Avalon Finance: An Overview
Avalon Finance centers on Bitcoin and blends DeFi and CeFi lending with its native AVL token. It aims to connect on-chain finance with traditional markets, enabling Bitcoin to function as an active financial asset.
Quick answer
Avalon Finance centers on Bitcoin and blends DeFi and CeFi lending with its native AVL token. It aims to connect on-chain finance with traditional markets, enabling Bitcoin to function as an active financial asset.
Avalon Labs seeks to establish an on-chain financial hub centered on Bitcoin, bridging decentralized finance (DeFi) with conventional financial services. Its goal is to convert Bitcoin from a passive store of value into an active financial asset, expanding real-world use and utility.
The platform features Bitcoin-backed lending, a Bitcoin-backed stablecoin (USDa), yield-generating accounts, and a credit card, all designed to let Bitcoin holders deploy their assets within a dynamic ecosystem.
Overview
Avalon Labs is built around four core pillars: a Bitcoin-backed CeDeFi CDP USDa, a yield-generating collateralized debt position backed by BTC; USDaLend, a lending protocol using Bitcoin-backed stablecoins; CeDeFi Lending, a hybrid protocol linking DeFi with CeFi liquidity providers to boost scalability and liquidity; and Decentralized Lending, which uses an isolation pool mechanism for secure lending with Bitcoin Liquid Staking Derivatives (LSDFi).
History
Avalon Finance participated in Season 8 of the Most Valuable Builder (MVB) program, an incubator co-led by BNB Chain, YZi Labs, and CoinMarketCap, which helped accelerate its growth and visibility in the Bitcoin DeFi ecosystem.
In February 2025, Avalon Labs disclosed explorations of a Bitcoin-backed public debt fund, evaluating the use of the U.S. Securities and Exchange Commission's Regulation A exemption (a so-called mini-IPO) to offer regulated Bitcoin-backed debt products to both accredited and non-accredited retail investors as part of expanding lending into traditional markets within a compliant framework.
In June 2025, YZi Labs announced a strategic investment in Avalon Labs, with capital designated for regulatory compliance across several jurisdictions, license procurement, and accelerated growth of its institutional lending business toward becoming a fully regulated on-chain Bitcoin financial institution.
Technology and Mechanism
Avalon Finance operates on the Merlin Chain, a Layer 2 solution for Bitcoin that enhances scalability, speed, and security. Merlin Chain processes transactions off-chain before final settlement on the Bitcoin blockchain, enabling high throughput, quicker confirmations, and reduced fees while preserving Bitcoin's security.
Interest Rate Mechanism
The platform uses a dynamic interest-rate model that shifts with supply and demand in each lending pool. Rates are real-time and vary with pool utilization: abundant supply lowers borrowing costs to stimulate lending, while tight liquidity and higher borrowing demand raise rates to attract deposits and maintain balance.
Products
CeDeFi CDP USDa
USDa is a Bitcoin-backed collateralized debt position (CDP) stablecoin that has been described as the world's largest issuer of Bitcoin-backed stablecoins and ranked as the second-largest CDP on DeFiLlama in 2025. It uses a fixed borrowing rate for predictable costs, maintains a 1:1 peg with USDT to mitigate volatility, offers unlimited supply for ongoing scalability, and supports omnichain interaction via LayerZero. Users can stake USDa to earn yield, with the system aiming for high capital efficiency and liquidity.
sUSDa
sUSDa is the yield-bearing variant of USDa. Holders can mint it by depositing USDa into the Avalon Savings Account or vault. The sUSDa token accrues yield generated from USDa borrowing rates and platform loan revenues, potentially delivering around 15% APY. The design encourages a staking ratio below 50% to sustain double-digit APRs.
CeDeFi Lending
- Main Pool: supports permissionless assets with stable prices and strong resistance to manipulation, including major cryptocurrencies.
- Innovation Pool: reserved for newer, more volatile crypto assets offering higher potential returns but carrying greater risk.
- RWA Lending Pool: for Real World Asset (RWA) tokens, including money market funds, equity indexes, and corporate bonds, paired with stablecoins.
- BTC LSD Pool: handles BTC Liquid Staked Derivatives alongside BTC, with risk settings adjusted according to asset volatility.
AVL
AVL is Avalon’s governance token, enabling the community to participate in shaping Bitcoin-backed financial mechanisms. Holders of staked AVL (sAVL) can vote on key protocol decisions, access fee rebates, use AVL Lend, and receive exclusive incentives. The distribution allocates 90% of the supply to the community and 10% to the team.
Tokenomics
AVL has a total supply of 1B tokens and the following distribution:
sAVL
sAVL is the staked variant of AVL, crafted to reward long-term participation and align user interests with Avalon Labs. Staking for sAVL yields AVL rewards, grants governance rights, and influences emission allocations across pools. A bribing market supports extra yield for sAVL holders, and users receive fee rebates on USDa and CeDeFi Lending, with benefits rising as stake size increases. sAVL reinforces commitment to Avalon’s ongoing growth.
- Community Incentive: 28%
- Airdrop: 20%
- Investors: 19%
- Ecosystem & Treasury: 15%
- Team: 10%
- Advisor: 4%
- Initial Liquidity: 4%
Frequently Asked Questions
What is Avalon Finance?
Avalon Finance centers on Bitcoin and blends DeFi and CeFi lending with its native AVL token. It aims to connect on-chain finance with traditional markets, enabling Bitcoin to function as an active financial asset.
How does Avalon Finance work?
Avalon Finance operates through smart contracts deployed on the Ethereum blockchain. Users interact directly with the protocol via a web interface or wallet integration — no account creation or KYC is required. All operations are settled on-chain and are publicly verifiable.
Is Avalon Finance safe to use?
Avalon Finance has undergone smart contract audits and is among the more established protocols in DeFi. However, all DeFi protocols carry inherent risks including smart contract vulnerabilities, oracle failures, and liquidation risk. Users should only commit funds they can afford to lose and review the protocol's audit reports before participating.
What blockchain is Avalon Finance built on?
Avalon Finance is primarily deployed on Ethereum. Many leading DeFi protocols are also expanding to Layer-2 networks such as Arbitrum, Optimism, and Base to reduce transaction costs and improve throughput.
What are the risks of using Avalon Finance?
Key risks include smart contract exploits, governance attacks, oracle manipulation, liquidity crises, and regulatory uncertainty. DeFi protocols are uninsured — losses from exploits are typically not recoverable. Always review audits and understand the mechanism before depositing funds.
How do I get started with Avalon Finance?
To use Avalon Finance, you need a self-custody wallet (such as MetaMask or Rabby), ETH for gas fees, and the relevant tokens for the action you want to perform. Visit the official protocol interface, connect your wallet, and follow the on-screen steps. Start with a small amount to familiarise yourself with the UX.
What token does Avalon Finance use?
Avalon Finance typically has a native governance token that allows holders to vote on protocol parameters, fee structures, and treasury allocations. Check the protocol's documentation for the current token ticker, total supply, and distribution schedule.
Who created Avalon Finance?
Avalon Finance was founded by a team of blockchain developers and DeFi researchers. The protocol is typically governed by a decentralised autonomous organisation (DAO), meaning ongoing development and parameter changes are decided collectively by token holders rather than a central company.
What is the total value locked (TVL) in Avalon Finance?
Avalon Finance's TVL fluctuates with market conditions and can be tracked in real time on DeFiLlama (defillama.com). TVL measures the total value of assets deposited into the protocol and is a key indicator of user confidence and liquidity depth.
How does Avalon Finance compare to other DeFi protocols?
Avalon Finance is differentiated by its specific mechanism, fee structure, and supported assets. Comparing protocols should include factors such as audited security posture, capital efficiency, governance maturity, cross-chain availability, and historical uptime. DeFiLlama and Dune Analytics provide side-by-side comparative data.