Despite the benchmark S&P 500 more than doubling up its average annual total return in 2021, relative to the past four decades, it's the cryptocurrency market that again stole the show.
As of the time of this writing on Dec. 28, the aggregate value of all digital currencies was $2.25 trillion, according to CoinMarketCap.com. That's up a cool 191% from the beginning of 2021. Thanks to the consistent outperformance of the "Big Two" -- Bitcoin (BTC -2.53%) and Ethereum (ETH -4.96%) -- cryptocurrency investors are probably wealthier now than they were at this time last year.
And yet, in spite of extreme periods of volatility, opportunity is still knocking for investors to make money -- assuming they stick to digital currency projects that offer differentiation and competitive advantages.
As we steam forward into a new year, here are seven cryptocurrencies that have the potential to triple your money in 2022.
Among the largest cryptocurrencies by market cap, the one that excites me the most and has a realistic chance of tripling in value this year is Avalanche (AVAX -16.08%).
Avalanche is a smart contract-driven blockchain network that offers incredible speed and compatibility, which makes it a logical choice with which to develop decentralized applications (dApps). Smart contracts are the protocol that help with verifying, facilitating, and enforcing the negotiation of a contract between two parties.
According to Avalanche's development team, the blockchain-based network can process north of 4,500 transactions per second (TPS), and it offers a block finality of less than two seconds. To put this into context, the two most popular blockchain networks, Bitcoin and Ethereum, can handle a respective 7 and 13 TPS, and they complete transactions in approximately 60 minutes and six minutes. That's how much more efficient Avalanche is than the most popular cryptocurrencies.
But the real lure is the aforementioned compatibility. It's no secret that dApp developers love utilizing the Ethereum Virtual Machine (i.e., the software that allows developers to create dApps on Ethereum). Avalanche has the Ethereum Virtual Machine operating on its blockchain. This means dApp developers have the opportunity to avoid the congestion, high fees, and processing lag associated with Ethereum's blockchain and migrate their projects to Avalanche's superior network. This should be a major selling point for Avalanche in 2022.
If you want something a bit more off the radar, Qtum (QTUM -11.86%) (pronounced "Quantum") is the cryptocurrency that could triple your money in 2022.
It's relatively obvious, based on their market value dominance, that Bitcoin and Ethereum are loved by investors. However, these networks have their drawbacks. They're slow, congested, and often come with high transaction fees attached.
Enter Qtum, which aims to combine the best aspects of both networks into a single blockchain project.
Qtum's blockchain incorporates the highly secure UTXO transaction model from Bitcoin and combines it with the Ethereum Virtual Machine. The result is a secure network that can support smart contracts. In other words, Qtum can be used for sending payments, or could be a hub for dApp development, including decentralized finance (DeFi) applications. With low transaction fees and the ability to process 70 TPS, it's another smart option for dApp developers.
What's more, Qtum's Account Abstraction Layer (AAL) provides differentiation from other platforms. Without getting overly technical, AAL is the component that allows Qtum's engineers to continuously upgrade the smart contract component of the blockchain while always ensuring that, no matter how many upgrades are rolled out, it'll remain compatible with the UTXO transaction model.
With a handful of key partnerships under its belt, Qtum is a solid bet to outperform.
I'll be the first to say it: Aside from Bitcoin, payment coin-based networks don't get a lot of love in the crypto space. But if there's one that should, it's Stellar (XLM -7.10%), the 27th-largest digital currency by market value.
Imagine you have U.S. dollars in your pocket and you want to send money to a friend or family member in the U.K. Going through traditional banking routes, today's existing infrastructure could take a full week to validate and settle this transaction.
Comparatively, if you were utilizing Stellar's blockchain-based network, your U.S. dollars would be converted into Lumens (XLM, the protocol token of the network), sent to their destination, and converted to British pounds. The time to complete this transaction? About 4 to 5 seconds. That's hitting the send button, validation, and settlement faster than most people can walk to their fridge. And Stellar can handle up to 3,000 TPS, per developers, which blows most blockchain-based networks out of the water.
What Stellar offers is also incredibly cost-effective. The average transaction fee on Stellar's network is 0.00001 XLM. Based on a recent price of $0.274 per Lumen, we're talking about more than 364,000 transactions before a user would even rack up $1 in fees. Compare that to traditional banking fees or even Bitcoin, which regularly sports an average transaction fee of $2 or higher.
Considering that Stellar has a history of landing major partnerships, it's a project crypto investors should take seriously.
Another cryptocurrency that can triple you money in 2022 is Algorand (ALGO -9.81%), which slides in as the 22nd largest digital currency by market value.
One of the key themes of this list is competitive advantages. With Algorand, users are getting highly efficient execution and scalability. Based on recently updated data from Algorand, the network was processing at 1,162 TPS and offered a block finality of 4.36 seconds. This is more or less on par with Stellar.
Something that's unique about Algorand is the tweaking of the traditional proof-of-stake consensus mechanism. With Algorand's pure proof of stake (PPoS), holders of ALGO are randomly and secretly chosen to propose blocks and vote on proposals. The randomization associated with PPoS all but ensures that a small number of ALGO holders can't collude to disrupt the network.
But what makes Algorand so exciting is its emphasis on interoperability. The development team understands that countless unique blockchain projects are being developed, many of which may not be compatible with each other. Algorand is focused on bridging these gaps to make DeFi and dApps mainstream.
After quadrupling in 2021, Algorand has all the tools necessary to triple in 2022.
If you thought Qtum was off the radar, let me introduce you to Nano (NANO -8.50%), which is the smallest digital currency on this list at a hair above a $500 million market value. Though it may be small, Nano could pack a punch for patient investors this year.
Like Stellar, Nano is a payment-network coin that's all about speed, scalability, and completely outdoing traditional payment infrastructure.
What separates Nano from the thousands of other payment coin projects is its blockchain network. Nano employs what's known as the block-lattice blockchain. This design allows each user to have their own blockchain, which they're free to add to. Since users have their own blockchain, they don't compete with other users to propose new blocks, or worry about gaining approval from anyone other than the sender and receiver of a payment. In short, Nano's network can scale very rapidly without adversely affecting the performance of the network.
Speaking of performance, Nano offers the fastest block finality on this list. According to its developers, the typical transaction is validated and settled in under one second. I repeat, under one second!
Additional differentiation is supported by Nano's Open Representative Voting (ORV) consensus mechanism. Without digging into the weeds, ORV is the key component that makes transactions fee-less on the network.
To summarize: Nano can complete cross-border transactions, for free, in under a second. That's what we call a competitive edge.
6. Axie Infinity
There's arguably not a hotter trend in the cryptocurrency space right now than the metaverse. More specifically, investors are enamored with the prospects of decentralized, blockchain-based virtual worlds. Axie Infinity (AXS) is currently leading that charge and could triple investors' money in 2022.
Axie has developed a play-to-earn game on the Ethereum blockchain that's been a big hit in recent months. Users collect, raise, breed, and battle monster-like figures known as Axies. To go to battle, a user needs a minimum of three Axies. As with traditional games, the winner of these battles receives experience points that can be used to improve their Axies.
While this all might sound pretty straightforward, Axie Infinity deviates from traditional gaming in one big way: ownership. If you download a game on an Xbox that allows you to modify characters or create your own virtual world, the rights to those characters still belong to the game developers. By comparison, if you raise an Axie, it becomes a non-fungible token (NFT). It can be used in game play or be monetized in a marketplace. In other words, gamers have full ownership of their creations with Axie, which is in stark contrast to what we've witnessed from decades of gaming.
Furthermore, Axie is generating some cold, hard green with its game. Data from TokenTerminal.com shows that Axie Infinity has brought in $1.24 billion in protocol dApp revenue over the trailing-90-day period. That trails only Ethereum ($4.98 billion) over this time frame.
With increasing real-world usage, Axie Infinity could be a hot token in 2022.
The seventh and final cryptocurrency that can triple your money in 2022 is IOTA (MIOTA). Once a top-10 digital currency by market cap in 2017, IOTA has dipped all the way to No. 42, per CoinMarketCap.com.
The key theme throughout this list is the idea that competitive advantages and differentiation are a necessity to stand out when there are more than 16,000 listed cryptocurrencies. IOTA, like the projects I described above, provides this differentiation.
The interesting thing about IOTA is that it's not blockchain-based. Rather, developers built what's known as the "Tangle" -- a direct acyclic graph (DAG) that requires new transactions to confirm at least two previous transactions. Imagine this interconnection of transactions propagating along a timeline and creating something like a tangled web (thus, the "Tangle").
Why the Tangle and not blockchain like seemingly every other project? The answer is that blockchain can be slowed down by the need to generate, vote on, and validate new blocks. Eliminating these hurdles with the Tangle means a faster, more scalable network that, like Nano, is fee-less.
IOTA has also made waves by landing a major partnership with Dell Technologies. This pact, known as Project Alvarium, will seek to analyze and log the trustworthiness of data before it's used by an application.
Long story short, forget about the brand-name coins and think a bit smaller and off the radar in 2022 if you want to potentially triple your money.