The first rule of crypto-club is you don’t talk about your crypto.
You can probably figure out what the second rule for yourself.
I’m going to break both of those rules and talk about what decision making went into my picking up a position in Avalanche (AVAX).
Our story begins about three weeks ago, and the dip is strong. Bitcoin’s down substantially and it’s dragged the majority of the alts down with it in its wake. The pundits are decrying the death of crypto, and everyone in the mainstream media is going on about how it’s based on nothing and how it was fated to go to zero and they predicted this would happen.
Like they always do.
I was waiting for the bottom or a reasonable facsimile thereof, since it’s impossible to time the markets. Eventually, I saw a little green in the charts and decided I’d take the hit if it wasn’t the bottom and see what happens in a few months, so I reinforced my usual positions and decided on a new coin: AVAX, the proprietary token of the Avalanche blockchain.
What I look for:
- Environmentally friendly
- Purpose
- Governance
- Scalability
- Security
- Performance
The Avalanche Environmental Angle
Proof-of-Work coins aren’t doing anyone any favours with the amount of electricity they consume. Bitcoin’s power consumption is famously measured in countries. One single Ethereum transaction is equals the amount of energy consumption of more than several thousand VISA card transactions.
You get the idea. The biggest problem of course is Bitcoin and its carbon footprint. There’s a rising tide of Bitcoin miners getting onboard with ESG and environmental stewardship, but it’s still not enough. I want to know how the coin is being mined. I want to know it’s power source. I want to know if it’s involved in mitigation for the environmental catastrophe that’s on its way.
In this case, Avalanche isn’t a proof-of-work coin. It’s a staking coin. Staking uses vastly less electricity. Since I’m not actively getting involved in staking, I don’t particularly care about the specifics of the staking—such as whether or not it’s one of those coins where the rich get richer and the poor get laughed at (although it’s not, as per my earlier article) but I do care about its output. That output is negligible.
Avalanche Purpose
I’m not really interested in ‘store of value’ coins anymore. Mostly because they don’t actually store value, nor are they going to miraculously find a way to become cash overnight like many Bitcoin Cash punters will inform you if you make the mistake of asking them.
Don’t.
That doesn’t mean I’m not going to throw money into Bitcoin whenever I make enough to justify it, but it means I won’t be hopping on the next store of value bandwagon.
What I want is functionality. I want a reason for more people to buy the coin—drive the price up—so I can sell with a decent expectation of profit. I’m not a programmer and I won’t be minting any NFTs anytime soon, so the only reason for me to actually be in a functional crypto like ETH, ADA or AVAX is because so many other people are.
Ethereum is expensive. ADA has been underperforming. AVAX is in the middle.
AVAX is a so-called ethereum killer. It’s a smart contract enabled platform where you can perform all the same functions you can on Ethereum, but also port your projects back and forth via their Avalanche Bridge—which is a neat little function. It’s not novel as there are definitely other coins that do this, but it’s not widespread either, which given AVAX’s position by market cap, makes it probably the most prominent coin to offer this.
Governance
With any new coin you want to make sure it’s not run by idiots, first and foremost. Most coins you’ll find are run democratically and that’s all well and good, but some democracies are created more equal than others.
In this case, Avalanche provides on-chain governance where participants can vote on changes to the network and settle upgrade decisions democratically, including factors like minimum staking amount and time, minting rate, transaction fees and other such things.
Governance would matter more if I was investing.
Scalability
How does it scale? Honestly, this and governance matter to me more if I was looking to invest. I want to know if this particular blockchain can handle more or less transactions than its competitors, and how well it deals with added volume of users.
Here’s what I wrote on Monday about its scaling capacity:
“There’s also the scaling factor—wherein Bitcoin can process about seven transactions a second and Avalanche pulls in about 4,500. Still a far cry from Visa or Mastercard, but it’s a start.”
That number isn’t great, but neither is it Bitcoin or Ethereum’s level of drag. Granted, all of this might be moot if Buterin rolls out ETH 2.0 and it manages to scale the way he says it will. But that’s been a promise a long time coming.
Security
The biggest threats to blockchain security generally come from within. In most PoW coins it’s the threat of the 51% attack. No Proof of Work? No problem. Next is the usuals—wallet security, losing your passphrase, and getting conned out of it. If you’re secure against those—then no problem.
Performance
Given that cryptocurrency in general has been dealing with widespread decline over the past few months, and my intention here is to buy the dip and sell in some distant future where presumably there’s money to be made, performance is still a factor. It’s more of a factor when I want to think long-term, but given that when the dip is over and AVAX hits a certain previously determined price point, I’ll be politely offering my claim and taking my money (presumably), this isn’t as much of a factor.
Finally, a note about the ancillaries.
Avalanche Explorer: This wasn’t really a draw. It’s neither a perk nor a detriment to my decision making as most if not all cryptos should provide some variety of access to this kind of service. It allows you to peer inside the blockchain and watch the transactions, including your own. There’s some argument that this kind of thing is a bug and not a perk—primarily because in the future it’s going to give anyone with the tech to see and follow the ability to watch every financial decision.
Avalanche Wallet: Most coins come with their own hot wallet. With this one—well, the signup process is actually kind of fun. It’s like a word game with notepad. Given I won’t be using this wallet, I’m fine with a one time deal. The inside of the mainframe looks like most I’ve seen—with the exception of that it keeps track of your NFT’s, and has a cross-chain option. These are new, at least to me. It allows you to transfer between exchange, contract and platform subnets.
Again I’m not really going to be buying NFTs or using AVAX for anything but a speculative asset, but I like that these are here and people can use them.
Avalanche Bridge – The bridge is what provides Avalanche one of its biggest selling points. It’s ethereum compatible, which means you can bring ERC-20 tokens (which a great many of the alts are built on) over to Avalanche to do the necessary work at lower gas prices. Then either launch them here or shunt them back over the bridge to launch into a wider market.
Mostly, there you have it.
—Joseph Morton
Full disclosure: Yes. I own some AVAX. For now.