As cryptocurrency competition intensifies, here’s what smart investors are looking at

Web3, cryptocurrencies and non-fungible tokens (NFT) have been a hot topic for the last two years as the cryptocurrency market has risen and fallen, but what are smart investors looking for in this industry?

Increasing value in the long run will need more than just high trading volumes; it is going to require real disruption. This is why smart investors look at who builds, what they build, where they build and who uses their products. Understanding these factors will tell a lot about what will be a good crypto investment in the long run.

Developers, developers, developers

Any blockchain trying to build a true digital economy with a digital currency must attract developers. Bitcoin (BTC -0.42%) is the largest, oldest and most well-known cryptocurrency, but it has only around 500 developers, according to an analysis by Andreesen Horowitz. The leaders are, in fact Ethereum (ETH -0.67%)with around 4,000 developers, and Solana (SUN -2.32%)which is growing fast and has 1000 developers.

What do developers build on these platforms? There are decentralized financial products, NFT marketplaces and projects, meta-verses and more. The more developers, the more projects can be tried. Think of this as the first days of the internet. There were many mistakes, but there were a few big winners, included AmazonGoogle and PayPal, which emerged from the ashes after the technology crash in 2000-2002. Developers are in a similar place right now, and see what’s going on in the market. Having multiple developers will be a good thing for any blockchain.

If users are not on the blockchain, what’s the point?

Developers are great, but if you do not have users, then who are you developing for?

According to The Block, Solana had more than 30 million monthly active addresses in the last two months, while Ethereum had 14 million. The Binance (BNB -0.30%) blockchain is the only other chain in the same neighborhood, with 7.6 million active addresses in the last 30 days.

The use may vary over time, but blockchains and cryptocurrencies that do not grow in the long run will face serious challenges. According to Coinopsy, over 1000 crypto tokens were “declared dead” in 2018 after their ICOs (initial coin offerings) collapsed. More recently, Terra Luna collapsed and the blockchain was even shut down for a short time after TerraUSD [now TerraClassicUSD (USTC)] lost the tap and the entire crypto ecosystem collapsed when users took out the money they could. After all, if there are no users, there will be no developers, and there is probably no value in a cryptocurrency or token.

Transaction speed and cost

There are debates among those in the cryptocurrency industry about the value of speed versus security. But I think a basic look at any technology will tell us that if transactions are slow and high cost, there will be limited uses in the long run.

To be truly disruptive, blockchains must be both fast and affordable. Here, data on transaction costs and speed is based on current data for Solana, Ethereum and BNB.

• Solana: 2238 transactions per second and costs less than $ 0.01 per transaction.
• Ethereum: 13.5 transactions per second and Gwei 39, which means that a median transaction costs $ 1.01.
• BNB: 44.3 transactions per second and an average fee of $ 0.18 per transaction.

These costs and speeds play a big role in how I think about cryptocurrencies as an investor. I want fast and low costs, which is why I think Solana has a bright future, especially compared to Ethereum.

This data is changing, so investors need to stay up to date on speed and cost. “The Merge”, which is when Ethereum goes from Proof of Work to Proof of Stake, can affect both, and Solana has undergone consistent upgrades this year. Regardless of your view of a cryptocurrency, it is crucial to understand how it compares to competitors in terms of speed and cost, which is why I follow this data closely.

How To Think About Cryptocurrencies In Today’s Market

When looking at investment decisions in cryptocurrency, I think it is important to focus on where the developers build (the cryptocurrency / blockchain), what they build (does it add value?), And how many users flock to what is being built. .

Technology companies have a long history of boom, but the companies that can build something people really want or need can add tremendous value. That value should ultimately flow to cryptocurrency owners or owners of other digital assets on successful blockchains, which is why I’m positive about the industry.