Altcoins: Long-Term Potential

With extensive experience as an electrical/software/coding engineer along with having a diverse financial background, Thomas Wettermann’s areas of interests include Machine Learning (ML), artificial intelligence (AI), and Financial Technology (FinTech). For the past few years, Thomas Wettermann has focused on the underlying technologies that support and promote all phases of cryptocurrency ecosystems. 

What Altcoins Have Long-Term Potential?

There are many different altcoin options to choose from as a potential investment. How can investors choose which altcoin is a good investment option for them?

Well, one way to identify an altcoin that has a valid long-term potential is to focus on its use case. That is, what added value or unique feature does the altcoin present with respect to other coins in the marketplace? 

Several altcoins that appear to have long-term potential given their strong use cases are summarized below.

Avalanche Ethereum, a second-generation blockchain, allows developers to build-out smart contracts and distributed applications (dApps). Ethereum ranks as the number one DeFi protocol with over $116 billion in total locked value (TLV) with over 415 active on-chain projects. However, Ethereum’s continuing success among developers has been hampered by the platform’s slow transaction speeds and high gas fees.

Providers of newer blockchains have jumped at this opportunity by providing enhanced platforms that minimize these drawbacks. Avalanche is one such enhanced platform.

For example, Avalanche states that it the fastest smart contracts platform when measured by time-to-finality. Time to finality is an extremely important blockchain metric in that it represents the time it takes to validate a transaction and guarantee the transaction’s execution.

Based on these measures, Avalanche can process 6,500 Transactions Per Second (TPS). To put this speed into perspective, note that Ethereum can only process 14 TPS and Bitcoin can process a mere 5 TPS. These are critical issues for organizations that are called upon to handle a massive amount of transactions, such as Visa, Mastercard, and PayPal, for example.

To achieve these incredible processing speeds, Avalanche utilizes a multi-layered approach comprising three different blockchains. An Exchange Chain (or X-Chain) is structured as a decentralized platform for exchanging smart contracts. A Platform Chain (P-Chain) coordinates the processing nodes that validate network transactions. And a Contract Chain (C-Chain) which enables smart contract creation and execution.

In essence, Avalanche’s multi-layered blockchain acts as a fourth generation or Layer 1 chain. And the fact that that decentralized applications developers can deploy existing Ethereum DApps onto the Avalanche network makes Avalanche a real Ethereum killer. Institutional investors and large corporations have taken notice of the advantages that Avalanche provides.

For example, Avalanche has received funding from venture fund behemoth Andreessen Horowitz and has also inked partnership deals with Mastercard and consulting firm Deloitte. In addition, Official Major League Baseball (MLB) card manufacturer Topps is partnering with Avalanche to develop an NFT marketplace to sell official MLB NFTs. 

Polygon Polygon (MATIC) is a scaling solution that operates in parallel to the Ethereum blockchain or mainnet. 

Unlike Avalanche creating a brand new layer 1 blockchain, Polygon is a layer 2 network that functions as a second layer to Ethereum’s mainnet.

Unlike Avalanche, it does not seek to change the original blockchain layer. But, similar to Avalanche, Polygon does seek to provide a blockchain that is faster, more cost-efficient, and more eco-friendly.

For example, Polygon’s blockchain architecture utilizes a network of sidechains to open up Ethereum’s scalability. These Polygon sidechains - sometimes referred to as second layers - comprise separate blockchains that communicate with Ethereum’s mainnet. Transactions take place on the side chains, thereby limiting the processing load required to be performed by Ethereum’s mainnet.

Polygon can operate at up to 65,000 TPS with transaction fees costing $ 0.01 USD per transaction. In the case of Polygon, its main side chain utilizes the PoS consensus mechanism. PoS allows Polygon the ability to achieve its Green Manifesto that it recently announced. As part of this Manifesto, Polygon will strive to achieve carbon-negative status this year. Polygon is also pledging $20 million to various initiatives focused on combatting climate change.

Industry participants are growing quite receptive to Polygon. For example, the popular retail investment platform Robinhood recently listed Polygon as an available cryptocurrency for purchase and sale on its platform. And the NFT marketplace OceanSea has recently listed a number of NFT projects that reside on the Polygon blockchain.

Solana Solana (SOL) is directed to decentralized blockchain architecture. Solana is an extremely fast and secure, open-sourced blockchain. According to Solana, its platform can perform 50,000 transactions per second (TPS). Compare that to Ethereum which can only process 15 TPS.

To achieve its processing rates, Solana utilizes a novel blockchain structure that implements both a Proof of History (PoH) coupled with a Proof of Stake (PoS). The slower and much more congested Ethereum currently uses PoW, the same as Bitcoin. Since its initial release, Solana’s price has been nothing short of meteoric, hitting an all-time high of $260 last November.

With a market cap of just over $32 billion, Solana now ranks in sixth place among the largest cryptocurrencies by total value. Solana has been placed into a category of potential Ethereum killers, shared by other smart contract projects such as Binance Smart Chain, Cardano, and Avalanche. The high throughput that Solana achieves through its innovative ecosystem makes it ideal for decentralized applications (dApps). Simply put, it offers a more scalable platform with lower transaction costs.

All the views expressed on this site are those of Thomas Wettermann and do not represent the opinions of any entity whatsoever with which Thomas Wettermann has been, is currently, or will be affiliated.

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