Wall Street endured a bad year, with all three major U.S. stock indexes dipping into a bear market. But that's nothing compared to the struggles of the cryptocurrency space, which shed approximately $1.4 trillion of its market value last year, and well over $2 trillion following its all-time high set in November 2021.
But just as big declines in the stock market are viewed as buying opportunities, sizable drawdowns in the crypto arena may represent the ideal time for digital currency investors to pounce.
The key to finding bargains in an asset class where tangible data can be sparse is to look for projects that deliver true competitive advantages and differentiation. With more than 21,100 cryptocurrencies listed on CoinMarketCap.com, the ability to stand out is where real value is created.
Image source: Getty Images.
As we open the curtain to a new year, the following four cryptocurrencies stand out as having the potential to triple your money in 2023.
1. Avalanche
When it comes to innovation and tangible results, Ethereum (ETH +1.30%) tends to lead the pack. The Ethereum network is home to the bulk of decentralized application (dApp) development. Over the trailing year, Ethereum has brought in $3.8 billion in dApp protocol revenue, which is seven times more than the next-closest competitor, based on data from TokenTerminal.com.
But what if there were a potentially better dApp development solution to Ethereum? Say hello to Avalanche (AVAX +2.02%).
One of the most important differentiating factors with Avalanche is the speed of its network. The big two in crypto, Bitcoin (BTC +0.52%) and Ethereum, are capable of processing at respective peaks of 7 and 14 transactions per second (TPS). Meanwhile, Avalanche's developers have stated the network can process at more than 4,500 TPS. Whereas Ethereum's popularity can lead to network lag, Avalanche can thrive.
The other big key to Avalanche's success is the compatibility of its network with the Ethereum Virtual Machine (EVM). The EVM is the software developers use to create dApps. With Avalanche running the EVM on its blockchain, it's able to offer dApp developers access to a tool they're familiar with, but with far lower transaction costs and considerably faster transaction completion, compared to Ethereum.
Over the past year, Avalanche's $96.1 million in dApp protocol revenue is just a fraction of what Ethereum has brought in. But if it continues to court developers to its faster and less-costly network, a tripling in its value in 2023 isn't out of the question.
CRYPTO: ALGO
Key Data Points
2. Algorand
The second cryptocurrency capable of delivering 200% returns to investors in 2023, if things go its way, is Algorand (ALGO 0.75%). Similar to Avalanche, Algorand is a smart play on dApp development, with a big focus on decentralized finance (DeFi).
With competitive advantages being key to standing out in the digital currency arena, Algorand doesn't skimp on speed. If you thought Avalanche was impressive with 4,500-plus TPS, you're going to love Algorand, which boasts a throughput of approximately 6,000 TPS and a block finality of a few seconds. In other words, it's an expansive layer-1 blockchain that can handle a lot of transactions and validate them almost instantaneously.
Maybe the biggest differentiator for Algorand is the project's focus on interoperability. Algorand's developers recognize that there are a lot of different blockchain networks, and many of these blockchains won't work with each other. Within the financial space, Algorand is using its layer-1 blockchain to act as a bridge between these projects.
Additionally, Algorand has shunned the traditional proof-of-stake consensus mechanism in favor of pure proof of stake (PPoS). With PPoS, people who hold ALGO tokens are chosen at random to vote on various proposals and create new blocks. PPoS is designed with security in mind, while maintaining scalability and decentralization.
While we've yet to see a lot of tangible data from Algorand to support a big move higher, it's a project with the competitive edges needed to stand out.
Image source: Getty Images.
3. IOTA
A third cryptocurrency that has the potential to triple your money in 2023 -- and that's certainly off the radar when compared to Avalanche and Algorand -- is IOTA (CRYPTO: MIOTA). This lesser-known digital currency has the tools to become a key player in facilitating payments from Internet-of-Things (IoT) devices.
Prospective investors don't have to search long to find clear-cut differentiation with IOTA. That's because unlike thousands upon thousands of other cryptocurrency projects, IOTA doesn't use blockchain technology. Rather, transactions are validated using a decentralized acyclic graph consensus algorithm that IOTA's developers refer to as the "Tangle."
Traditional blockchain technology has limitations. For example, the approvals required to create new blocks, validate transactions, and/or vote on proposals, have been known to slow down many of the most-popular networks. The IOTA network doesn't have these same constraints, which is why transaction finality occurs within minutes.
What's more, the Tangle is designed to grow more efficient over time. Since new transactions help to confirm previous transactions, the network, in theory, becomes more scalable and effective with each payment.
Something else IOTA brings to the table that's quite unique is feeless transactions. Being able to offer no-fee payments, as well as scaling that doesn't adversely affect the network, is precisely what could make it a popular payment network as IoT devices infiltrate our homes, roads, and offices.
CRYPTO: XLM
Key Data Points
4. Stellar
The fourth and final cryptocurrency that can triple your money in 2023 is Stellar (XLM 0.14%). Normally, something as simple as a blockchain-based payment network wouldn't make the cut. But given its comparative advantages to other payment networks, this could be the year Stellar's Lumen token (XLM) shoots to the moon.
Although this list has primarily focused on dApp development, one of the core purposes of blockchain technology (at least from a financial perspective) is to eliminate or circumvent the slow and costly pathway traditional payments take today.
If you want to send money overseas, you'll potentially have to pay a non-negligible fee to do so. Worst of all, your payment may not validate and settle for up to a week. However, payments sent with Stellar using its Lumen token can complete this overseas trip and settle in five seconds or less.
Even better, the average transaction fee is 0.00001 XLM. With Stellar's Lumen at just $0.0718 at the time of this writing, it means the average transaction runs just $0.00000072. Put another way, you could conduct almost 1.4 million transactions on Stellar's network before racking up $1 in fees. Try doing that with your local bank or credit union.
But just because Stellar's network is inexpensive from a fee standpoint, it's not skimping on throughput or functionality. It's capable of surpassing well over 1,000 TPS. Further, a 2022 research report by ForexSuggest.com found it to be the leading network in terms of transactions per day. ForexSuggest.com's data showed Stellar was completing nearly six times as many transactions daily as Ethereum, and more than 32 times as many each day as Bitcoin.
This tangible data suggests the Stellar network has a pathway to eventually become a mainstream payment solution. If Stellar were to land additional partnerships in 2023, it could be all that's needed to unlock a 200% or greater gain for investors.
