the advantage of Avalanche subnets over Ethereum’s L2 is that it offers greater interoperability as developers are building on the same set of shared infrastructure.
Three chain approach:
Avalanche is composed of three distinct but interoperable chain:
-C-Chain (Contract Chain): EVM (Ethereum Virtual Machine) compatible chain used for smart contracts and other dApps. This chain is compatible with MetaMask or other wallets.
-X-Chain (Exchange-Chain): used for receiving and sending funds. This includes Avalanche’s native token: AVAX. However, it cannot be used with Metamask or similar wallets and addresses start with “X-avax.”
-P-Chain (Platform-Chain): used for validators and the creation of subnets. Avax rewards from staking are received on the P-Chain and addresses start with “P-avax.”
True blockchain growth stems from diversifying and broadening its applications, and Avalanche aligns well with this belief. It is evolving beyond its role as a hub for innovative DeFi projects and a thriving community and is emerging as the premier RWA (Real World Assets) and FX (Foreign Exchange) chain. Leveraging Avalanche's groundbreaking subnet technology, the network is poised to entice major institutions into the blockchain realm.
Some notable partnerships includes:
- JP Morgan
- Citi Bank
- Wisdom Tree
- T. Rowe Price
-Amazon Web Service
Strong Price Performance in H2 2023
In the last 6 months, Avalanche has been one of the best performing assets among the major L1. This performance likely demonstrates the regain of confidence on Avalanche. If this trend continues, it is reasonable to expect further project development taking place on Avalanche. This can yield interesting opportunities for Colony Lab going forward.
Monthly active users
Active users have been in a long term uptrend since inception. In 2023, active users increased with a peak in December. As users are what ultimately drives a network, a continuation of this trend can be seen as a positive element for the Avalanche blockchain.
Without a doubt, decentralisation is a guiding principle of blockchain networks as it distributes power, control, and decision-making across nodes, making a network more secure and censorship-resistant. This property can be measured by the Nakamoto coefficient - where the larger the coefficient is, the more decentralised the blockchain network.
According to the most recent data from NakaFlow, Avalanche Nakamoto coefficient is higher than Solana, Ethereum, and Cosmos making it one of the most decentralised chains among major Layer 1.
DeFi activity on Avalanche has not significantly increased in 2023. We witnessed a slow downtrend in TVL (Total Value Locked) in the first two thirds of the year followed by a strong surge of activity towards the end of the year. But overall Avalanche is the 8th highest chain in terms of TVL and the growth in 2023 was approximately 30%. As a comparison, total TVL growth across all protocols was 44% in 2023.
The Avalanche ecosystem is dynamic and comprises 444 dApps according to Core App. Looking at the top projects by user activity, we observe that most of them, like Circle or Tether, are not native to the Avalanche network. Hence, it can be argued that for now, Avalanche does not truly have a unique killer feature.
However, it seems that GameFi is one of the most promising use cases for Avalanche. Blizzard, Avalanche $200+ million ecosystem fund, is seeking gaming developers looking to utilise subnet architecture. This is something worth following as it could bring interesting early stage opportunities for Colony Lab.
Colony Lab Track Record
As of now, Colony has invested over $2.3 million in projects with the largest allocation going to Dexalot at $300,000.
Furthermore, CLY stakers have shared among them more than $1.3 million worth of airdrops ($23.8 million at ATH) on 166 different aidrops as well as over 5,900 AVAX ($236,000 USD at current AVAX price). In just AVAX airdrops, Colony Lab plans to distribute over 15,000 AVAX annually to CLY stakers, amounting to over $2 million worth of AVAX at its ATH.
Participation in SwissBorg alpha deals grants the community automatic eligibility for future vaults and airdrop opportunities curated by Colony Lab.
Another point worth mentioning is the strong treasury behind Colony Lab. At the time of writing, the treasury is higher than the token market cap meaning that each CLY is backed by $0.43. This is almost twice the current market price of the token.
While CLY is still down 90% from its December 2021 ATH (All Time High) of $2.40 USD, the token has had a great year-on-year performance of 439% and is still below its IDO (Initial Dex Offering) price of $0.3. At the time of writing, the market cap is only $24 million and it ranks on the 852nd place on CoinGecko.
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