BENQI🔺 · 2026-10-28 16:19 UTC

Why Should BENQI Users Care About Avalanche's New Economic Research Agenda? Welcome to Freshman Questions, a BENQI educational series designed to make Avalanche and decentralized finance easier to understand for new users. 🔺 What makes a blockchain economically successful? Is it the number of transactions? The amount of capital invested in its ecosystem? The number of applications being built? Or the price of its native token? These are all important indicators. But they don't necessarily answer a more fundamental question. When a blockchain ecosystem creates economic value, how much of that value actually accrues to the protocol and AVAX, the token that secures it? That's the question at the center of the Avalanche Foundation's newly published Economic Research Agenda. The Foundation is examining how Avalanche creates economic value, how that value can be captured at the protocol level, and how it should be distributed to maximise AVAX value accrual and support long-term growth and security. For BENQI users, this may sound like a topic for economists. But it has practical implications for anyone holding AVAX, staking through BENQI, using sAVAX, or participating in Avalanche DeFi. Because understanding where economic value comes from—and where it goes—is essential to understanding productive finance. First, What Is Avalanche Trying to Understand? Avalanche has been expanding into new areas of financial and economic activity, including: Institutional finance. Tokenized assets. Payments. Private credit. Decentralized lending. Custom Avalanche Layer 1 blockchains. Each new application potentially adds economic activity to the ecosystem. But there's an important distinction. Economic activity on Avalanche doesn't automatically translate into economic value accrual for AVAX. Imagine a company builds a successful financial application on an Avalanche L1. The company attracts users. It generates revenue. It processes millions of dollars in transactions. That's valuable activity. But how much of that value reaches the underlying Avalanche protocol? How much contributes to validator incentives? How much creates demand for AVAX? And how much remains within the application itself? These are the types of questions the Avalanche Foundation is investigating. Rather than assuming that more activity automatically benefits the network, the Foundation is developing ways to measure the relationship. What Does "Measure, Capture, Distribute" Mean? The Foundation organizes its research around three steps. Measure → Capture → Distribute It's a simple framework for understanding a complicated economic system. 1. Measure: How Much Value Is Avalanche Creating? The first step is understanding economic activity. The Foundation’s research includes Gross Chain Product (GCP) and Gross Chain Income (GCI). Think of GCP as an attempt to measure the economic production occurring within the blockchain ecosystem. GCI provides another perspective by examining income, including income that originates outside the on-chain economy but flows into on-chain participants and balances inside it. These are research frameworks, not simple equivalents of GDP or guaranteed measures of token value. The goal is to move beyond hyped headline statistics and develop a clearer picture of the economy Avalanche supports. The most important gap today is the connection between ecosystem value and AVAX value accrual. Closing that gap is the main organising objective of the economic analysis developed. 2. Capture: How Much Value Reaches the Protocol? Imagine a blockchain ecosystem generates substantial economic activity. Applications earn revenue. Users exchange assets. Financial institutions process transactions. But what portion of that activity contributes to the economics of the network itself? Today, the foundation says Avalanche's protocol revenue is predominantly transaction fees from the Primary Network. The Foundation is studying how that base could be expanded to capture more of the value created across the ecosystem. Potential areas include fees, MEV, application and L1 revenue sharing, and other protocol native mechanisms. The challenge is capturing value without discouraging the activity that created it. 3. Distribute: Where Should That Value Go? Once economic value reaches the protocol, another question emerges. How should it be used? Should some value support validators? Should some contribute to AVAX burns? What mechanisms best support long-term network security and sustainability? The Foundation is researching these trade-offs. The goal isn't simply to generate more economic activity. It's to understand how that activity can support long-term economic sustainability and AVAX value accrual. Why Does This Matter for AVAX Holders? AVAX serves several important functions within Avalanche. It is used for staking and network security. It is used to pay transaction fees on Avalanche’s Primary Network, including the C-Chain. And it plays a role in the broader economic structure of the network. For long-term holders, understanding these functions is important. Because there is a difference between: Avalanche becoming more widely used and That usage creating additional economic value for AVAX. The two can be related. But they aren't identical. The Foundation's research is focused on understanding and potentially strengthening that connection. For AVAX holders, this creates a useful framework for evaluating ecosystem growth. Instead of asking only how many applications are launching, users can also ask: How much economic activity are those applications generating, and how does it support the network? Why Are Validator Economics So Important? This is where the research becomes particularly relevant to BENQI. Avalanche is a Proof-of-Stake network. Validators help operate and secure the network. To encourage participation, the system provides staking rewards to eligible participants. But those rewards have an economic cost. The Foundation points out that Avalanche's validator security is currently funded primarily through token emissions. And AVAX has a capped supply. As the finite issuance budget declines over time, Avalanche needs to understand how network revenue could contribute more substantially to sustaining validator incentives. This creates a fundamental economic question: How can Avalanche continue rewarding validators and maintaining network security over the long term? The Foundation isn't announcing a completed solution. It's researching the relationship between network activity, protocol revenue, staking incentives, and security. For anyone participating in staking, that's a question worth following. How Does This Connect to BENQI Liquid Staking? BENQI Liquid Staking allows AVAX holders to participate in Avalanche staking while receiving sAVAX. When users deposit AVAX through BENQI, the underlying AVAX is delegated to validators. Those staking positions can earn rewards. Meanwhile, users receive sAVAX representing their share of the liquid staking pool. As rewards accrue, the amount of AVAX backing each sAVAX can increase. That means BENQI users are directly connected to Avalanche's staking economy and the economies of network security. And the Foundation's research is examining the long-term sustainability of that same economy. Consider the relationship: Avalanche economic activity ↓ Protocol revenue and economic incentives ↓ Validator sustainability ↓ Staking rewards and network security ↓ The underlying staking activity represented by sAVAX The research could eventually influence how users evaluate the long-term economics of staking and the relationship between network activity, protocol revenue and staking incentives. But it doesn't mean staking rewards are about to change, and it doesn't guarantee that future protocol revenue will increase sAVAX returns. Those outcomes depend on future research, proposals, implementation, and actual economic conditions. The immediate benefit is better understanding. What About BENQI Markets and Productive Finance? The Foundation's agenda also connects with BENQI's broader Productive Finance conversation. BENQI Markets allows users to supply supported assets and borrow against eligible collateral. Those activities create their own economic relationships. Suppliers provide liquidity. Borrowers pay to access it. Interest rates respond to market conditions. This is different from Avalanche's protocol-level revenue and validator staking incentives. But the same fundamental questions apply. Where does economic value come from? Who pays for the service? Who receives the resulting income? What risks are involved? Consider a user supplying assets to a lending market. The potential yield isn't generated simply because the assets were deposited. It comes from economic activity involving borrowers. Similarly, Avalanche's long-term network economics depend on understanding the activity that creates value and the mechanisms that distribute it. This is an important lesson for DeFi users. Not all yield has the same source. And understanding the source is essential to understanding the risk. Does Avalanche's Research Change How We Measureably Evaluate Ecosystem Growth? Yes. Consider the announcement that Avalanche builders raised more than $500 million over the previous year. ( link) That's an indicator of investor interest and resources available for continued development. But funding alone doesn't prove that the network has generated wide-spread adopted economic value. A funded project still needs to launch. It needs users. It needs sustainable activity. And the question is how that activity contributes to the wider ecosystem and ultimately to AVAX value accrual and solid participatory adoption. The Foundation's research provides a framework for asking what happens after the announcement. Instead of focusing only on capital raised, users can examine economic production, protocol revenue, validator incentives, and value distribution. That could make ecosystem analysis more meaningful. Growth matters. But understanding how growth becomes sustainable economic value matters just as much. What Should BENQI Users Watch for Next? The research agenda isn't a finalized change to Avalanche's tokenomics. It's a program of investigation. The Foundation has identified three main research areas: Tokenomics and Protocol Revenue Capture How can Avalanche measure and capture more of the economic value created across its ecosystem? Validator Economics and Long-Term Staking Incentives How can validator incentives remain economically sustainable as the finite token emission quantities decline? Ecosystem Capital Allocation How should captured value be distributed through mechanisms such as burns, validator-directed revenue, and other mechanics ? These are the developments BENQI users should monitor. Not because they guarantee higher yields or a higher AVAX price. But because they help explain the long-term economic environment in which AVAX staking and DeFi operate. Why This Matters BENQI's products allow users to participate in several layers of Avalanche's economy. Liquid Staking connects AVAX holders with network security. sAVAX makes staking positions transferable and potentially useful across supported DeFi applications. BENQI Markets connects capital suppliers with borrowers. Ignite makes it easier to launch and run Avalanche validators. Each product helps capital perform a useful function. The Avalanche Foundation's research asks a related question at the network level. How can the economic value created across Avalanche contribute to the sustainability of the ecosystem itself? That is a natural extension of the Productive Finance conversation: understanding how capital creates value through measurable economic activity. The Bigger Picture Avalanche has become more than a network for trading digital assets. Its ecosystem already includes financial institutions, tokenized assets, payments, lending markets, and specialized blockchains. That expansion created new opportunities. It also created new measurable economic questions. How much value is being produced? Where does that value accumulate? How should it support the network? And what makes the entire system sustainable? The Avalanche Foundation's research agenda represents an effort to answer those questions systematically. For BENQI users, it offers a useful reminder. Productive capital isn't simply capital that earns yield. It's capital participating in a solid economic system where the resources of value, incentives and risks can be understood sufficiently and sustainably. Staking rewards matter. Lending yields matter. Liquidity matters. But so do the economic structures that make those activities possible. As Avalanche grows, understanding those structures may become just as important as understanding the applications and use-cases built on top of them. Next Step If you hold AVAX or sAVAX, take some time to explore the Avalanche Foundation's Economic Research Agenda. Start with its three central questions: Measure: What economic value is Avalanche creating? Capture: How much of that value reaches the network? Distribute: How can that value support long-term sustainability? Then connect those questions to your own BENQI activity. If you hold sAVAX, understand where staking rewards come from. If you supply assets to BENQI Markets, understand where lending interest originates. If you borrow, understand the costs and risks of accessing liquidity. And if you're interested in Avalanche's long-term future, follow how the Foundation's research develops. Because the next stage of productive finance isn't just about putting more capital to work. It's about understanding how the economic system supporting that capital can remain productive over time. 🔺 Got another Freshman Question you'd like us to cover? Let us know!

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