Avalanche Prediction: Can AVAX Be The Next Ethereum?

The Avalanche blockchain is quickly becoming an important ecosystem of decentralized services.

Ethereum is an ecosystem of decentralized applications and financial services.

Since Ethereum has become increasingly crowded, transaction speeds have slowed, and fees have increased.

Avalanche is a faster and cheaper alternative to Ethereum, and it is growing rapidly.

The Ethereum blockchain is powered by its native crypto ETH, a cryptocurrency with a market value of $370 billion. Only Bitcoin is worth more. The success of Ethereum can be attributed to its smart contracts. Specifically, developers can use the platform to build and deploy decentralized applications (dApps), software that exists on a peer-to-peer network rather than centralized services.

Decentralized Finance (DeFi) products are an example of dApps. They allow investors to lend, trade, and earn interest on crypto without going or paying a traditional bank or broker. DeFi products make financial services more efficient and accessible by removing intermediaries from the equation. Thanks to its first-mover status, Ethereum is the largest dApp and DeFi ecosystem in the blockchain industry. But that popularity has also revealed a significant weakness: it lacks scalability.

As Ethereum’s transaction volume increased, network traffic speed slowed down. Since each transaction competes for limited mining power, transaction fees have skyrocketed. Of course, an upgrade is on the way to solving this problem, but the scalability should not improve until 2023. In the meantime, other blockchains have already solved this problem and are gaining ground in the crypto market. One of the best examples would be Avalanche.

Here is why Avalanche could eventually overtake or at least go head-to-head with Ethereum.

High Scalability & Low Costs

Avalanche (AVAX ) is a programmable blockchain designed by Ava Labs. Its main innovation is the Snowman consensus protocol, a type of proof-of-stake in which validators confirm transactions by randomly sampling a small subset of nodes (computers) rather than exchanging time-consuming messages with all other nodes in the network.

This makes Avalanche very fast. In fact, with a throughput of 4,500 transactions per second (TPS) and a completion time of two seconds, Ava Labs believes Avalanche is now the fastest blockchain in the world. For context, Ethereum runs about 14 TPS, and it takes up to six minutes to finalize transactions. This lack of scalability made the platform expensive; average transaction fees are over $20 on Ethereum, but you’ll probably only pay a few cents on Avalanche.

Compatibility

Avalanche is designed to be compatible with Ethereum smart contracts, which means developers can easily transfer their dApps from one blockchain to another. In fact, stablecoin exchange Curve and lending protocol Aave are two of the most popular DeFi platforms on Ethereum, and both went live on Avalanche in October, giving investors a way to access services faster and cheaper.

Shortly after, an Ethereum-based stablecoin USDC – a stablecoin pegged to the US dollar – was added to Avalanche in December. As the second most popular stablecoin in the crypto market, USDC could energize the Avalanche DeFi ecosystem, as it allows people to invest in DeFi without holding volatile cryptocurrencies. For example, right now, you can earn an annual percentage yield (APY) of 1.56% by lending USDC to the Aave protocol. This is a lot more than the 0.06% paid by the average bank savings account.

These Features Could Accelerate AVAX Adoption

In short, Avalanche is fast, cheap, and compatible with Ethereum. Over the past year, this value proposition has fueled rapid adoption. Avalanche’s daily transaction volume crossed 1 million for the first time in January 2022. This represents an increase from just a few hundred transactions per day in January 2021 and is almost equal to the 1.2 million transactions daily averages seen on Ethereum so far this year.

Additionally, Avalanche currently offers 175 blockchain projects — including an array of video games, NFT marketplaces, and DeFi protocols — and ranks second among DeFi ecosystems, with approximately $11 billion invested in blockchain. Going forward, as these dApps and DeFi products attract more developers, consumers, and investors to the platform, the demand for the AVAX crypto could rise, driving up its price. If given enough time, Avalanche could surpass Ethereum in price and popularity in the long run.

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More about the author: Almmaye

Alm Maye has been a trader and analyst since 2013. He is an expert in equity markets, Forex, and cryptocurrencies. He is the creator of Almvest.com and Imveste.com, two sites dedicated to finance. Additionally, he participates in the development of featured articles on various sites such as Actions-boursieres.fr, as well as the international network of Finixio.com.