In 2013, Ethereum ( ETH ) was the first programmable blockchain. Whereas previous recordkeeping systems were limited to keeping track of transactions, Ethereum is able to execute self-executing computer programs known as smart contracts. That technology has evolved into a thriving ecosystem of decentralized finance (DeFi) and decentralized applications (dApps) offerings since then.
As the most popular platform for smart contracts, Ethereum has become a thriving ecosystem of applications and services. However, with its popularity increasing, so have transaction fees on the network. Of course, the developer community is working on a solution, but it won’t be available until 2023. Rivals such as Fantom ( FTM -1.47% ) and Solana ( SOL 0.77% ) will have an opportunity to grow in the meantime.
Here’s what you should know.
The Fantom blockchain was launched in December 2019. The Lachesis protocol, a proof of stake (PoS) consensus mechanism that speeds transaction processing to thousands of transactions per second, is the main feature. Fantom can finalize transactions in one or two seconds and those operations cost less than a penny each. Ethereum handles around 14 transactions per second, with an average price of more than $13 each.
Even better, Fantom is completely compatible with Solidity, the programming language used to create smart contracts on Ethereum. As a result, developers may simply deploy Ethereum-based applications and services on the Fantom blockchain, improving performance and lowering costs. Yearn.finance, an Ethereum-based yield aggregator that went live last October on Fantom, is only one of many DeFi providers joining its quickly expanding network. In reality, Fantom presently ranks sixth among the most popular DeFi ecosystems with almost $6 billion invested in it so far.
The value proposition of Fantom in the future years — fast and cheap transactions, as well as Solidity compatibility — makes it a strong candidate to disrupt Ethereum. What does this imply for investors? Fantom presently has a market capitalization of $3 billion, which is less than 1% of Ethereum’s current valuation of $365 billion. However, if the usage of Fantom-powered software and services continues to rise, demand for the cryptocurrency (the FTM coin) will increase, pushing its price higher. If the company’s market value reaches $365 billion, investors would profit 120 times if its current price is taken into account.
The blockchain technology Solana is most famous for being the world’s most-performant. Its PoS consensus algorithm time-stamps incoming transactions, generating a verifiable sequence of events that can be quickly verified by validators. Solana can handle 50,000 transactions per second and completes them in under 13 seconds. Transactions are far less expensive as a result of this scalability.
Solana launched in February 2020, a few months after Fantom, but has sparked far more interest from developers and DeFi investors. There are over 1,500 blockchain-based projects live on the network, including popular NFT marketplace Magic Eden and disruptive payment system Solana Pay, which eliminates bank and card fees by allowing consumers to make direct transactions with merchants. Solana is the fifth most popular DeFi ecosystem with $6.5 billion invested on it collectively.
Solana is not compatible with Solidity, unlike Fantom, but its ecosystem of decentralized software and services has nonetheless blossomed quickly. Assuming dApps and DeFi solutions on the blockchain continue to be adopted, demand for the native currency (the SOL coin) will rise, pushing its price higher. Investors who bought Solana when it was valued at $34 billion would see a ten-fold return if it reached a market capitalization of $365 billion (e.g., Ethereum’s current market cap).
The fine print
I believe that Fantom and Solana could be long-term investments, whether or not they outperform Ethereum in terms of price and popularity. However, the blockchain sector is extremely competitive, and the crypto market is notorious for its volatility. As a result, I believe investors should adhere to the following four principles: Develop a balanced portfolio; a diversified stock-and cryptocurrency combination is an excellent way to go. And never put money into anything you can’t afford to lose in three years.