See why Avalanche’s new Firewood update is causing jitters among AVAX investors!

The Avalanche Network is preparing for a major update known as “Firewood”. It is an efficient system designed to improve blockchain storage. Ava Labs, the creator of the Avalanche blockchain, has announced that Firewood is currently under development and not yet ready to be deployed.

However, the Avalanche Network has already incorporated a preview of Firewood for developers on its network. Ava Labs explained that the future update will address one of the biggest bottlenecks in blockchain technology: scalability.

The system aims to efficiently organize information while allowing for effective management to assist with scalability. Projects like Bitcoin and Ethereum, for example, use a tree data structure (Merkle storage) in their blockchains. Therefore, Firewood is designed to read the state of the Merkle blockchain under heavy loads.

Ava Labs stated that it will evaluate the performance of Firewood compared to other blockchain databases in the coming months.

AVAX Price at Risk

While the Firewood update is an optimistic development for the Avalanche ecosystem from a broader perspective, on-chain metrics reveal a less optimistic trend that could create headwinds for the AVAX price.

According to Token Terminal statistics, the number of addresses actively interacting with the Avalanche network has decreased in recent weeks, indicating a capital flight. The average number of active users in the past 30 days has dropped by almost 33%.

Furthermore, revenue in the past 30 days has also suffered from the decline in activity. The revenue generated by AVAX from fees and other sources during this period has fallen by 45%. The annualized fees for the network are at $3.65 million, a decrease of over 47%.

“With key network metrics declining, the AVAX price is at risk of further decline and losing support,” said analyst Shraddha Sharma.

She also pointed out that while Firewood may bring significant improvements to Avalanche technology, investors are showing caution due to recent data indicating a reduction in activity and revenue.

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