Ending 2021 with a market cap of $2.2 trillion, cryptocurrency's total valuation almost tripled from $774 billion at the start of the year. 2022 also looks promising as COVID-19 uncertainty and inflation (the U.S. CPI rose 6.8% in November) push investors out of fiat currency.
Let's explore the reasons why these two cryptocurrency assets, Solana (SOL 2.74%) and Avalanche (AVAX 2.38%), could make top picks in this red-hot investment opportunity.
1. Solana
Up almost 10,000% in 2021, Solana enjoyed a massive bull run last year. The platform's advantages in speed and transaction capacity can help keep the momentum strong by attracting decentralized applications (dApp) projects that need a robust blockchain platform.
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dApps are programs that use self-executing smart contracts to offer services on the blockchain. So far, these include relatively niche applications like decentralized cryptocurrency exchanges and digital art markets. But as the technology improves, so will its use-cases.
With a transaction capacity of 50,000 per second (compared to Ethereum's 15), Solana's platform could help usher in a new generation of scalable blockchain-based programs with real-world utility.
Solana-based payments protocol Zebec highlights this potential. Zebec is designed to enable real-time financial transactions for payroll and investments. In January, megacap fintech company Visa partnered with Zebec through its Fintech Fast Track program designed to incubate innovative payment solutions. This deal is an impressive vote of confidence in Zebec's protocol and the Solana blockchain it is built on.
2. Avalanche
Soaring over 3,000% in 2021, Avalanche has left early investors smiling all the way to the bank. Like Solana, Avalanche is designed for dApp development and can process an impressive 4,500 transactions per second. Its unique transaction-burning mechanism could help sustain price growth by boosting the scarcity of its native token, AVAX.
Unlike Ethereum, which uses a cumbersome proof-of-work (PoW) mechanism where miners solve puzzles to verify transactions, Avalanche uses proof of stake (PoS). Its miners validate transactions using AVAX tokens they already own in a process called staking. The tokens are locked up, making them temporarily untransferable, in return for new units valued at an annual percentage yield (APY) of 9.8%, according to the platform's website.
To counteract inflation and boost AVAX's scarcity, the avalanche network burns transaction fees by sending them to an inaccessible wallet.
So far, roughly 617,000 units of AVAX have been removed from circulation, worth $55 million. The transaction burning system is great news for investors because scarce assets tend to be more valuable, assuming demand stays constant or increases. And with its impressive transaction capacity, the network is poised to attract its fair share of developers.
Betting on innovation
Solana and Avalanche are very different cryptocurrencies, but they have one big thing in common: innovation. Solana has optimized its blockchain for speed and scalability, while Avalanche's unique transaction-burning mechanism could help increase its scarcity and token price. These features could help ensure both coins stay ahead of the pack in 2022. And it's not too late for new investors to bet on their success.
