Relatively unheralded cryptocurrency Waves (WAVES -3.44%) is up 50% year to date, standing out in a market where most other cryptocurrencies are in the red for 2022. Furthermore, Waves is up over 200% over the past month. Some investors have erroneously dubbed Waves "the Russian Ethereum," which seems to have led to an uptick in attention, but Waves is compelling for reasons far beyond that. What is Waves, and is it a buy?
Image source: Getty Images.
What is Waves?
Waves is a proof-of-stake asset with a $3 billion market cap. Created by Ukrainian developer Sasha Ivanov, Waves has been around since 2016 and has achieved this growth without any venture capital funding, unlike many other prominent cryptocurrencies. Instead, Waves grew organically. Waves currently has 2 million user wallets worldwide.
Waves is transitioning to Waves 2.0, which will be compatible with the Ethereum Virtual Machine (EVM), which is essentially a layer of middleware that allows applications to interact with the main network, in this case powering smart contracts and other applications. This will make Waves more interoperable and enable it to interact with other major blockchains like Ethereum (CRYPTO: ETH). This compatibility has been a boon for Avalanche (CRYPTO: AVAX) and other tokens. The transition will make Waves more accessible for outside teams of developers and should encourage the creation of more applications in the Waves ecosystem.
A tidal wave of funding incoming
Waves announced the establishment of a new parent company, Wave Labs, which will be headquartered in Miami, and a new $150 million fund that will be used to incubate new projects on the Waves platform. Last year, we witnessed how development and activity on Avalanche flourished after its parent company Ava Labs announced an incubation fund in the amount of $200 million. It attracted developers to Avalanche and led to developments like popular decentralized exchange Trader Joe, play-to-earn (P2E) game Crabada, and more. If this influx of funding can help Waves attract developers to build on the platform, and thus a similar explosion of new applications on its own platform, it would be huge for the Waves ecosystem.
While it's exciting to look ahead to where Waves is headed in the future, it's important not to overlook the fact that a lot of development is already flourishing on the Waves network. Waves Ducks is an NFT-based game in which users can buy, sell and breed Duck NFTs and even earn yield on these NFTs by staking them to earn EGG tokens. Waves Ducks already has over 200,000 players and the most expensive Duck sold for 12,500 WAVES, or over $245,000. Waves.exchange is a decentralized exchange built on Waves that has attracted over 32,000 users. Vires Finance is a lending protocol that uses algorithms to match borrowers with pools of capital using smart contracts. Neutrino is a protocol on Waves that enables the creation of stablecoins tied to real-world assets, such as the U.S. Dollar or the Euro, or even commodities, which is somewhat similar to Terra's (LUNA) Mirror Protocol.
Is Waves a buy?
Waves is still a very speculative investment as a cryptocurrency farther down in the market cap rankings. I'm bullish on Waves based on the dedicated and talented developer at the project's helm. I am also excited about the influx of funding it is deploying to encourage development on the platform, which could lead to even more interesting applications and increased user growth. Lastly, Waves looks attractively valued when comparing its market cap ($3 billion) to the total value locked (TVL) in the network ($2.56 billion), giving it a market cap to TVL ratio of 1.2, which is inexpensive compared to other major cryptocurrencies like Ethereum and Solana (CRYPTO:SOL) which trade at market cap to TVL ratios of 2.7 and 3.9, respectively.
