on the crypto
Ethereum is the clear leader, but rivals like Avalanche are quickly gaining ground.
The decentralized web has morphed into a trillion dollar industry seemingly overnight. Developers have created platforms for digital art, financial products and even e-commerce on these so-called Web3 networks. Ethereum (CRYPTO: ETH) is the clear leader, but its dominance is under threat. Rivals such as Avalanche (CRYPTO: AVAX) are rapidly gaining ground.
Here's a closer look at Ethereum's vulnerabilities, the benefits of Avalanche, and the best investment strategy in this new space.
The vulnerabilities of Ethereum
In terms of size, Ethereum clearly dominates the decentralized web. The network has more applications, users and revenues than any other. The combined value of this ecosystem is currently $ 475 billion. This is second only to Bitcoin.
However, the network is based on a structure that seems increasingly outdated. Proof-of-Work has made every Ethereum transaction much more expensive and energetic. Each Ether transaction releases the carbon equivalent of 17.607 hours of YouTube viewing. Overall, the grid consumes 73,19 TWh of energy - equivalent to a small nation.
This is not the only problem. Ethereum transactions are also expensive. At the time of writing, the average fee to complete transactions is 86 gwei, or $ 9,35. This makes microtransactions and frequent transactions inconvenient.
Updates
The Ethereum development team, led by founder Vitalik Buterin, is working to solve these problems. Future network updates are expected to reduce its energy use by 99,9%. Meanwhile, the team is also working on solutions to the cost problem. Layer 2 protocols could dramatically reduce the time and cost of each transaction.
The problem is that these updates take too long to implement. If they are delayed much longer or fall short of expectations, Ethereum's rivals could snatch the crown from them. One such challenger is Avalanche.
The potential of Avalanche
Launched in 2020, Avalanche is a decentralized web platform just like Ethereum. The network can support smart contracts. This means that non-fungible tokens (NFTs) and decentralized applications (dApps) can also be developed on Avalanche.
However, Avalanche has some advantages. It is based on the Proof-of-Stake mechanism, which makes each transaction less energy-consuming. It can also process more transactions per second (4.500) than Ethereum (13). Each transaction costs even less. Currently, an average Avalanche transaction costs 58 nAVAX, or $ 0,0000064525.
The network also allows developers to create subnets - private or public blockchain networks that they own.
Unsurprisingly, Avalanche is gaining some traction. The price of each AVAX token has risen by 4,100% since last December. The ecosystem is now the 36,8th largest and is worth $ XNUMX billion in total. If it reaches Ether, the upside could be immense.
Which one to buy?
While it is difficult to pick a winner, I am more inclined to Ethereum. Ethereum has the first-mover advantage and network effects of a larger developer community. Upcoming updates should also help her capture Avalanche's key cost and efficiency benefits. However, Avalanche may struggle to replicate Ethereum's network effects and the size of its ecosystem.
In short, Ethereum will get the better of it before Avalanche gets a chance to beat it.
