The last 12 months have taken crypto investors for a wild ride. The market plunged in May, shedding 50% of its value in a matter of weeks. Then the frenzied enthusiasm returned, sending the crypto market to new highs in November. Unfortunately, the tide has turned once again. The collective value of all cryptocurrencies currently sits at $2 trillion, a third below its all-time high.
However, there is a silver lining for long-term investors. Decentralized finance (DeFi) applications — products that feature programmable money, making it possible to borrow, lend, and earn interest without going through a bank — make financial services more efficient. And investors are throwing money at these platforms. Over the past year, DeFi investments have soared 1,000% to $242 billion.
More importantly, given its value proposition, I think DeFi will continue to gain traction in the years ahead. And both Avalanche (CRYPTO:AVAX) and Terra (CRYPTO:LUNA) have become key players in this emerging industry, a quality that makes both cryptocurrencies smart long-term investments. Here’s what you should know.
1. Avalanche
Avalanche is a smart contracts platform designed to support scalable decentralized applications (dApps), including DeFi products. The blockchain is secured by so-called snow protocols, a type of Proof of Stake consensus in which validators verify transactions by sampling a small subset of nodes (computers), rather than waiting for each node to reach agreement with every other node. That makes Avalanche fast.
In fact, Avalanche is the fastest smart contracts platform in the blockchain industry in terms of time to finality. The network has been clocked at 4,500 transactions per second (TPS), but the developer team believes that figure could reach 20,000 TPS. And those transactions are finalized in less than two seconds (i.e. irreversibly added to the blockchain).
Moreover, Avalanche is compatible with Solidity, the programming language used to build dApps on the Ethereum blockchain. In other words, developers can easily deploy their Ethereum dApps on Avalanche too. That interoperability has already been a significant growth driver. In fact, Avalanche is the fourth-most-popular DeFi ecosystem, with $11.2 billion invested on the platform.
In short, Avalanche is fast, scalable, and interoperable. And in the coming years, those three qualities should make it more popular with dApp developers and users, as well as DeFi investors. As that trend plays out, demand for the AVAX token should rise, driving its price higher.
2. Terra
Terra is a smart contracts platform that aims to make financial services and payments more efficient. To that end, it features an array of stablecoins, which are cryptocurrencies designed to track the price of fiat currencies. For instance, the TerraUSD token is tied to the price of the U.S. dollar, and the TerraKRW token is tied…
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