Avalanche (AVAX)In this episode, Bobby Ong, co-founder of CoinGecko is joined by Emin Gün Sirer, founder and CEO of Ava Labs. Bobby interviewed Gün on the background of Avalanche, differences between three Avalanche’s blockchains, use cases of AVAX token, as well as Avalanche’s plans for 2021.
[00:02:28] What is Avalanche?
[00:08:20] Avalanche’s consensus mechanism
[00:11:50] Avalanche’s competitors
[00:19:52] P-Chain, X-Chain, C-Chain
[00:25:32] Projects launched on top of Avalanche
[00:34:47] How Emin Gün Sirer stays up to date with the crypto world?
[00:36:02] Plans for Avalanche in 2021
[00:40:34] Why is ILO better on blockchain?
[00:42:29] Use Cases of AVAX token
Quotes from the episode:
“Whereas Bitcoin is trying to be digital gold or a replacement for the Euro, the replacement for Dollars and so on, and whereas Ethereum is an internet computer, what we're building is very different. It's a platform for other people to create digital assets.” [00:04:18]
“We're three times faster than Visa. And if anybody else can, believe that they can compete with Visa, they should come up and line up and we should do a side-by-side comparison. There is no other coin that can say this” [00:08:10]
“We're going through a set of improvements to Avalanche called Apricot, and we're about halfway done with it. When Apricot is done, we're going to have a fee structure for Avalanche that is much more dynamic. And potentially very, very, very low, much lower than it's been.” [00:36:14]
Ava Labs - https://www.avalabs.org/
CoinGecko - https://www.coingecko.com/
Avalanche (AVAX) on CoinGecko - https://www.coingecko.com/en/coins/avalanche
Bobby Ong [00:00:00]:
Welcome to the CoinGecko podcast. I'm your host. Bobby Ong. Each week we will be interviewing someone from the blockchain industry to learn more about this fast moving cryptocurrency economy. If this is your first time listening then, thanks for coming. The CoinGecko podcast is produced each week to help you stay ahead of the curve show notes can be found at podcast.coingecko.com. I highly encourage you to join our newsletter, where we send out top news in the crypto industry every Monday to Friday. Come back often and feel free to add the podcast to your favorite RSS feed or iTunes. You can also follow us on Twitter and Telegram at CoinGecko.
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Bobby Ong [00:01:40]:
Welcome to the CoinGecko podcast. For today's episode, we have Emin Gün Sirer, founder and CEO of Ava Labs. Gün is a professor of computer science at Cornell university. And he's founder of Ava Labs, co-founder of bloXroute, co-director of Initiative for Cryptocurrencies and Smart Contracts (IC3). And among other things, Gün is also known for having implemented the first currency that uses proof of work to mint coins, for selfish mining or characterizing the scale and centralization of existing cryptocurrencies, as well having proposed the leading protocols for on-chain, off-chain scaling. Of all his collaborations, he's proudest of his contribution to the John Oliver Show's segment on cryptocurrencies. Very happy to have you on the CoinGecko podcast, Gün.
Emin Gün Sirer [00:02:25]:
I'm very, very happy to be here, Bobby. Thank you for having me.
Bobby Ong [00:02:28]:
Yeah, to start things off right, Gün maybe can you give us at Coingecko, the audience at CoinGecko, a simple explanation of what Avalanche is?
Emin Gün Sirer [00:02:37]:
Sure. Avalanche is simply the most recent, most powerful platform for blockchains. It's different from all of the existing chains that came before it in a couple of ways. One, it uses a revolutionary big breakthrough in distributed systems, called the Avalanche protocol for achieving consensus that allows it to achieve scales that are unprecedented. It can actually achieve a much, much, much faster rates of clearing transactions. It's achieves finality. It's the quickest way to get coins in and out of exchanges because it is so fast. The finality is within a second and it also has a very different structure. It is the only chain that accommodates more than a single virtual machine. So you can run multiple virtual machines on it, allowing you to create lots of different assets for different use cases. So this is in contrast with other chains that typically have one coin, one virtual machine, and one network, Avalanche allows you to create any number of coins, any number of digital assets backed by any number of virtual machines and implemented on any number of networks with different properties. These networks that potentially could be have different properties are called subnets in Avalanche parlance.
And every subnet could be different. In particular it can be tailored to different use cases, to different legal jurisdictions, to different resource requirements. So this allows us to do a much wider range of operations and every other chain. For example, the entirety of the Ethereum blockchain is a subnet in Avalanche. And we could also do similar things with other virtual machines and other approaches. So that sets us apart. And our vision also is different from everyone else. Whereas Bitcoin is trying to be digital gold or a replacement for the Euro, the replacement for Dollars and so on, and whereas Ethereum is a, is an internet computer, what we're building is very different. It's a platform for other people to create digital assets. From the ground up, Avalanche is designed for other people to convert whatever they might have in their hands, into a tradable worldwide, reachable good. And so this allows us to uh, and do so in a compliant manner, in a legally compliant manner. So this allows us to have many more use cases than other chains. So approximately the Avalanche value proposition. And it's been a fun ride. Avalanche is relatively new. It went mainnet in September, last September. So at the time that we were talking right now, it's been about six, seven months. And we're at the beginning of a very fun journey. We've had quite a come up, quite a journey so far, but there's much more fun stuff to come.
Bobby Ong [00:05:13]:
It's interesting how you kind of put things into perspective. I mean a lot of people's perspective, Avalanche is just another Layer 1 blockchain that promises high scalability, high transaction throughput and all, but it seems that you guys have a lot more with all the EVMS and all, multiple EVMS on a chain, you call it subnet. My question, actually is...
Emin Gün Sirer [00:05:31]:
Let me chime in there. There are so many Ethereum killers. We're not an Ethereum killer. We love Ethereum. We are not trying to compete with it. And all of these so-called Ethereum killers, they're based on the same idea. They are trying to implement ETH2, it's the same idea as ETH2. It's a boring idea. It's an idea that goes back to 1999 and that's the consensus protocol they use. And that idea gives rise to systems that are inherently centralized, that don't actually scale that well. So we're very different from all of those. They can do whatever they want. That's fine. Most of those reported TPS numbers are collected in a funny way. And if you actually examine them, then you find that they're actually not as fast as they're advertised. So this is my area of distributed systems. It's an area that's been around for only 45 years. And in that time there have only been three breakthroughs. The first was classical consensus protocols. The second was Satoshi Nakamoto coming in and saying, "Hey, I've got a great protocol", and showing the world how Bitcoin could be implemented.
And then what's happened is all these other people are like, well, I want to do Bitcoin, but I want to go back and use one of these classical protocols. All those classical protocols are already limited in scale. We knew that. Satoshi knew that. All these people are trying to resurrect these old protocols. And Avalanche is the only, and the biggest breakthrough since the Bitcoin white paper. It's a completely new approach to consensus. That's how we get these enormous speed ups. That's how we get these incredibly short times to finality. So I'm really happy about the technical background and history of the protocol and where it stands in the history of science. I know, everybody knows exactly how to resurrect an old protocol and fake up the numbers so they sound big, but that's not the game we're in at all. There are a lot of people in that game, power to them. We don't even criticize them anymore. There's no point in fighting with that. So power to them. But the savvy people know exactly what's behind Avalanche and how revolutionary it is.
Bobby Ong [00:07:28]:
So, I don't know if you go around claiming the TPS number for Avalanche, but if you do what will be the maximum theoretical TPS that Avalanche can run?
Emin Gün Sirer [00:07:37]:
The maximum theoretical TPS is amazingly high, but the TPS numbers are misleading. So everybody lies about them. So they measure them in a giant data center. So if you measured it in a data center, I can get enormous numbers myself. Some people boost up their numbers by counting things as transactions that aren't actually users submitted transactions. So I don't want to name names and I try not to get into the TPS game, but I can say this, Avalanche is three times faster than Visa.
Bobby Ong [00:08:07]:
Okay. That's a good number.
Emin Gün Sirer [00:08:08]:
[inaudible] today. We're three times faster than Visa. And if anybody else can, believes that they can compete with Visa, they should come up and line up and we should do a side-by-side comparison. There is no other coin that can say this.
Bobby Ong [00:08:20]:
And you talk a lot about consensus mechanism, like, I mean, Bitcoin has a proof of work mechanism and then Ethereum is kind of moving towards proof of stake. And what's the Avalanche's consensus mechanism? How is it different than one of these two, for examples?
Emin Gün Sirer [00:08:32]:
Sure. Ethereum is not proof of stake. Ethereum is trying to move to proof of stake. That's Ethereum 2. The biggest Ethereum killer is Ethereum 2 as you know. So we'll see if it succeeds. Ethereum 2 is something that we've been talking about with Vitalik, with Vlad Zamfir and other people in the Ethereum community for many years. So I'm still waiting for it to arrive. And it's not here yet. There was something called a Beacon chain, which is the most basic thing that doesn't actually process transactions. So Ethereum is squarely in the same category as Bitcoin. It is based on proof of work and proof of work is an incredibly robust mechanism for achieving consensus. As you know Bitcoin is a fantastic system and was a big breakthrough when it came out. The problem with proof of work is twofold, it doesn't scale and it uses so much energy that it destroys the environment and it also leaks value from the ecosystem. So Bitcoin, for example, must have millions of dollars of new money come into it, or else the price is on a decline that is not true for a system like Avalanche or a modern system based on proof of stake.
So how is the Avalanche protocol different? Well, so maybe the thing to do is to describe very quickly what the protocol does. The protocols job is to decide which transactions happened in which order, and to do that, there's typically some messaging. There's typically some, some set of messages that nodes send to each other. And in proof of work, those messages carry this cryptographic puzzle in them, called a proof of work. And that's how you add a new block to the end of a blockchain in Bitcoin and Ethereum. In proof of stake systems, other than Avalanche, there is voting and it's all-to-all voting. So there was a set of nodes that are involved in creating blocks and they vote. And if you get more than two thirds of the nodes to agree, then that block is added to the blockchain. That's a reasonable thing to do. But because everybody has to vote and because everybody has to collect votes, you end up having to have all-to-all communication.
So if there are a hundred people in the system, a hundred block producers, then you have to have a hundred squared messages, which is 10,000. That's a large number. Now, imagine if you had a thousand participants. Then you have to have a million messages. If you suppose you had to have a, say a million participants, God forbid in the system, it's just wouldn't scale. So the Avalanche protocol is very different. It's based on sub sampled, repeated voting. What does that mean? It means that at any one time, I simply ask a small number of nodes how they're about to finalize their blockchain and they adjust my finalization accordingly. So instead of me asking everybody I sample and I do this repeatedly and magic of this protocol is that after a small number of rounds, even though I haven't ask everybody, I have asked enough people, who have asked enough people, who have asked enough people and so on, that everybody's on the same page.
So that's really the short of the protocol. There's a lot of complicated details that I'm happy to go into but at the highest level, this has happened. And it's revolutionary. Before us, nobody even thought about how to do consensus in this fashion. Nobody even thought that this would actually lead to consensus. And so I'm really, really happy to show that this actually works and it works incredibly effective.
Bobby Ong [00:11:51]:
Would you say that the competitors for Avalanche will be other Layer 1 chain such as interblockchains, like Polkadot, Cosmos, or some other Layer 2 scalability solutions like Optimism, Arbitum, Zk-rollup or both. You solve both and more, I suppose.
Emin Gün Sirer [00:12:05]:
Yeah, Bobby, that's a good question. Let me start maybe by poking holes at some assumptions that people make. So there is this idea that Layer Twos and Layer Ones are different from each other, that they in a different space. And first of all, I don't think that's true. I believe that every single Layer 2 will eventually introduce its own token, because why not? And like Uniswap ultimately introduced its own token. And the moment they do, they become competitors to whatever they started out on. So I don't believe this thing that, "Oh, Layer Twos are non-competitors, but Layer Ones compete with it", no, that's just utterly wrong. Every single Layer 2 will try to carve out cannibalize, vampire attack the system that it started off. That's one. Layer Ones, you know, who competes with who? I don't really see us competing with other Layer Ones, head to head. We are doing things that other people are not even conceiving of. So if you think of the space as a finite small pie, then you could imagine that people are just copying each other's ideas and that they all compete with each other. This is true to some extent, right?
Like there are many projects that are just copycats. There are many projects where the people in charge have no original ideas. They took an old protocol. They took the vision from Satoshi. They took some of the features from other chains that they saw around. And so those people are in some, you know, enormous copycat battle. We are distinctly different from them. We brought in a different protocol. We have a different vision. Everybody is trying to do the Bitcoin game. We're trying to play a different game. So in my view, Bitcoin is fantastic. Ethereum is fantastic. We're not competing against them. What we're trying to do is go into a different space of allowing other people to issue their own digital assets. And we're trying to bring a new value into the system. So in the game I'm playing for an example, it's just to give you an idea, everybody was just like copying each other and so on. We just introduced a brand new asset class, called Initial Litigation Offerings, ILOs. There is nobody out there who does things like this. They just copy stuff and then they like, they'd go on on the internet and they do marketing, and so on. We are actively working to come up with new ideas and new assets. So the pie that we're trying to take a slice of is much bigger than your typical crypto project, that's the copycat of another crypto project. So as I said, we love Ethereum, they are doing something awesome. A lot of the people that work with me came from the Ethereum community.
We love Bitcoin. It's trying to compete against the sovereign currencies of the world, it's trying to compete against gold and so forth. Fantastic. It should succeed. What we are trying to do is something different. We're trying to bring in multi-universe of assets. A universe, where there could be, for example, a specific assets for specific countries issued in a compliant manner. You can't do this on Ethereum. Ethereum generalize the scripting language of Bitcoin. And that's the one improvement it did. While we brought in a new protocol, we expanded on the scripting languages to add any number of them. And we're doing something that most people are blind to, which is allow people to create subnetworks with different properties. So people don't even understand what that means, and they don't understand why this is such a huge step forward. And so when they do, it's going to be really fun to see, and they will start copying us all of a sudden. And we're beginning to see that. The savvy people are beginning to copy features of Avalanche. But the game we're playing is, is a bigger game. It's a much more fun game than the game other people play.
Bobby Ong [00:15:40]:
I start to understand what you mean by creating chain specific rules for certain countries, like immediately of my head, it just reminds me of all the security token offerings. And then you have people like Polymath launching their own blockchain. And because like only certain people who are KYC for example, can own certain assets and all. So I can imagine, like, instead of launching your own chain on securitize with Polymath, if you can kind of launch it as a subnet with all these rules, preset, I suppose. Is that kind of like the thinking?
Emin Gün Sirer [00:16:07]:
Exactly that, exactly that. So take your typical enterprise. So every single fortune 500 company, minus a few, maybe I think 490 of the top 500 companies have experimented with blockchains. Not a single one has actually seen the lights of day except actually one. One has the Burger King had a Whopper coin. And that was actually based on an old protocol of mine. It's based on Bitcoin [MG] and it was issued around the world that was used for sometime. But most of these companies have never issued their assets on a blockchain because the blockchains that they experimented with don't give them enough control. If you're a company, would you like to issue an asset on the Ethereum blockchain, where the fees could spike up to hundreds of dollars? If you are an IOT company, would you like to place their IOT devices on a chain where the scale is just not sufficient? These are like non-starters. Or if you're issuing a security, would you like to issue the security in a way where you cannot control what happens to it, when the laws change, you have no idea how to change the underlying network? So were all of these, what you need is an underlying substrate where you can change the rules of the substrate, where you can actually control what's happens on your network. So that's where the subnet idea comes in. And enterprises absolutely love this notion.
They want the benefits of blockchains, the transparency, the decentralization and so forth, but they want to retain a level of compliance and the level of control over the net. And so for that, the subnet idea comes to the fore, and for exactly the types of reasons. You can have a subnet dedicated to the European Union, that where the nodes are compliant to GDPR or compliant to other data privacy rules in the European Union. You could have a subnet for Americans. You could have a subnet for, you know, for example, Malaysia, for each country, et cetera. And so these are all our features that allow us to expand to a much wider universe of digital assets.
Bobby Ong [00:18:01]:
It almost sounds like you are sort of combining the enterprise blockchain, permission blockchain kind of ecosystem into this permission-less world as one of the subnet on Avalanche, right, with this?
Emin Gün Sirer [00:18:13]:
Yeah, exactly. And before us, everybody thought that was a dichotomy, that you either had a public network or a private network. And we all know that private networks don't work. Okay. So people start out and then they never succeed. What we are showing is that there is a continuum, a spectrum. You can go anywhere in between. You can start out, you can just say this subnet is closed. And you have a private network, or you can say, look, this subnet is open to everybody in this country X, or the subnet is open, everybody who has signed this agreement. The subnet is open to everybody whose machines have the following resources. And then suddenly you have a continuum on which you can travel all the way between completely private to completely public and everywhere in between.
Bobby Ong [00:18:59]:
I guess in a few years time, like you will start seeing all these fortune 500 companies launching your own subnet with their own token with certain rules specific to their own use cases. And then they all have their own, it's kind of like the permission blockchain kind of going live and all this POC is going up and see the light of the day in a few years time from now on I suppose, yeah?
Emin Gün Sirer [00:19:17]:
Exactly and I'm so excited because the conversations I've been having with enterprises, with large companies have been so fun to have. So they keep asking for these features and often the conversation starts out with them saying, look, we already experimented with this stuff. And we need this, that, and the other. And often our answers are, "Yes, we understand exactly what you need. And we have the feature that you need." And so there are so many exciting pieces of news in the pipeline that I can't share at the moment, but you know, I have Ava Labs has grown to be a fairly large company and we're doing a lot of partnerships with other large companies because of this features.
Bobby Ong [00:19:52]:
Based on my reading, right, I mean, it seems like on Avalanche, there are three blockchains within it, which you guys call it the Platform Chain (P), the Exchange Chain (X), and the Contracts Chain (C). So, why do you guys split things up into three different chains? I guess before that, like what are these three different chains in the first place?
Emin Gün Sirer [00:20:12]:
Sure. The P-Chain, the Platform Chain is the sort of the biggest chain, the sort of the most fundamental one that is used to coordinate the other chains. So when you want to, suppose you create a Bobby subnet and you want to take your assets and swap them with assets on my subnet. Well, our subnets need to know how to communicate with each other. So the Platform Chain is used for that communication. It's also used for staking. It's also used to determine who's in the system. And I forgot to mention maybe, but the Avalanche protocol can accommodate millions of participants. So all of those nodes need to be able to locate each other and that's done through the Platform Chain. It's mostly for the most lowest level machine to machine communication. The exchange is a chain, it's a public chain, it's for asset creation, it's for NFTs and it's for other assets of that kind, that anybody can issue. And in fact, there are maybe hundreds, if not thousands of assets that have already been created on the exchange. The nice feature about the exchange is that it doesn't build a totally ordered chain. It builds what we call a directed acyclic graph. It builds a set of transactions that are not a single chain, but more like a graph.
What that means is if I'm giving you money and somebody else is giving somebody else money, those two things don't have to be sequenced with respect to each other. So my transaction can be finalized while your transaction is being worked upon. So it achieves concurrency, and it's one of the many reasons why our chain is so much faster than other people. So that's the exchange. The final one is the contract chain and the contract chain contains the entirety of the Ethereum virtual machine. And it allows people to write smart contracts. That's a totally ordered chain. It has exact bite by bite compatible with Ethereum. So if you were writing some code for Ethereum and Ethereum is too expensive for you, or is too slow for you, the interactions are taking, you know, 15 seconds or more, you should try the Contract Chain because the exact same contracts will work and they will simply be much, much faster. And I think we're the only chain other than Binance's Smart Contract Chain, that can say that it's fully Ethereum compatible. That's the C-Chain. So those are the three chains we have. There are also other subnets and there are more coming by the way. So there'll be more chains to come in the future. We're very excited about the whole design.
Bobby Ong [00:22:36]:
So this Platform Chain, the P-, and X-, and the C-Chains, are they the individual subnets by itself or are they different things?
Emin Gün Sirer [00:22:42]:
They are, they are. So if you want to think of it, it's really just one big thing that everybody is working on. The Platform Chain is a single line like this. There's a graph that contains the X-Chain, and there's another line that contains the C-Chain. You can think of it that way. There are different virtual machines in all of these different chains but anybody could come in and say, "Look, I have a new virtual machine", and create a fourth subnet for example. We are in the business of doing that. We're designing new subnets, even as we speak with new features.
Bobby Ong [00:23:14]:
How many subnets can it support? So I could theoretically say that the Binance Smart Chain, which is EVM compatible could kind of run as an EVM. I mean, it ran as a subnet, S, instead of P, C, X, we also have P-, C-, X-B for example, then you have the Binance Smart Chain. And what about all the tokens, are they all issued? Like, say if I run my own subnet, Bobby subnet, for example, on Avalanche and I want to issue like ERC-20 equivalent on my subnet, do I issue it all on the Exchange Chain or do I have a token on my side, and then which goes onto the Exchange Chain? I'm just curious how it works then.
Emin Gün Sirer [00:23:48]:
Oh, great question. Yeah. The digital assets are transferable between different chains. So for example, I can create a token on the exchange, transfer it to the C-Chain, process it through a smart contract and move it back to the exchange to be transferred much faster. It's really a revolutionary vision. It's very different from what everybody else is talking about. I started out by saying this in the beginning and it takes a little bit of learning but Avalanche is just genuinely very different.
Bobby Ong [00:24:16]:
And would you say that like moving tokens around these different subnets, I mean, if you look at how tokens are moved across different chains these days, normally involve some sort of a blocking within a smart contract and then issuing of some [wrapped] tokens on the other chain and all. Is it something similar in Avalanche, I suppose?
Emin Gün Sirer [00:24:32]:
No, no. It's different, Bobby. No. It's supported at the protocol level. So we're not locking something and creating a wrapped version of that thing. You are really taking it. Well there are different cases, but in the most basic one, the simplest one, you are taking the asset out of the X-Chain and moving it into the C-Chain. And so it's just literally moved. You could also wrap it. You could do that. We have bridges that wrap Ethereum assets and move them onto Avalanche. So those are possible as well. But we can do this thing between the subnet. You know, the reason why we can do this is because every subnet implements the same protocol. There is a basic protocol, the Avalanche protocol. Think of it like TCP/IP. Think of it as the core mechanism. It's a simple mechanism. It's based on this repeated sub sampling idea. And if your subnet speaks it and my subnet speaks it, then we have compatibility between the subnets. So we can take an asset from one subnet and move it to another.
Bobby Ong [00:25:32]:
What are some interesting projects that have launched on top of Avalanche so far?
Emin Gün Sirer [00:25:37]:
Oh God. This is a hard question. Okay. So I can say, I can tell you this there are many. There are many, so many that I sadly I'm finding it very difficult to keep tabs on exactly what has launched. I'll try to give some examples. But the one indicator that there are so many is simply the following fact: the amount of fees burned on the Avalanche chain is so high that Avalanche is the number three coin with the highest organic usage. The number one coin that is heavily used right now is because of DeFi, is Ethereum. Ethereum surpassed Bitcoin. Number two is Bitcoin. And number three is Avalanche. Number four is Binance Smart Chain. So those are the top four of chains that people are actually organically using with a lot of actual systems and projects on top. So on top of Avalanche, we have NFTs up the wazoo. We have many NFT projects and NFT marketplaces coming online. So we have Uniswap-like systems. There's something called Pangolin It's actually like Uniswap but it's democratic. It's completely user controlled. There is no team allocation. And it's just a, it's a very fun system to use. But there are other copies of, there are other systems like it as well.
There is an Aave-like lending platform coming up, called [one elbow]. There is a flash loan project coming up. There are DEXs, that are not like Pangolin, that are not like uniUniswap that are also coming up. The DEXs I'm really excited about. They're exploring things that are simply not feasible to do on Ethereum because Ethereum is so expensive. But they can be done on Avalanche. There are credential projects or identity projects coming online. There are projects for payments international payments. There are projects for international credentials especially for identity tracking, for people, for refugees and similar use cases. There are hang on, let me think a little bit about this, there are IOT projects, where the IOT devices are tied to the Avalanche platform. I can go on like this, like you give me a topic, I'll rattle off some of these things. But yeah it's so fun. It's so such a great time to be into blockchains, right?
Bobby Ong [00:27:45]:
Yeah. I mean, so here you are launching Layer 1, a new chain, the new blockchain. You got to bootstrap everything, bring it from scratch. I mean the vision, the future you've already explained what the future would look like? So if I to ask you, like, from now to a few years from now, like five years from now, for example, what are the things that you guys got to do to kind of grow this ecosystem and see it succeed. And then you'll see all these other chains as well growing and competing as well. And mindshare is kind of limited, I suppose, in crypto.
Emin Gün Sirer [00:28:10]:
Yeah, great question. So what do you think is going to happen, and in the five years or so, in Avalanche, also in general, right? So what I think is going to happen is we're going to see a lot of innovation on Avalanche, because it's such a flexible substrate. There's a lot of excitement happening on the system because it's all accommodating. So what exactly will happen then? Well, one of the main things that I think is going to change the world is DEXs will finally become much better, much easier, much cheaper to use. I love Uniswap. I love the Uniswap family. I love Pangolin. You know it's just a system I happen to really like think a lot about, but Uniswap-like systems have slippage and they're very expensive to use. So uh, it just so happens that they're a very robust way of trading, but they're expensive. So we're going to start seeing much more efficient DEXs that are truly decentralized. That really have like thousands of participants in their operation that nobody could ever shut down, even, you know, nobody could ever touch them. So that I think is going to be a huge step forward for the entire industry. And then it's going to have a lot of ramifications because these smart contracts are truly different. I believe that identity will be solved. I don't know, I mean, I've known how to solve the blockchain identity problem for years now. And I just watched as a professor, I watched the industry grappled with all these problems. It's really simpler than you know, it's just, it's not very hard.
I've known how to do it. I don't understand why the industry has not been able to, we're going to see that problem solved. We're going to see that suddenly credentials are on the blockchain issued, managed, et cetera. And that's going to open up a new set of compliant behaviors on a blockchain. We're going to see a localized blockchains on subnetworks. We're going to see assets issued that are specific to different domains with proper legal backing. And it's going to be commonplace for a company to say, "Look, we have these things in our hands. And we'd like to offer them to the world. We'd like to sell them to the world." One of the things, Bobby, I'm not sure if you're seeing this from your vantage point in the world, but you know, if you're in the US, you have access to capital markets, but if you're not in the US, if you're not in Europe, you've lived through the pandemic and post pandemic now, now there's most likely you're dealing with an economically depressed era. There's going to be a capital crunch for many companies and what you will need to do, what many, many, many companies and many smaller markets will need to do is raise capital. So they're going to turn to not parochial system, not limited systems, not their national securities markets, but they will turn around and they will try to raise capital at a global scale because they are trying to compete on a global scale, and it's funny, or weird or incredibly inefficient.
I don't know what. They're all three of those to try to be limited to one's own local national market. And we're going to see this play out. And the only way to succeed in this game is to have the ability to support securities offerings that are compliant. And I'm really excited about that. We will see finally, I think, let me just end on this note, there are trillions of dollars worth of assets, that are on people's balance sheets. These are debt instruments. These are bonds. These are complicated derivatives, complicated contracts that will bring in money in the future. We will see all of these digitized fractionalized and issued on blockchains. And maybe if I can just sort of wrap it up, we saw what people could do when they took information technology and they applied it to a really, what I would call a really dumb idea. What's the dumb idea? Hailing a taxi cab. You take, you make it an app. You simply digitize it. And you've got a billion dollar company. What are you doing with it? You're calling taxis. You take hotels, you apply information technology, you've got Airbnb, you've got the multi-billion dollar company. Now what blockchain has give us, if they have the right substrate, they have the right features. They are here to revolutionize the fundamentals of finance.
You were taking information technology, the latest, greatest breakthroughs, and you're applying it to every aspect of asset creation and asset issuance. That's going to open up trillions of dollars of value. And so that's why I say, you know, who am I competing with? I'm not competing with any of the existing systems. I'm trying to go in a direction that these systems aren't going in and in the process, of course, we have to duplicate what they do, but we're going in a direction that people are blind to, we're not inwards oriented. Most of the company that is on the business side, has a finance spec. So the technical people, they have a crypto background. Sure. But the business people that are working with me, they are looking towards these financial assets. They will all be on blockchain. They will all have global scope and global reach. And it's going to be a fantastic world that I'm really excited about.
Bobby Ong [00:32:58]:
Yeah. I keep telling all my friends, you know, for the longest time, since I got into crypto in 2013 that, you know, blockchain is a truly revolutionary technology. You know, you either learn it now or you'll be forced to learn it like 10 years later down the road. And you know, you'll be a dinosaur by that. You'll miss all the opportunities. I think a lot of my friends don't believe me back then. They still don't believe me some up to now. Some of them have to believe, but like this is, to me, it's kind of like internet revolution back in the 1990s, I was too young to kind of go through and take advantage of any of these .com boom, but when I first saw about Bitcoin and all the smart contracts, or the possibility that it could take a place, like this is deeply, it's like to be in, because this is global possibilities and you can take advantage and this will be a multi-decade boom. It's like everything that you just said is kind of there. And it's interesting because it kind of enables like one global market, as you say it, like, it's kind of weird how markets are structured, where everything's very local. It's very not efficient because I mean, you're based in the US, so it's fine. You get access to capital easily, but that's like how many, 300 million people in the world.
That's like 7 Billion people in the world with like no access to capital. You have all these farmers and all, they have no access and suddenly with the blockchain, you can kind of make it efficient market and anybody who wants to have an asset class or asset portfolio of like, whatever that you want and you can kind of get it. And I think that, you also mentioned that financial assets, like a lot of these assets that [we hold the] balance sheet, like, there's no liquidity on these things and it's very hard to assign a value to it. Like once you have this thing, you can liquid, you can fractionalize, you can put it as a collateral or like CREAM, Aave and Compound and sort of showing what we can do when all these assets are digital and you can kind of like put it as collateral and draw a loan and all? So I think it's interesting. How it's going to pan out? What infrastructure, how it will run? We don't know yet, but I think that future, I think, is very near. And it will come by us very soon.
Emin Gün Sirer [00:34:41]:
Yeah, exactly. Exactly. I'm 1000%. We're on the same page on that one. Yeah, exactly.
Bobby Ong [00:34:47]:
I've got an interesting question for you, right? I mean, you're involved in so many projects. I've read your writing on your blog. You are a professor at Cornell, doing Avalanche. You also did bloXroute, which we haven't even, got into it, like, which is like a Layer 0 scalability solution. How do you find the time to manage all these commitments and still stay up to date with the fast moving world of crypto?
Emin Gün Sirer [00:35:07]:
I don't sleep much. It's kind of funny, but so yeah, no, that's a good question. No, these days my focus is entirely on Avalanche. Prior to Avalanche, I worked on a lot of things. I think there were a lot of newcomers to the crypto. They might not know what I did, but I was in the space prior to Satoshi. Six years before Satoshi, I was minting coins through proof of work. But Satoshi of course improved on what I did. He had a brilliant insight that I did not have. I built a system called Karma built in 2002, published in 2003. So that's six years before Satoshi. And after Satoshi, I worked on a whole lot of things, including Layer 2s. I was involved in the DAO hack of Ethereum, I called it before it happened. You know, there were a bunch of things I did. I played a fairly you know, it sincerely fascinates me. So I ended up being in the middle of a lot of excitement at the time. And these days I'm focusing purely on Avalanche and building the Avalanche ecosystem. And it's a great ride. It's so fun.
Bobby Ong [00:36:02]:
What's kind of the route map and the plans for Avalanche this year, I suppose? The shot term improvement here.
Emin Gün Sirer [00:36:08]:
Yeah. Yeah. Well, I can share with you the parts that are public. There's a lot happening. So at the moment, we're going through a set of improvements to Avalanche called Apricot, and we're about halfway done with it. When Apricot is done, we're going to have a fee structure for Avalanche that is much more dynamic. And potentially very, very, very low, much lower than it's been. So in the first months of the system, we wanted to set the fees at the static level. Just to see how the network would shake out. And now we need to take them to mainly to make them dynamic. and then during that process, we also are adding new features that allow us to change some of the parameters of the system sound, economic parameters, the staking rates and the rewards rates and so forth. So Apricot is coming. It's going to unlock a lot of exciting features for us. That's on the platform level. We are uh, working with an IM. I can only speak for myself, right. There are many other people doing lots of fun things on Avalanche. We're working with some groups building DEXs, exciting DEXs on top. DEXs of the kind that you couldn't build on other chains.
And that's going to be, I think, revolutionary. We're working with some enterprises that need identity solutions and compliance solutions to bring uh, compliance, to make compliance possible in a decentralized fashion on blockchains. Let's see. What else is happening this year? There are many new asset classes coming out. One of them is ILOs So this might not resonate with people outside the US, but in the US, there's a real problem with the justice system. Sometimes what happens is you get involved in the lawsuit and you need money or else the other side spends more than you and you will, of course, have to forfeit. You just have to say, "Well, look, you're racking up so much. So many charges that I cannot adequately defend myself." ILOs are a different, interesting asset class that allows people to raise money using blockchains for a lawsuit, for litigation. This litigation finance area is really big in the US and it's growing. And so normal people can participate in this. And if, even if you're a non-American, if there's a lawsuit in the US, where you think one side is right, and the other side is wrong. And that side that you're on, you want to show support for it. You want to financially back those people. Well, you can, with an ILO. And these ILOs will hopefully allow little guy to be able to defend themselves effectively in court. I'm really excited. Those are happening very, very soon in the next few weeks or maybe in the next few months. And I'm, I'm so excited. It's the new asset class that we opened up.
Bobby Ong [00:38:45]:
I thought I heard you wrongly, but you actually say Initial Litigation Offering. So it's essentially if like a patent troll were to come to us or to come somebody, you, as a small timer can kind of launch an ILO token and then sue the patent troll and if you win, then the rewards are shared, I don't know, 70/30 with the crowdfunders and the company or something [inaudible].
Emin Gün Sirer [00:39:05]:
That's exactly the idea. That's exactly the idea. And vice versa from an investor point of view, suppose you have bunch of money sitting on the side, and there is clearly for example, a lawsuit where one side has been wronged and they are fighting somebody with deep pockets. Well, then you can put your money to work in that litigation. And if you win, then the winning some portion of the winnings come to you. And that's a pretty nice situation to be in. It's a very good investment potentially. And I mean, you're doing what might resonate with you ethically. And there is some financial benefit to be had, and it's good for the participant. It's good for justice as well.
Bobby Ong [00:39:42]:
It's interesting how you have sort of crowd funded a lawsuit, I mean, litigation campaign. I mean, I guess there's a lot of class action lawsuits happening in the US whether you like it or not. Previously, only those with pockets or those who have access to rich people can kind of fund this lawsuits, or class action lawsuits but now you can kind of have a, kind of Indiegogo or Kickstarter, but they have like investors all over the world and then, investing. So you normally you have like the money, you have a million dollars or 2 million or $10 million in legal fund. But you also have a bag by 10 million people, I suppose, on the blockchain.
Emin Gün Sirer [00:40:13]:
Right, exactly. Right. And it's a great way to do this. The counterparty risk is fairly small because you know, you're dealing with established professionals along well-established guidelines. So yeah, we were the very first people to suggest this and we're about to be the first people to introduce first instance of an ILO. I'm really excited. It's going to be so much fun.
Bobby Ong [00:40:34]:
And just to be devil's advocate, so what's stopping and why do you think this ILO on a blockchain is better than someone launching an Indiegogo or Kickstarter on a centralized platform? I suppose you can't really do that profit sharing thing on Kickstarter but I'm just curious to hear your thoughts on why do you think it's better?
Emin Gün Sirer [00:40:49]:
Yeah, that's a good question. Why hasn't Indiegogo gone into this space? I don't know. They probably didn't think of it. They weren't creative enough. Oh, you could always go through a centralized platform and a centralized platforms might be okay. So here's the deal. There are some established companies and litigation finance. Today, litigation financing happens through, essentially mostly through these two companies in the US. They are incredibly profitable. And so I think most other people haven't caught onto the game. The legal infrastructure isn't there. We've spent a lot of time and effort and of course, money getting, you know, making sure that we are compliant as we come up with the ILO assets. And so the other thing of course is Indiegogo, et cetera, Kickstarter, they are okay. But their reach, their tradeability is nowhere near a blockchain asset. So blockchain assets are liquid from day one. Kickstarter's assets, Indiegogo is not. You buy in, you're stuck, you're locked in. But if this is on a blockchain, then you could start trading it on Binance. You know, whenever its allowable to be traded globally. And that's a fantastic situation. So you can get out of your position. It turns out that the judge has ruled against you, well, then you get out of your position and sell it to somebody who wants to hold it.
Bobby Ong [00:42:03]:
I like that part. The part you have a liquid asset and you can kind of see the prize of the assets. It's kind of like the FTX trading, one of these like Coinbase pre IPO shares and all. Essentially these tokens, like you can kind of have a real time view of the token price as the court proceeding goes on. So one day it might go up, because of some evidence then it goes down. And if you don't want to bet on it, you just exit completely. Yeah. But Indiegogo and Kickstarter, you can't get it out. One last question before we end this thing. Right. So. Avalanche has this AVAX token, what's the use-case of AVAX token? Is it mainly to pay the gas fees on Avalanche or is there something else beyond that?
Emin Gün Sirer [00:42:39]:
Oh, there's quite a few. So it serves as the core asset for carrying out transactions on the P-,X-, and C-Chain. . It is used to create new assets. That's the main use case, and it's used to create new subnets. It's used to introduce new validators, new block producers into the network. So all of those consumer box. And as I mentioned before, AVAX or Avalanche is the chain, the third biggest chain in terms of fees consumed. There was a lot of organic demand for it. This whole system is constructed in such a way as to consume AVAX. Unlike other chains, the gas paid in Avalanche is not given to a miner. In fact, Avalanche, the way the protocol works, it doesn't have a concept of miners. So the first number one chain is Ethereum. It's just all miners. Yeah. Number two chain is Bitcoin, all miners. In Avalanche, it's just everybody, who's a block producer, is a regular user. I'm a block producer. There are many others like me, hundreds of people like me who are part of the system at the moment. So the fees that are paid for the AVAX that is paid for these operations is burned. It just disappears from the system. So there's deflationary pressure on the system as AVAX is burned and we're burning all this stuff up.
So it's a really good situation to be in. Like, we really thought it through and maybe just to roll it back and tie it back to the very first question that you asked, which is what makes AVAX different? And I think, you know, I gave you a lot of the technical reasons and I've mentioned some business ideas and the business division is different, where we're going is different, but at the very, very core of it all, I think the biggest differentiator is that it's a different kind of, different set of people behind this. We are not crypto people. We are not people with one idea, the wrapping up that idea around the system and selling tokens and so forth. We are a bunch of professionals, many of us with an academic background, many of us with a very strong business background. And in fact, all of us with a strong commitment to science. And a pretty nice streak of creativity, I would say, not me necessarily, but the people who work for me, who are building, who are bringing science to blockchain. That's really the differentiator. Whereas everybody else is doing the minimum thing you can do to have a play, we are actually just, we're deeply embedded in this space. We're here to stay. And we're doing whatever we can to advance the state of blockchains with the latest, greatest ideas. So that's why you see Avalanche being able to do things that you don't see on other chains.
Bobby Ong [00:45:06]:
Cool. Yeah. Thank you very much for taking the time to explain Avalanche. It feels like I'm in a university lecture, and you gave a fantastic lecture to me on, on Avalanche today. I mean, just kind of made it a lot easier to understand things and all. So thank you very much for taking the time to, explain Avalanche. Yeah, really appreciate it.
Emin Gün Sirer [00:45:28]:
Thank you so much, Bobby for all the time and for the insightful questions. Very nice to talk to you as well as the CoinGecko audience. Thanks.
Bobby Ong [00:45:35]:
All right. That wraps up the show. Thank you for listening to the CoinGecko podcast with Bobby. If you like our show and want to know more, check out podcast.coingecko.com or please leave us a review on iTunes. If you have any feedback, do drop us an email at email@example.com. Join us for more next week. See ya.
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