Missed Bitcoin? 2 best cryptocurrencies to buy now and keep

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Bitcoin debuted in 2009 and first hit a value of $ 1.00 in 2011. Since then, its price has skyrocketed to 4,900,000%, meaning that $ 21 invested in Bitcoin ago. ten years old would be worth $ 1 million today. And while Bitcoin remains a profitable investment, other cryptocurrencies likely offer a longer-term benefit, especially those that contribute to decentralized finance (DeFi).

Blockchain technology makes it possible to spend money electronically without involving financial institutions, and DeFi products extend this value proposition to other financial services, such as loans, borrowings, and interest. And as banks are taken out of the equation, DeFi products could make these services more accessible and less expensive.

Building on this idea, Solana (CRYPTO: SOL) and Avalanche (CRYPTO: AVAX) play key roles in the DeFi ecosystem, and both cryptocurrencies could be big winners down the road. Here is what you need to know.

Image source: Getty Images.

1. Solana

Solana is a programmable blockchain designed for smart contracts, decentralized application building blocks (dApps) like DeFi products. Of course, it’s far from the only DeFi-compatible blockchain, but it’s currently the fastest in terms of throughput.

Why is this important? Scalability is a big issue for many blockchains. In its current form, Ethereum only supports 30 transactions per second (TPS), which limits its usefulness. Imagine what would happen if Visa could only process 30 TPS – network traffic would cause a bottleneck and you could end up waiting hours for a payment to be accepted. Fortunately, Visa can handle over 24,000 GST.

This is why Solana is so impressive. It can handle around 50,000 TPS, which makes it twice as fast as Visa and orders of magnitude faster than other blockchains. Of course, Ethereum is still by far the largest DeFi ecosystem, with $ 163.1 billion invested in DeFi. But Solana has made its way to fourth place and now has $ 11 billion stuck in DeFi products on its blockchain. And he is well positioned to continue to climb the ranks.

Concrete example: DeFi services are quickly becoming more popular. Since last December, the collective value locked in DeFi products across blockchains has grown from $ 17 billion to $ 246 billion, or fourteen times more in a single year. Assuming this trend continues, Solana’s speed makes it a great alternative to Ethereum.

So what? DeFi products are not free. Miners and validators should be paid for their time, so users pay transaction fees using native cryptocurrency. In other words, as DeFi products on the Solana blockchain become more and more popular, users will have to purchase more SOL tokens, which will increase their price. This is why Solana looks like a smart long-term investment.

Image source: Getty Images.

2. Avalanche

Solana is far from the only blockchain project to try to dethrone Ethereum. Avalanche has similar ambitions, and despite its launch in 2020, the platform has already generated great interest. In fact, Avalanche is the fifth most popular DeFi ecosystem, with $ 11.25 billion locked in DeFi products.

More importantly, the platform has already been rated at 4,500 TPS, but it can theoretically support 20,000 TPS. Of course, this means that Avalanche offers less than half of Solana’s throughput, but there is another variable to consider: time to finality.

While TPS measures throughput, time to final measures how quickly the network can embed transaction data into blocks on the blockchain. At this point, the transactions are irreversible. From this point of view, Avalanche is actually faster than Solana. In fact, Avalanche is the fastest blockchain-powered smart contract platform measured by time to end.

From there, the investment thesis mirrors that of Solana. As dApps and DeFi products on the Avalanche blockchain are increasingly adopted, more people will need to purchase the underlying cryptocurrency, which will increase its price. That’s why risk-tolerant investors should consider adding Avalanche to their portfolios.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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