As Ethereum has seen an increased transaction volume, network traffic speeds have slowed down. And because of each transaction that is competing for a limited amount of mining power, transaction fees have soared. Of course, there is an upgrade underway that will attempt to address that issue, but scalability is not expected to start improving until 2023. In the meantime, there are other blockchains that have already fixed that problem, and they are starting to gain ground on Ethereum.
Here is one crypto that might eventually be bigger than Ethereum.
Scalability keeps its costs low
Avalanche is a programmable blockchain that is designed by Ava Labs. Its main innovation is the snowman consensus protocol, which is a type of POS in which validators can confirm transactions by sampling a small random subset of nodes instead of engaging in a time-consuming exchange of messages with every other node that’s on the network.
That gives Avalanche very fast speeds. In fact, with a throughput of about 4,500 transactions each second and a finalization time of just two seconds, Ava Labs thinks Avalanche now is the fastest blockchain in the world. For context, ETH handles about 14 transactions per second, and it needs up to six minutes to finalize its transactions. That lack of scalability has made its platform expensive; the avg. transaction fee is over $20 on ETH, but you will likely have to pay just a few cents on the Avalanche network.
Compatibility grows use cases
Avalanche is created to be compatible with ETH smart contracts, meaning creators could easily port their dApps from one blockchain to the other. Lending protocol Aave and Stablecoin exchange Curve are two of the more popular DeFi platforms on ETH, and both were launched on Avalanche in Oct, offering its investors a cheaper and faster means of access.
Shortly after, ETH-native USD Coin — a stablecoin that’s pegged to the United States dollar — was added to Avalanche in Dec. As the cryptoeconomy’s number two most-popular stablecoin, USDC might give the Avalanche DeFi ecosystem a large boost, because it lets people invest in DeFi without have to hold volatile crypto. For example, you could earn a 1.56% yearly percentage yield by lending USDC to the Aave protocol today. That is orders of magnitude over the 0.06% paid by the avg. bank savings account.
Utility might supercharge adoption
In short, Avalanche is very cheap, fast and compatible with ETH. Over the last year, that value proposition has given rise to rapid adoption. Avalanche’s transaction volume crossed 1 million per day for the first time in Jan. 2022. That is up from just a few hundred transactions each day in Jan. 2021, and it is almost equal to the 1.2 million avg. daily transactions that is seen on ETH so far this year.
Moreover, Avalanche currently has 175 blockchain projects — including many video games, DeFi protocols and NFT marketplaces– and it comes in ranked as the fourth-biggest DeFi ecosystem, with around $11 billion being invested on the blockchain. Moving forward, as those DeFi and dApps products draw in more consumers, developers and investors to its platform, demand for the AVAX token should increase, driving its value even higher. And with time, I think Avalanche might surpass ETH in terms of value and popularity.