The avatars are automatically resized to 48x48. For pixel art avatars you may wish to use a 48x48 source image, otherwise the resize should be fine. The Steemit image rehoster is constantly displaying resized images in the form of preview thumbnails on most posts.
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The original, default avatar shown below is 128x128 pixels with a transparent background. If you use it as a template and stay within the circle there is no circular cropping, just scaling. I used a square 128x128 canvas with a picture with a transparant background that fit in the circle.
