Is Avalanche A Good Investment?
Blockchain technology has been around for a while and improvements are being made to it every year. There were issues with first and second-generation Blockchains that needed solving and Bitcoin and Ethereum, although most widely known, still had some niggling issues.
This led numerous developers to create third-generation Blockchains which Avalanche is among. Avalanche aimed at solving problems with Bitcoin and Ethereum which include interoperability, sustainability, and scalability.
What Is Avalanche?
Avalanche is a Blockchain network whose native token is AVAX. Avalanche is one of the many third-generation Blockchains. So, it has very similar features to competing Blockchain like Polkadot and Cosmos. It uses a Proof-of-Stake network where users validate transactions through the Avalanche consensus system.
It has many features of Ethereum while solving many other of the former’s issues. It accommodates smart contracts, peer-to-peer payment, decentralized apps and processes 4500 transactions per second. Avalanche also creates a platform for financial markets and allows users to create smart assets where they can hold bonds, real estate, equities, and even own debt.
Avalanche was established in October 2020. Since then, it has grown leaps and bounds and it is currently in the top 30 cryptos projects by market cap. Since then, it has been expanding its network and incorporating new features. New things incorporated into the Blockchain include Decentralized Exchanges (DEX), ILOs, Stablecoins, Private securities, and many more.
The Avalanche Ecosystem
Avalanche has a very robust ecosystem that includes a platform for building customizable blockchains, holding smart assets as well as making and validating transactions.
Creating Blockchains: The Avalanche platform is mainly used for building blockchains. Decentralized applications and financial apps can be created and launched using the Avalanche blockchain. It could be an imported Blockchain or one that is created on Avalanche.
To build decentralized applications on Avalanche Blockchain, developers can either import the Blockchain from another system or create it from the start. On the Avalanche network, developers can build their virtual machines to create these Blockchains. On the flip side, they can also use the virtual machines Avalanche provided like EVM, WASM, and BTC script.
Smart Assets: To solve how people trade low liquidity assets, developers can use the Avalanche platform to issue assets that are not traded efficiently. These assets are digitized and launched and tied with terms and conditions. These assets can already and may include real estate, equities or bonds, etc.
The Avalanche Governance Protocol
The Avalanche primary Blockchain validates transactions, manages smart assets, and enables smart contracts and dApps through a consensus. It uses two consensus protocols which include:
- Avalanche Consensus Protocol: Avalanche consensus protocol uses a Directed Acyclic Graph protocol (DAG) which is parallelizable, simple to prune, and high throughput.
- Snowman Protocol: This consensus is specially designed for smart contracts. It largely uses the Avalanche consensus mechanism with a few additional features to accommodate smart contracts.
The three chains on the Avalanche primary network use these consensus protocols:
- Platform Chain: Also known as the P-Chain, the Platform Chain coordinates validators, staking processes, and creates subnets. Platform Chain uses the Snowman Protocol.
- Exchange Chain: The X-Chain coordinates smart assets on Avalanche. This chain enables asset creation, transaction, and transfer of assets either in the same or among different subnets. It uses the Avalanche Consensus protocol.
- Contract Chain: The Avalanche C-Chain uses the Snowman Protocol. Its main purpose is to create smart contracts and decentralized applications. It has an EVM virtual machine that powers the creation of Ethereum based smart contracts on the Avalanche network.
The AVAX Token
As the native token of Avalanche, the AVAX token is an integral part of Avalanche Blockchain. It has many purposes which include:
- Transaction Fees: Any fees that result from using the Avalanche Blockchain are paid using AVAX.
- Network Security: AVAX mining makes the network as secure as possible. Token holders who validate transactions by staking their tokens mine new coins as a result. Transaction validation prevents any hack, attack, or double spending on the system.
- Exchange: Just like every other token, AVAX represents a transfer of value that can be traded with any other token or fiat currencies to and from a wallet.
Avalanche Price History and Prediction
Avalanche closed 2020 at $3.14 after trading around 2–5 dollars for much of the previous months. It started 2021 with a boom going with the crypto bull run.
It reached a high of $4.34 on January 5 and it was traded at $7.22 five days after. It continued soaring, reaching $13.36 on January 16. It stabled afterwards, closing the month at $13.52.
Its February rise was even better. It reached a high of $59.94 on February 10 and closed the month at $23.82. It traded a monthly high of $39.39 in March and $40.80 in April. At the end of April, it was at $32.92.
Its price stabilized in May, at around $30 and $40 before it came to a slump. It closed in May at under the $20 mark. It continued dropping in June and July. It went as low as $9.34 in July.
August and September were the months of recovery for AVAX. It reached an all-time high of $58.98 on August 24 and 60.75 on September 13. On September 23, it reached an all-time high of $79.52. It closed in September at $66.77. It was $56.08 on October 24 and $91.18 on November 8.
At the end of November, AVAX was priced at $119.10 and was ranked the 12th ranked cryptocurrency with a market cap of $26,659,766,024. At the time of writing, AVAX is priced at $103.93, down 6.66% in the past 24 hours.
The general price prediction for AVAX is optimistic; most price predictions foresee its rise, though some predictions are more bullish than others.
DigitalCoinPrice predicts Avalanche to reach $132.17 in December 2021, $172.28 in November 2022, and $227.04 in four years.
In a tweet by Casper Insider on November 29, 2021, he provided a graphical representation of different Blockchain’s 30-day social volume growth.
Is Avalanche A Good Investment?
Currently, Avalanche is soaring high and looks like a good investment. Forecasts predict it to go leaps and bounds over the coming years. Even though these predictions are usually correct, they should be taken with a pinch of salt as the best predictions often go wrong. Many other underlying factors could determine AVAX price over the next few years. These factors could be unforeseen or result from the perceived strengths and weaknesses of the Blockchain. Here are the good and bad features of Avalanche that could affect its price in the next few years.
Pros of Avalanche
Blockchain Development: One unique feature of Avalanche is its ability to help developers create new Blockchains. Developers can import, build and customize private and public blockchains. Through this, Avalanche is a frontrunner for making Web3 a reality.
Grant Program: Avalanche helps developers in many ways. Not only does it create a perfect environment to build new Blockchains, but it also helps them solicit funds. Avalanche-X is a grant program that helps financially restrained developers build their projects on the Avalanche Blockchain.
Scalability: In the crypto world where scalability is a big problem, Avalanche is a big exception. It doesn’t need a hard fork to accommodate a large network. It is designed in such a way that its number of participants doesn’t reduce its speed and transaction throughput.
Hard Capped Supply: Avalanche has a maximum limit of supply which can preserve its price. As a capped supply, its increase in demand would not increase supply, rather, it would make AVAX more valuable over the coming years. If you are looking for a long-term store of value, AVAX might be worth taking a punt.
Cons of Avalanche
Form of Currency: Cryptocurrencies are known for being prone to volatility and other conditions. Its hard-capped supply makes it impossible to be a feasible currency option over the long term.
Competition: One fundamental question about altcoins is which one would eventually challenge Ethereum. Polkadot, Cardano, Avalanche have all been called Ethereum Killers but none have actually been able to challenge Ethereum as they are miles off. Could it overtake Ethereum eventually? Could it even challenge competing altcoins? It is safe to say the competition among these altcoins is fierce. Even though Avalanche has the potential to overtake its competitors, what the future holds is yet to be seen.