Is Avalanche (AVAX) a Good Investment?

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In recent months, Ethereum gas fees have soared. For the past few years, Ethereum has been the go-to blockchain for all things decentralized finance (DeFi).

However, with these high gas fees, many users are beginning to shift away from the crypto giant. Those who are leaving Ethereum are searching for new blockchains to call home, and Avalanche (AVAX) could be a top choice. Learn more about investing in AVAX now.

What is Avalanche (AVAX)?

Avalanche is a blockchain that hopes to provide speed and low fees to its users. It does this through a unique model that involves three distinct chains that each serve their own purpose. With these chains, Avalanche hopes to create a more scalable and affordable blockchain for all.

The first chain on the Avalanche network is the Exchange Chain (X-Chain). This chain allows users to create and trade AVAX-based tokens. It uses a Proof-of-Stake (PoS) consensus model to verify transactions.

Next is the Contract Chain (C-Chain). This allows users to create smart contracts on the blockchain. These smart contracts are a fork of the Ethereum Virtual Machine (EVM). This chain uses a snowman method of consensus. This is essentially a version of PoS where users continuously vote until a consensus is reached.

The last chain is the Platform Chain (P-Chain), which is used to coordinate the consensus protocol. This also uses the snowman method of consensus.

When users contribute to the PoS or snowman methods of consensus, they can earn rewards in the form of AVAX. The blockchain mints new tokens to pay these rewards and burns all of their transaction fees. This allows the total supply to grow very slowly and perhaps even become smaller.

Avalanche (AVAX) Price History

As of December 2021, AVAX is trading between $100 to $120 with a market capitalization of just under $30 billion. It has a circulating supply of around 250 million with a maximum supply of 720 million.

In 2021, it saw highs of nearly $150 and lows of under $3. It currently ranks in the top 10 of all cryptocurrencies in terms of market capitalization.

Pros and Cons of Avalanche

The Avalanche blockchain has a few key advantages, as well as areas needing improvement:

Pros

  • Subnets that are great for gaming and institutional use
  • Transaction finality < 2 seconds
  • Infinite transactional throughputs
  • More decentralized than most competitors
  • EVM compatibility to make using Ethereum dApps on AVAX simple

Cons

  • Number of developers is small in comparison to other Layer 1s
  • Dropped over 75% in 2022
  • Must compete with Ethereum and its many Layer 2s

Avalanche (AVAX) Competition

Avalanche’s main competition is Ethereum. Ethereum has reigned supreme for the past several years, as it is a robust blockchain that gives users easy access to DeFi technology. However, recent surges in fees and much slower throughput paved the way for blockchains like Avalanche.

Avalanche hopes to provide everything Ethereum can and more. It offers what are essentially the same smart contracts and token protocols, but Avalanche adds a few distinct features that set it apart from Ethereum.

The use of three separate chains is a revolutionary idea that helps distribute the workload on the blockchain. Ethereum is made up of a single chain, and everything operates on that chain. Avalanche has three separate chains that form the larger blockchain, and each chain has its own purpose.

Avalanche also uses a PoS verification system. This is much more energy and time efficient than Ethereum’s Proof-of-Work (PoW) system. PoW uses computers that compete to earn the ability to verify transactions and earn rewards, while PoS simply has users give their tokens to the blockchain in order to earn a reward. PoS is often much faster and more energy efficient. However, it is worth noting that Ethereum is migrating to ETH2.0, which will use a PoS system.

Finally, Avalanche burns all of its transaction fees, while Ethereum redistributes them to its validators. This means that Ethereum’s supply may grow much faster. However, Ethereum does burn tokens with each transaction, as implemented in EIP-1559. Only a fraction of the transaction fee is burned on Ethereum. Avalanche burns all transaction fees, which decreases the overall supply.

So, Which is Better: Avalanche or Ethereum?

Is it impossible to say right now which chain is definitely better. Ethereum is currently struggling with high gas fees, but ETH2.0 may be the solution to this problem. Avalanche has seen a recent rise in popularity, but gains may not continue if Ethereum can increase speeds and lower costs. ETH 2.0’s success may be the deciding factor for the future of Ethereum.

How to Buy Avalanche (AVAX).

Avalanche has become increasingly popular, both in terms of market cap and public attention. Because of this, it is becoming more common and easier to purchase.

Coinbase and FTX are both exchanges that offer AVAX. It only takes a handful of minutes to create an account, and users can typically begin trading within 24 hours.

Best Hardware Wallet For Avalanche (AVAX)

If you are looking to buy AVAX or already have some, you may want to consider where you are going to hold your tokens. While a trading platform is the easiest place to store tokens, a hardware wallet is often regarded as the safest place to store them.

Hardware wallets store the private keys needed to send crypto. Without the physical device, crypto cannot be sent.

Best Hardware Wallet: Ledger

Ledger is an industry-leading brand of hardware wallet that supports the sending, receiving and staking of AVAX. It currently offers Nano S and Nano X models.

The Nano S is the introductory hardware wallet and only offers necessary features. The Nano X supports ease of use, toting a larger screen and Bluetooth connectivity.

Bonus section: Keep an eye out for the release and reception of ETH2.0. This will almost certainly have an effect on Avalanche and AVAX.

Cryptocurrency Market Outlook

Heading into the new year, most cryptocurrencies have been pretty stagnant. This is coming off of a tumultuous and volatile fourth quarter of 2021, where tokens flew up and down by huge amounts.

While things may seem to be cooling off, some predict that the beginning of 2022 may be a turning point for cryptocurrency prices. If you want to see where they are right now, make sure to check out our up-to-date price table.

Is AVAX a Good Investment?

Avalanche certainly has defining characteristics that could propel it into the front of the blockchain race. However, it may be a bit late to the party. If ETH2.0 is released and addresses issues of fees and scalability, then Avalanche may not have as many uses.

If ETH2.0 continues to be delayed or is not as useful as predicted, then Avalanche could continue to gain popularity. No matter the case, ETH2.0 will certainly play a large role in Avalanche’s future.

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