Why L1 Chains on Avalanche Are Transforming the Future of Web3

HyperNest Podcast is a monthly series where we meet Web3 founders, industry leaders, and blockchain experts to discuss various topics in the web3 space.

In this episode of the HyperNest podcast, we had a chat with Eric Kang of Ava Labs, offering actionable insights into how L1 chains on Avalanche are redefining Web3 development and empowering ambitious DeFi and RWA founders.

Eric Kang, the Head of DeFi at Ava Labs, brings a rare blend of TradFi acumen and Web3 expertise. With a background in management consulting and M&A for private equity giants like Apollo, Eric made the leap into crypto by joining Ava Labs in 2020 as one of their earliest business development hires. Since then, he’s played a pivotal role in shaping Avalanche’s DeFi ecosystem and guiding partners through the nuanced journey of L1 innovation.

Having seen Avalanche evolve from its genesis to a thriving multi-chain ecosystem, Eric’s perspective is invaluable to any founder assessing the best blockchain environment to scale their DeFi or RWA startup.

Key Insights on L1 Chains from Avalanche’s Ecosystem Strategy

1. The Core Innovation: Avalanche as a Network of L1 Chains

One of the foundational breakthroughs behind Avalanche is its horizontal scaling approach. Unlike Layer 2s or single-chain ecosystems, Avalanche allows developers to launch independent L1 chains with full sovereignty — also called Avalanche subnets.

These L1 chains can be:

– Permissioned or permissionless

– Customized with specific virtual machines (EVM-compatible, Solana VM, etc.)

– Configured with KYC/whitelist integration for compliance

This flexibility makes Avalanche a go-to solution for a diverse set of builders, including government agencies, DeFi platforms, enterprise projects, and real-world asset tokenizers.

2. L1 Chains for Every Stage: Public C Chain or Custom Blockchains

Startups on Avalanche often begin developing on the C chain — Avalanche’s default public smart contract chain — and migrate to a custom L1 chain as they scale.

Eric Kang explains, “We want to meet builders where they are. The C chain lowers the barrier to entry, and when teams hit scale or need sovereignty — that’s the moment to graduate to their own L1 chain.”

3. Simplifying L1 Launches: AvaCloud & Builder Credits

For many founders, infrastructure complexity can be overwhelming. That’s why Ava Labs introduced:

– Avalanche Builder Credits: Subsidies for cloud infrastructure, reducing upfront costs

– AvaCloud: A blockchain-as-a-service suite that enables chain deployment in under 10 minutes

These tools empower both technical and non-technical teams to launch performant L1 chains, eliminating the myth that L1s are prohibitively expensive.

4. RWAs Thrive on Avalanche L1 Chains

Tokenizing RWAs — such as real estate, treasury bonds, and private credit — requires strict regulatory compliance, granular access control, and enhanced data privacy.

Avalanche L1 chains empower institutional partners to:

– Create permissioned environments

– Control validator sets

– Define custom smart contract permissions

From Balcony’s land deed tracking to state pilots in New Jersey and California, Eric confirms that “Avalanche is becoming the blockchain of choice for RWA implementation due to its modular design and enterprise readiness.”

5. From DeFi to DePINs: Proven L1 Use Cases Like Dexalot

One of Avalanche’s standout L1 deployments is Dexalot — a central limit order book (CLOB) DEX that began on the C chain and later launched its own L1 subnet to achieve performance and UX enhancements.

This move allowed Dexalot to:

– Control cost per transaction

– Optimize throughput beyond public chain limits

– Offer near-centralized UX while staying fully on-chain

By using Avalanche’s inter-chain messaging (ICM), Dexalot lets users trade even without bridging, showcasing how seamless an L1 user experience can be.

Why Build an L1 Chain on Avalanche vs. Other Architectures?

Let’s explore how Avalanche L1 chains compare to other alternatives:

🛠️ L2 on Ethereum:

– Pros: Built-in ETH community, EVM compatible

– Cons: Dependent on Ethereum mainnet; centralized sequencers, higher finality latency

🧱 Cosmos AppChains:

– Pros: Interoperability via IBC, customization

– Cons: Fragmented BD support, harder ecosystem entry

🪙 Standalone L1:

– Pros: Total independence

– Cons: Costly, infrastructure-heavy, and isolated

✅ Avalanche L1 Chains:

– Modular and scalable

– Backed by Ava Labs’ grants (Retro9000) and tech support

– EVM-compatible or customizable VMs

– Flexible security: Validators can stake AVAX or pay ongoing node fees

In Eric’s words: “With Avalanche, you’re joining a cohesive ecosystem with permissionless interoperability — not just a standalone chain or siloed community.”

RWA Integration with DeFi: A Growing Frontier

Tokenization is only half the challenge. The next phase is bringing RWAs into composable DeFi ecosystems.

Examples include:

– BIDL by BlackRock: Used as collateral in money markets

– Apollo’s tokenized private credit integrated with Morphos yield strategies

DeFi startups building on Avalanche L1 chains gain direct access to institutional-grade assets, unlocking use cases in over-collateralized lending, liquidity bootstrapping, and secondary markets — all on-chain.

Value Accrual: AVAX and the Economics of L1s

Avalanche recently upgraded its validator incentives. Previously, L1 operators needed to stake AVAX to validate their chain. Today, new models allow chains to:

– Stake their own token

– Or pay monthly node fees in AVAX (burned post-payment)

This flexible model lowers the barrier to L1 adoption while ensuring long-term token value accrual through AVAX burn mechanics.

As adoption grows, value from usage returns to the network — aligning incentives for builders and tokenholders alike.

Build Freely, Scale Confidently with L1 Chains

Whether you’re issuing a programmable bond, launching a multi-asset lending protocol, or empowering global users with compliant financial tools — L1 chains on Avalanche give you the freedom to build, scale, and push the boundaries of DeFi and RWAs.

Eric Kang summed it up best: “Avalanche’s modular L1 design is here to serve the builders — wherever they are and however they want to build.”

Want the Full Play-by-Play?

To catch the full energy, behind-the-scenes insights, and Altug’s unfiltered thoughts, you can listen to or watch the complete podcast episode.

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