Ethereum (ETH 2.25%) is the world's second-biggest cryptocurrency by market value -- and on its way to changing the way business is done. That's because decentralized applications (dApps) on the blockchain help users do everything from managing their finances to collecting art. This popular crypto player has climbed more than 500% over the past three years.
I'm optimistic about Ethereum's future. But two cryptocurrencies may actually outpace this crypto giant. I'm talking about smaller, younger players, Cardano (ADA 5.91%) and Avalanche (AVAX 14.26%). Here's why...
Ethereum's biggest problems are its transaction speed and high cost. It's in the middle of an upgrade set to address these issues. But Cardano already is faster -- and it's on its way to picking up even more speed.
But, first, a little background on this cryptocurrency. One of Ethereum's co-founders -- Charles Hoskinson -- is also the founder of Cardano. This means there is a lot of experience and expertise behind this newer player. Cardano has a native token called "ada" and is a blockchain.
This crypto reached a big milestone last fall with the launch of smart contract functionality. This means dApps can be built on the blockchain. And here's a good sign: More and more money is being committed to these projects on Cardano. Total value locked has climbed 14% since the start of the month to about $136.93 million now, according to Defi Llama.
Now, let's get back to the subject of speed. Cardano software engineers are working on the hydra head scaling solution. Each head is an off-chain network that allows a transaction to happen. The idea is to increase the number of transactions on Cardano by conducting many of them on these heads. Initial estimates showed each head processing 1,000 transactions per second. It's possible hydra could start rolling out as soon as this year.
Like Cardano, Avalanche has a native token -- called Avax -- and is a blockchain. Avalanche also is winning when it comes to speed. Transactions on Avalanche reach completion in less than two seconds. That's compared to as much as six minutes on Ethereum.
And while Ethereum processes about 14 transactions per second, Avalanche can handle an unlimited number. That's thanks to Avalanche's subnets -- or independent networks. Developers can build these for specific projects.
The rest of Avalanche's structure also favors speed and efficiency. Avalanche actually is made up of three blockchains with different functions -- such as the creation of assets, the coordination of validators, and the handling of smart contracts. The primary network coordinates all three blockchains and the subnets.
Next, it's important to note that this blockchain offers compatibility with bigger rival Ethereum -- that makes it easier for those building on Ethereum to also build and operate on Avalanche. Developers can launch Ethereum dApps right on Avalanche. They can transfer assets easily using the Avalanche Bridge.
Right now, more than 200 projects exist on Avalanche. They range from decentralized finance to gaming and art.
When it comes to developers using the network, Avalanche is growing faster than Ethereum did at the same moment in its story, according to an Electric Capital report. Growth in the number of developers using the network is a sign of strength.
Cardano, Avalanche, and Ethereum
Cardano and Avalanche are winning when it comes to speed and users. As for stock performance, these players and Ethereum all have suffered in recent times. So far this year, Cardano and Avalanche have lost 62% and 75%, respectively. Ethereum has declined 58%.
All three have what it takes to rebound and hold a big spot in the cryptocurrency market. With the strengths I've mentioned above, Cardano and Avalanche could outperform their bigger rival as the crypto market recovers and beyond.