Cryptocurrency investors have certainly seen some rather impressive returns of late. The recent valuation growth among cryptocurrencies has largely been tied to the innovations blockchain technology has brought to how efficiently and effectively transactions can be handled.
However, many cryptocurrency investors have recently found that they're stuck waiting for transactions to clear or paying exorbitant fees to process transactions. Think of blockchains like a highway. Those validating networks (nodes) can be thought of as lanes on the road. Depending on how many nodes there are, and how much traffic is on a network, transaction times can really vary.
Of course, much has been made about the gas fees (fees paid by users to process transactions) across various networks of late. it can be typical for crypto users to pay more than $100 to get a transaction processed quickly. Again, it's a supply and demand thing. However, the bottom line is that if a merchant wants to settle a transaction instantly and in a low-fee manner, there are few options today.
These are problems Amp (AMP -1.75%) is helping to provide a solution for.
Created by the Flexa team, Amp is an open-source protocol based on Ethereum (ETH -1.76%). Flexa's unique value proposition is derived from the digital payment platform's merchant-focused design. Amp tokens power the Flexa network, which is increasingly being viewed as the future of how merchants may choose to process transactions on the blockchain.
Is this new cryptocurrency going to create waves in the payment processing space? Let's look at why Amp could be set to make enormous strides in this regard.
1. Makes instant payments possible
One of the major drawbacks of cryptocurrency has always been the lag time between when payments are sent and when transactions are processed. The time a block takes to be validated varies across various blockchain networks. Accordingly, high-volume users, or those requiring speedy payment, are often left with little recourse but to hurry up and wait.
Amp solves this by allocating its token as collateral. If a given payment fails, the merchant will receive Amp and be compensated for the loss. This is a novel idea in the cryptocurrency space and one that should excite investors.
Additionally, security has also been a key pain point for blockchain-based payment processors. Amp has been designed to be an open-source and extensible network. Future developers can add to the protocol to increase the number of use cases. More users also mean increased network security. Currently, Amp's security has been validated by leading research firms such as ConsenSys, Diligence, and TrailOfBits. In this regard, the network earns top marks in my book.
Amp's rigorous testing and track record of providing safe, lightning-fast transactions is encouraging. Indeed, Amp appears to be an attractive option for investors looking to build a long term position in an emerging cryptocurrency.
2. Amp has a fixed supply
Investors can choose to look at two main types of cryptocurrencies. There are cryptocurrencies that have a capped supply, such as Bitcoin (BTC -0.82%). Other cryptocurrencies, such as Ethereum, have chosen not to cap their supply, and in effect be inflationary.
Inflationary cryptocurrencies have advantages. However, a key disadvantage of an inflationary token is downward price pressure over time.
Think of this in the same context as a stock. The more share issuances a company undertakes, the more each individual investor's stake gets diluted. We call share inflation "dilution" in the equities world, but it's a driving factor behind how cryptocurrency tokens are priced as well.
In this regard, Amp is certainly intriguing. This cryptocurrency has a fixed, non-inflationary supply. Like Bitcoin, in the long run, many investors believe this will drive upward momentum with this token's price. The laws of supply and demand remain a focal point of many fundamentals-oriented investors in the crypto space. In this regard, Amp is a token that's generating a lot of interest right now.
3. Flexa has a diverse network of partnerships
Amp's parent company Flexa is making major moves in the cryptocurrency space. Its network is currently accepted at 41,336 locations in the U.S. and Canada, though this number is constantly, and rapidly, expanding. A quick look at Flexa's Twitter account shows near-weekly updates on new Flexa partnerships. This is great news for Amp.
The value of a network is directly correlated to its size. Flexa's continuously expanding acceptance among users forces investors to buy more AMP. This is a key value driver for this cryptocurrency, especially given Amp's fixed supply.
Currently, a rather large swath of cryptocurrencies has little to no practical use in terms of real-world applications. However, Amp is quite the opposite. The Amp token powers a functional payment network that creates meaningful utility for its end users.
Cryptocurrency investing is inherently volatile. Amp holders could experience large fluctuations in the value of their holdings depending on trends in the larger market. As always, invest with caution.
Investors in Amp certainly are not immune to the market-related forces that are likely to result in future volatility. However, on a token-specific level, this cryptocurrency is also one with risks investors need to consider. There are other up-and-coming cryptocurrencies that are likely to rip a page out of Amp's book and attempt to do what Amp is doing, better. Additionally, the staking rewards for Amp are extremely low, at only 2%.
However, Amp does provide investors with a compelling thesis right now. This cryptocurrency powers one of the quickest blockchains in terms of transaction time in the market right now. This sort of innovation should not be lost on investors, particularly those with a long-term investing time horizon.