The blockchain Ethereum (CRYPTO:ETH) is powered by the crypto ETH, a cryptocurrency with a market value of $320 billion. Only Bitcoin worth more. And Ethereum’s success can be attributed to its programmability. 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 enterprise services.
Decentralized finance (DeFi) products are a type of dApp. They allow investors to lend, trade, and earn interest on money without having to pay to go through a traditional bank or brokerage. And by removing intermediaries from the equation, DeFi products make financial services more efficient and accessible. Thanks to its first-mover status, Ethereum is the largest dApp and DeFi ecosystem of the blockchain industry. But that popularity has also revealed a significant weakness: it lacks scalability.
As Ethereum’s transaction volume has increased, the speed of network traffic has slowed. And because each transaction competes for limited mining power, transaction fees have skyrocketed. Of course, an upgrade is on the way to solve this problem, but the scalability should not improve until 2023. In the meantime, other blockchains have already solved this problem and are gaining ground on the market leader .
here is a crypto-currency that could possibly exceed Ethereum.
Scalability keeps costs low
avalanche (CRYPTO: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 engaging in an exchange of 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 around 14 TPS and it takes up to six minutes to finalize transactions. This lack of scalability made the platform expensive; Iaverage transaction fees are over $20 on Ethereumbut you will probably only pay pennies on Avalanche.
Compatibility expands use cases
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, the crypto stable exchange Curve and the loan protocol Aave are two of the most popular DeFi platforms on Ethereum, and both went live on Avalanche in October, giving investors a faster and cheaper way to access.
Shortly after, the crypto USD native of ethereum (CRYPTO:USDC) – a stablecoin pegged to the US dollar – was added to Avalanche in December. As the second most popular stablecoin in the crypto economy, USDC could energize the Avalanche DeFi ecosystem, as it allows people to invest in DeFi without holding cryptocurrencies volatile. For example, you can earn an annual percentage yield (APY) of 1.56% by lending USDC to the Aave protocol right now. That’s orders of magnitude more than the 0.06% paid by the average bank savings account.
These aspects could accelerate its 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 trading volume has crossed the million mark 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 average daily transactions 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 fourth 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 AVAX crypto is expected to grow, making raise its price. And given enough time, I think Avalanche could surpass Ethereum in terms of price and popularity.