If you bought Ethereum (ETH 0.36%) back in July 2015 when it first launched, you would now be up a whopping 47,000%, making it one of the greatest crypto investment plays ever. Unfortunately, it may be too late to capture anything close to these stratospheric returns now that Ethereum is the No. 2 cryptocurrency in the world and has a market capitalization of more than $200 billion.
But there are still ways to make the same kinds of eye-popping returns as you would have made if you had invested in Ethereum seven years ago. One investment that particularly stands out is Avalanche (AVAX -0.25%), an up-and-coming cryptocurrency that launched in September 2020. It now ranks among the 15 biggest cryptos with a market value of about $7 billion, and in a relatively short time it has been hailed as a potential "Ethereum killer."
World-class blockchain
The most important selling point about Avalanche is that it is faster and more scalable than Ethereum. And it's not just a little bit faster -- it's entire orders of magnitude faster. For example, right now, Ethereum can only process about 15 transactions per second. In comparison, Avalanche can process 4,500.
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Moreover, since Avalanche uses a very efficient proof-of-stake mechanism to verify transactions on the blockchain, and the fees for using Avalanche are much cheaper than they are on Ethereum. This is important because users have been complaining about Ethereum's high transaction charges (known as "gas fees"). It's just common sense -- people will go where the fees are cheaper. That's one major reason so many people are enthusiastic about the future prospects of Avalanche: It has a world-class blockchain that is also significantly cheaper to use than Ethereum's.
The rapidly expanding Avalanche ecosystem
All of Avalanche's speed and scalability has convinced a growing number of developers to migrate to the Avalanche ecosystem. In 2021, much of the early interest was in developing decentralized finance (DeFi) applications on top of the Avalanche blockchain. This makes sense because in the financial world, transaction speed matters. (Think about the stock market and how important it is to get your trades executed as fast as possible to get the best price.) So, naturally, many of the most popular applications for Avalanche are related to DeFi, where Avalanche has a clear competitive advantage.
However, there is another area where all of that speed, efficiency, and scalability can be put to work, and that's in the field of crypto gaming. Much of the new enthusiasm surrounding Avalanche in 2022 appears to be based around gaming and the creation of new metaverse worlds. This might be one area in the future where Avalanche can develop a robust developer ecosystem and attract even more users.
Will the best technology win?
Obviously, there's a lot to like about Avalanche. The only problem is that Avalanche does face some stiff competition, and not only from Ethereum. It competes against other blockchains such as Solana. So, for Avalanche to become a successful investment, it will have to prove that it is the best blockchain for developers and users. In comparison, when Ethereum first launched, it was the only blockchain of its kind handling smart contracts and decentralized applications; as a result, it easily became the market leader.
The big question is whether the best technology will win. Avalanche might be faster, cheaper, and better than Ethereum, but will people really care? Ethereum is so dominant and so entrenched as the market leader that the switching costs might just be too high for developers and users. This story has been repeated over and over again in the tech space. The best technology does not always win. Sometimes the first-mover advantage is simply insurmountable.
The exciting part about Avalanche, though, is that all of this uncertainty creates opportunity. It's too late to buy a crypto when it has already proven its worth and that everyone knows about. The real opportunity to make eye-popping returns is by getting in early, buying the asset while it is cheap, and then making huge profits once everyone else realizes what's going on. There might just be a unique opportunity to do this with Avalanche.
