Crypto investors may be in the game for a variety of reasons. Some simply focus on the life-changing returns crypto can provide. Indeed, many of the charts investors watch have seen incredible growth over the past year alone. Others prefer to trade these tokens based on momentum. And still others may be enticed by the innovation and utility being created by some top projects out there.
Among projects creating real utility right now, Avalanche (AVAX -1.90%) remains a top-10 cryptocurrency by market capitalization.
Here's why Avalanche's recent outperformance may be just the beginning for long-term crypto investors.
I know, another Layer-1 network...
Since the launch of Ethereum, a wide range of Layer-1 networks have popped up, looking to take market share away from this leading crypto ecosystem. Ethereum's success has been due, in part, to being the first major blockchain network to incorporate smart contracts into its protocol. Additionally, Ethereum has been working (for years, mind you) on shifting toward a less energy-intensive proof-of-stake (PoS) consensus mechanism to validate transactions. The upcoming "Ethereum merge," which will bring this goal to reality, is expected to be completed in the coming months.
Accordingly, the rise of a number of Layer-1 networks with smart contract capabilities and PoS consensus mechanisms have popped up. Avalanche is thus one of many, in this regard.
Image source: Getty Images.
However, Avalanche is different. This is a heterogenous network of interoperable blockchains, utilizing custom validator sets to achieve scale. In layman's terms, this means Avalanche has found a way to create unique and independent blockchain solutions (via subnets), each supported by its own staking system.
What are subnets?
Subnets, short for subnetworks, are Avalanche's solution to the interoperability problem plaguing the crypto world. Essentially, due to the siloed nature of most blockchains, projects created on one blockchain have trouble talking to others. That's somewhat by design -- the security of these projects often requires siloing.
However, Avalanche's subnets, really secondary networks on Avalanche's primary network, allow for developers to build projects on its own network, with its own set of validators (stakers) and even its own tokens. Avalanche's AVAX token is still used to stake the mainnet, which is necessary for the proper functioning of all subnets. However, the unique autonomy with which these projects can operate is something many developers prefer.
This has led to developer growth on Avalanche's network outpacing many of its peers. Customizable blockchains supporting the trading of digital assets, or simply as a way to transfer value in a decentralized way, remain in high demand. Accordingly, investors looking at Avalanche as a way to play this growth have a lot to like right now.
The metrics are impressive
Just how impressive has Avalanche's growth been?
Well, looking at total value locked (TVL), a key metric in the crypto world, Avalanche is becoming a leader in the decentralized finance (DeFi) market. Ethereum still takes the No. 1 spot, by a country mile. However, Avalanche's TVL has skyrocketed of late, pushing this network into the No. 4 spot among all projects.
As a measure of ecosystem growth, TVL basically allows investors to see how much value is being locked within specific networks. Typically, investors won't put their hard-earned money into projects they think are sketchy, or may fail. TVL is also a solid predictor of future network growth, as the compounding effect of locking in value tends to create longer-term, growth-oriented projects.
There are many reasons why developers choose Avalanche over other Layer-1 networks to build their projects. However, among the key reasons is time to finality (how long it takes for a transaction to be accepted, confirmed, and finalized). In Avalanche's case, this is less than one second. Other leading networks such as Bitcoin and Etheruem take roughly 30 minutes and six minutes, respectively, for the same process. Even Solana, one of the fastest networks out there, has a five-second time-to-finality.
Bottom line: Avalanche is fast.
So what
Avalanche isn't only fast, this blockchain network is scalable, and is seeing faster growth than most other networks based on most available metrics. Indeed, it appears to me that Avalanche has found a way to create immense value by constructing a rather sophisticated system from the ground up.
Now, with sophistication comes complexity, and this is certainly true with Avalanche. Understanding the technical elements underpinning this network is difficult. Accordingly, many early investors who jumped on Avalanche early appear to have been more technically inclined, and could see the value that Avalanche could, or would, create.
The good news is that Avalanche has built a strong track record of performance for today's investor to base an investment decision on. Even more, the world-class team behind this project is still intact, providing more reason for investors to get excited about Avalanche's growth prospects.
Overall, I think Avalanche is a top crypto project worth considering right now. And it's not too late in the game for investors looking at this token for the first time. Indeed, I think the growth this network has seen may only be starting.
