Want to earn returns that leave the rest of the cryptocurrency market behind? Skip the big names and bet on lesser-known tokens with explosive potential. Fantom (FTM 3.78%) and Aave (AAVE 2.86%) fit the bill with their tiny market caps and unique value propositions.
Fantom is the 32nd largest cryptocurrency with a market cap of less than $6 billion -- suggesting it's largely undiscovered by investors. But that could change because of its lightning-fast speed and interoperability with the industry-leading blockchain, Ethereum.
Ethereum hosts the lion's share of decentralized applications (dApp), which are self-executing programs stored on the blockchain, with an estimated 3,000 of the more than 4,000 existing dApp projects being hosted on its platform. But it faces challenges with congestion and bottlenecks, which Fantom aims to solve.
Instead of measuring transactions per second (TPS), its developers focus on time-to-finality, which measures the time from transaction submission to confirmation. Fantom boasts a time-to-finality of about one second, making it the fastest blockchain of its kind, according to its official website, although developers have not provided any details on rival networks' performances using the times-to-finality metric.
As icing on the cake, smart contracts created with Ethereum's programming language Solidity can be easily adapted to run on the Fantom network. This feature helps Fantom benefit from Ethereum's scale and the huge pool of talented developers who are already familiar with using Solidity. While Fantom is still a relatively minor project, its unique value proposition could help it attract investor attention over the long term.
Aave is a decentralized-finance platform that helps users borrow and earn interest on digital assets. Unlike stand-alone blockchains like Fantom, Aave is programmed on the Ethereum network, which exposes it to some limitations. But its $2.5 billion market cap could get significantly bigger, as it offers investors a way to earn income in a low-interest rate environment.
According to the U.S. Federal Deposit Insurance Corp. (FDIC), the average bank deposit rate is just 0.06% for savings accounts, making it hard for savers to accumulate wealth over the long term. Aave provides an alternative by allowing users to lend digital assets through liquidity pools in return for interest income that varies based on demand.
To reduce the risk, Aave loans are overcollateralized, so the borrower must pledge at least 100% of the loan's value as collateral. This allows borrowers to cash out of their positions without having to sell their crypto.
As an Ethereum-based dApp, Aave suffers from previously mentioned challenges like congestion and transaction bottlenecks. But the platform will benefit from Ethereum's planned upgrades, which aim to replace its cumbersome proof-of-work (PoW) system (where miners solve puzzles to validate transactions), with a faster proof-of-stake (PoS) system, where mining will be done using existing tokens.
Betting on a crypto rebound
Cryptocurrency prices have been off to a rough start in 2022, with the total market down 25% to $1.65 trillion. But the asset class has a track record of bouncing back from its declines over the long term. Fantom and Aave could help lead the recovery because of their advantages in hosting dApp development and decentralized finance.