Cryptocurrency was one of the hottest investment themes of last year. Leaders like Bitcoin soared past $60,000. And meme tokens skyrocketed -- for example, Shiba Inu surged a jaw-dropping 45,000,000%. With all of that action, the value of the cryptocurrency market reached more than $3 trillion as of late last year.
And it doesn't look like the interest in cryptocurrency is about to end. That's because many offer exciting uses in the real world and a new revolutionary way of doing business. Here's a look at two I'd buy in a heartbeat this year.
Ethereum (ETH -2.13%) is the world's second-largest cryptocurrency after Bitcoin. It's the network behind the currency "Ether." And it's a blockchain that hosts more than 2,900 decentralized applications (dApps) in areas such as finance, gaming, and technology. For example, users can lend, invest, and even buy insurance on the network. Ethereum also is a big player in the world of non-fungible tokens (NFTs). These are certificates of ownership of items such as artwork. Ethereum is the No. 1 player by NFT sales volume, according to CryptoSlam.
The big problem with Ethereum today is transaction speed. The network only processes about 30 transactions per second. But here's the good news: Ethereum plans to launch an upgrade this year that will solve the problem. It's switching to the proof-of-stake validation method. This means no need for complex computations to validate transactions (that's what takes time and energy). Instead, validation power will be granted according to coins held. A final step in the upgrade will happen in 2023. That's the addition of shard chains to relieve congestion on the main network. As a result of the upgrade, Ethereum will be able to process as many as 100,000 transactions per second.
Ethereum already has market dominance among investors and users. Once the platform gets faster, its value could move significantly higher.
Avalanche (AVAX -1.36%) is similar to Ethereum. It's a currency -- called AVAX -- and a blockchain hosting dApps. Avalanche only launched in 2020, so when compared to Ethereum, it still has some catching up to do. It hosts about 400 dApps so far. But the important words here are "so far." The advantages of Avalanche may push this number significantly higher in the coming months and years.
What helps Avalanche stand out among the thousands of crypto players out there? Avalanche's speed is one major advantage. It boasts a speed of 4,500 transactions per second. And it completes transactions in less than two seconds. That's compared to six minutes for Ethereum.
Another plus is Avalanche's structure. Just think of the idea of divide and conquer. Instead of all operations taking place in one place, Avalanche is made up of three blockchains that work together. Avalanche includes one chain to exchange tokens, another to host dApps, and a third to coordinate validators. This is great for efficiency and results in lower costs for users.
I expect Avalanche's interoperability with other blockchains to help it stay in the forefront as the use of cryptocurrencies progresses. For instance, you can build an Ethereum-compatible dApp on Avalanche or transfer assets via a bridge.
Avalanche climbed more than 3,300% last year. But there's a lot more to come for this young crypto player. And that could translate into further gains down the road.