Avalanche (AVAX) is the #11 listed cryptocurrency by market cap. Unlike many new cryptos that take years to build momentum, Avalanche (AVAX) bypassed the standard route for cryptos and pushed ahead of thousands of other cryptos.
The crypto market has experienced exponential growth during 2020/2021. New cryptos emerge every day. This last week alone, 200 new crypto tokens were listed on CoinMarketCap. So, it’s a competitive market where many crypto tokens won’t survive.
Today, for a crypto token to gain market capitalisation, it must differentiate from the mass crypto market, and this is where Avalanche (AVAX) scored its success.
Avalanche (AVAX) has disruptive and innovative technology interoperable with other blockchains. It is scalable and has attracted significant interest from cryptocurrency investors.
This post takes an unbiased look at the 4 pros and 4 cons of buying Avalanche (AVAX). In conclusion, you can decide whether to add Avalanche (AVAX) to your crypto portfolio.
What Is Avalanche (AVAX)?
Avalanche is a fast, low cost, and eco-friendly layer one blockchain that allows interoperability between other decentralised blockchains. Avalanche has exceptional scalability and has fast transaction speeds of over 4,500 transactions per second. The native coin of Avalanche is AVAX used for transaction fee payment.
Avalanche users can create DApps and smart assets on a fast, secure and permissionless system. It’s a marketplace for DeFi users who can create, trade, swap and store their products and assets.
Should You Buy Avalanche (AVAX)? 4 Pros, 4 Cons
With so many cryptocurrencies available, what makes Avalanche (AVAX) stand out? Are there downsides to buying Avalanche (AVAX), and should you buy AVAX tokens for investment?
The list of 4 pros and 4 cons outlines the essential details for understanding if Avalanche (AVAX) can sustain the growth experienced so far and if Avalanche has growth potential for the future.
Do the cons of buying AVAX outweigh the pros of buying AVAX tokens?
Let’s find out.
Pro #1 – Avalanche (AVAX) Has Unique And Innovative Technology
Many blockchains are either not scalable or lose functionality when trying to scale. It’s been a long-running problem for most blockchains.
The Avalanche network, however, overcomes most of the issues associated with other blockchains by having three interoperable blockchains:
X-Chain – using the Avalanche consensus mechanism, the X-chain creates and exchanges AVAX tokens and other assets.
C-Chain – the Contract Chain hosts decentralised applications and smart contracts. Through the Avalanche Virtual Machine (AVM), developers can fork EVM-compatible (Ethereum Virtual Machine) DApps
P-Chain – the Platform Chain coordinates network validators. It tracks the active subnets and facilitates new subnet creation.
The Avalanche blockchain technology is unique and innovative, and potentially infinitely scalable. Avalanche has made spectacular progress in the crypto market because of this.
Con #1 – Malicious Validator Activity Is Not Punishable
Many crypto networks punish validators for mistakes or fraudulent behaviour. It’s a process called “slashing.” Offending validators can lose some or all their crypto stake, which can be a significant investment depending on the crypto network. For instance, the Ethereum network has a minimum 32 ETH requirement to become a network validator and has a slashing protocol for validators. Losing 32 ETH at over $4k per ETH is a considerable risk.
Avalanche proudly states on the validators page of the website, “staked tokens on Avalanche are never at risk of slashing.”
It’s unknown why Avalanche doesn’t have a slashing protocol in place, and, of course, it could change in the future as AVAX increases in price.
Check Out: Is Avalanche (AVAX) Safe To Invest In?
Pro #2 – Avalanche (AVAX) Is Scalable Without Compromising Decentralisation
Very few blockchains can scale without compromising decentralisation, but Avalanche can. The three interoperable blockchains allow for other blockchains to interact, and the potential for interoperability with multiple blockchains is unlimited.
The Avalanche blockchains adapt consensus mechanisms per use case, and Avalanche has more validators than other networks.
Another bonus is the minimum hardware requirements, meaning it’s easy and low-cost for validators to set up. Bitcoin rig setup requirements, for instance, are costly and complex for Bitcoin miners and use excessive energy resources.
Avalanche says that they have “the lightest hardware requirements of any blockchain platform.”
The Avalanche network also provides security standards way above the 51% standard of most other blockchains.
Con #2 – Avalanche Is Expensive To Buy For Small Investors
Avalanche (AVAX) isn’t the most costly crypto to buy at $110 per AVAX token. But, for small investors, it requires more of a financial commitment than, say, Dogecoin (DOGE) at $0.20 per DOGE token.
The growth potential for Avalanche (AVAX) is exceptional for this unique crypto technology, but all financial advisors suggest not investing more money than you can comfortably afford to lose.
Pro #3 – Avalanche (AVAX) Is Interoperable With Other Blockchains
The interoperability of Avalanche factors significantly towards the scalability and future growth of Avalanche (AVAX). Very few crypto networks have interoperability between third-party tokens, and, without it, it’s a limitation on scalability. Interoperability helps improve the decentralised finance (DeFi) environment.
The Avalanche blockchain consists of thousands of subnets that form a diverse interoperable network of many other blockchains. The throughput is consistently high. The protocols and trustless framework are efficient and at no time compromises or risks decentralisation.
Con #3 – Competition From Other Blockchains
Right now, Avalanche is one of few crypto blockchains with Ethereum connectivity. Crypto blockchains require EVM (Ethereum Virtual Machine) to connect and branch from Ethereum.
The primary competition for Avalanche is Ethereum 2.0 (with 100,000 TPS after upgrade), Polkadot (DOT), Cardano (ADA), Terra (LUNA) and Solana (SOL). Although the latter does not have EVM, it can process 50,000 transactions per second.
As more cryptos emerge on the market, there will be other contenders to challenge Avalanche.
But, for now, the distinction of Avalanche from other cryptos almost guarantees that Avalanche can hold onto market gains for the interim.
Although many crypto followers think that Avalanche is a contender for Ethereum’s hold on the #2 position by market capitalisation, once the ETH2 upgrade completes, Ethereum’s warp speed transactions of 100,000 TPS challenge even mainstream payment methods like VISA transactions.
Though there’s no mention of improving transaction speeds on the Avalanche website, it will be interesting to see if they intend to compete with Ethereum 2.0 transaction speeds in the future.
Pro #4 – Avalanche (AVAX) Transactions Are Super-Fast And Low-Cost
The transaction speeds for Avalanche are exceptional, with over 4,500 transactions per second (TPS) and make some crypto industry leaders look like snail-pace for transactions.
Bitcoin (BTC) – 7 TPS
Ethereum (ETH) – 14 TPS
Polkadot (DOT) – 1,500 TPS
Comparing these speeds, Avalanche (AVAX) will likely gain popularity with merchants as a payment option. The Ethereum network states that their TPS will rise to 100,000 after the upgrade in 2022. Ethereum gas fees will reduce and put transaction speeds back ahead of Avalanche.
Many crypto enthusiasts and experts are saying that Avalanche (AVAX) is a real challenger for Ethereum. Right now, the network has a significant edge over the Ethereum network transaction fees, which may elevate it further as Ethereum continues with upgrade development.
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Con #4 – It’s Expensive To Become An Avalanche Validator
There’s always a price for becoming a network validator for a crypto network. If you want to become an Avalanche network validator, you need a minimum of 2,000 AVAX tokens. Today, that fee is around $220,000, as the price of AVAX is $110.
You must stake your AVAX for a minimum of two weeks and a maximum of one year and must be online and correct for a minimum of 60% of the time.
Those that can’t afford to become an Avalanche network validator can become a delegator with a minimum staking requirement of 25 AVAX tokens.
There is a maximum weighting for Avalanche validators, which is five times your stake, so for 2,000 AVAX, you can have 8,000 AVAX delegated. This restriction is to prevent fraudulent activity by creating nodes that may appear as delegators.
Avalanche network validators can set their own fees for delegators, but these are usually more than 2%. Delegators still earn the same percentage of AVAX rewards, depending on the size of your stake.
Recap Of Should You Buy Avalanche (AVAX)? 4 Pros, 4 Cons
Avalanche (AVAX) is of great interest to many crypto investors. The interoperability appeals to institutional investors because of the high growth potential and scalability of the blockchain. And with plans to build a registry or NFTs, Avalanche is looking to the future because NFTs are proving to be of great interest, with some reaching staggeringly high prices.
This post has looked at the pros and cons of buying Avalanche (AVAX). The pros advocate that an investment in AVAX tokens could be a good move for the long-term investor. The cons of buying Avalanche (AVAX) are not overly concerning as they could apply to most other cryptocurrencies.
It’s a spectacular achievement for a cryptocurrency to be (almost) in the top ten list. And the Avalanche network has achieved this position by unique, innovative technology and a sound utility. Compared to crypto meme tokens that have risen to the top ten by branding alone, Avalanche is a worthy contender for Ethereum.
Crypto industry experts believe that Avalanche has a future and anticipate further price gains, with up to 220% or more increases over the next 5-7 years.
Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor’s financial circumstances.
Trading, staking, or investing in financial instruments such as cryptos may not be suitable for all investors. It does involve risk and the possibility of a loss of capital. There are no guarantees for profiting from staking cryptocurrencies, and it’s advisable only to risk what you can comfortably afford to lose.
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