Blockchain Ethereum (CRYPTO:ETH) is powered by the crypto ETH, a cryptocurrency with a market value of $320 billion. Nothing but Bitcoin worth more. And the success of Ethereum 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 financial (DeFi) products are a type of dApp. They allow investors to lend, trade and earn interest without having to pay through a traditional bank or brokerage. And by taking intermediaries out of the equation, DeFi products make financial services more efficient and accessible. Thanks to the first-mover status, Ethereum is the largest dApp and DeFi ecosystem of the blockchain industry. But that popularity has also revealed a major weakness: it lacks scalability.
As Ethereum’s transaction volume has increased, the speed of network traffic has decreased. And as each transaction competes for limited mining power, transaction costs have skyrocketed. Of course, an upgrade is underway to fix this issue, but scalability shouldn’t improve until 2023. Meanwhile, other blockchains have already solved this problem and are gaining ground on the market leader.
here’s a cryptocurrencies-currency that could possibly exceed Ethereum.
Scalability keeps costs low
Avalanche (CRYPTO:AVAX) is a programmable blockchain designed by Ava Labs. The main innovation is the snowman consensus protocol, a kind of proof-of-stake in which validators confirm transactions by randomly sampling a small subset of nodes (computers) instead of engaging in an exchange of time-consuming messages with all other nodes in the network.
This makes Avalanche very fast. 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 takes a maximum of six minutes to complete trades. This lack of scalability made the platform expensive; laverage transaction costs are over $20 on Ethereumbut you probably only pay pennies on Avalanche†
Compatibility extends usage scenarios
Avalanche is designed to be compatible with Ethereum smart contracts, meaning 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 coming from 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 boost the Avalanche DeFi ecosystem as it empowers people to invest in DeFi without holding cryptocurrencies volatile. For example, you can earn an annual percentage return (APY) of 1.56% by borrowing USDC now on the Aave protocol. That is an order 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 led to rapid adoption. Avalanche’s daily trading volume has crossed the million mark for the first time in January 2022† This represents an increase of 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 a range 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, bringing raise its price† And given enough time, I think Avalanche could surpass Ethereum in terms of price and popularity†