The Wolf Of All Streets - Replacing the Global Financial System | Emin Gun Sirer, CEO of Ava Labs

Episode Date: August 31, 2021

Emin Gün Sirer is the CEO of Ava Labs, a company that is fixing our fragmented financial system. Emin’s vision is to unlock trillions of illiquid assets that are trapped in broken financial systems and to improve the lives of smaller investors who have never been given a fair chance. According to Emin, financial freedom isn’t around the corner - it is here. -- Sorare: Where fantasy meets reality. Collect, trade and earn weekly prizes on https://thewolfofallstreets.link/sorare. #OwnYourGame -- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members

This episode is brought to you by SoRare. Stay tuned for more information on them later in the episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of Wall Street's podcast, where twice a week I talk to your favorite personalities from the worlds of Bitcoin, finance, trading, art, music, sports, and politics, basically anyone with a good story to tell. Traditional finance is fragmented. Trillions of dollars are caught up in complicated systems that fail to easily interact with one

another. Blockchain and crypto help solve this, and Ava Labs is at the forefront of this effort. Today's guest is their CEO, Emin Gonser. Ava's objective is to open up financial services, products, and opportunities to everyone in the world. Now, Ava Labs may sound familiar to you because the president of the company, John Woo, has appeared on the show twice and is a fan and personal favorite. I'm excited to speak with Emin, who is known by the community for his ability to explain complicated concepts and words that everyone can easily understand. It's my hope today that he can shed some light on what's new with Avalanche and the DeFi space. Emin Gunsir, thank you so much for coming on today. Thank you so much for having me, Scott. So listen, I see that you have a very long history at Cornell University.

I'm a Penn graduate, so we won't have to get in any arguments or anything. But as a professor there, I know you're at Cornell. And if I remember correctly, John Wu also went to Cornell. Did you guys happen to meet there? What's the story of how you two came together? Yeah, we met there many years ago.

So I've been at Cornell for 20 years and we did not overlap when John was at Cornell. He did his undergraduate there, I believe. But we met when he was a trustee of the Dyson School, of the business school. And then I was a professor interested in blockchains. He was looking to talk to faculty interested in the topic. And of course, we met. And then we clicked immediately. We kept in touch over multiple years. And then once I got Ava Labs going and I found out what he was doing with his company,

we decided to join our paths. And we haven't looked back. It's funny. Cornell, obviously, is on Canandaigua, right? One of the finger lakes up in New York. And there was the huge news story that Bitcoin miners were boiling Seneca Lake, the next door lake. Three weeks ago, I was floating in that lake and it was still brisk and cold. But what do you make of the nonsensical news cycle surrounding Bitcoin? Well, what's there to make of it? Bitcoin is kind of like everybody's first kiss, right?

You can never forget the moment you read the white paper. You can never forget the moment you figured out how this thing worked. And it's just amazing. So now let's be clear. There's a long history of peer-to-peer systems and peer-to-peer money that predated Bitcoin. But, and in fact, I had been part of that as well. I built a system six, seven years before Bitcoin called Karma. But nobody had the technical insight that Satoshi did.

And nobody had the societal vision that he did. And it was the very first time that I discovered, oh my God, we can have money at a global scale without a sovereign backing it, controlling it, and potentially interfering with it. So that was an amazing thing to me. As great as Bitcoin is, and as hard as I worked to talk to lawmakers, for example, to get their hands off of the regulation of cryptocurrencies. As hard as I worked to get the technical aspects of cryptocurrencies built up, I worked very hard to get academics interested in this topic. I worked very hard to get academics interested in formal verification, game theory, cryptocurrencies, blockchain science. And as hard

as I did all that to help the Bitcoin case, it remains the very first and oldest currency. It is the oldest technology. And we have figured out ways of doing things that Bitcoin does that are far better. Now, this will sound heretical to some people, but it's nevertheless true. Its time has gone on. The science has advanced. And things that Bitcoin can do, we now know how to do better. That doesn't mean Bitcoin is obsolete by no means. It doesn't mean that Bitcoin has no role to play. To the contrary, I think its role in the ecosystem is solid. That's not going anywhere. But I want everybody listening to this podcast to know that there are other things out there that are taking

the technology that Bitcoin built up and they're doing something different with it that Bitcoin is not doing. There's so much more to do in that space other than Bitcoin. Now, when it comes to the Seneca Lake situation, when it comes to mining and its impact on the environment, my personal values are very clear. I don't think we should be melting down the poles. I don't think we should be killing polar bear habitat. And if we're going to do this, you know, there's an argument that says, look, you know, this is the cost of getting a decentralized system.

And, you know, as high as the cost is, it's still better than TradFi. So, you know, maybe you should pay the cost. And, you know, there's some better than TradFi. So, you know, maybe you should pay the cost. And, you know, there's some solid reasoning behind that. But the bottom line is we know how to achieve that level of decentralization and more using greener technologies. So at this point in time, you know, I think all of my energies are focused on the latest breakthroughs in the space that are scientifically backed, that are more decentralized, that open up and obviate, open up the systems and obviate mining. And I don't think we should be burning down, you know, anything. We shouldn't be burning coal for

sure. We certainly shouldn't be heating up the planet just to get a couple of dozen mining pools to build us a blockchain. We should be building systems that are open to everybody. Millions of people should participate. Through decentralization, our number is beyond, you know, beyond many hundreds, beyond thousands. So that's what we should be trying to achieve. So anyhow, that's sort of my vantage point. Seneca Lake is near and dear to my heart. So Cornell is on Lake Cayuga.

And just 45 minutes over, there's Lake Seneca, which is the one that got heated up. There are other lakes up north where people were actually upset as well because they had to pay more money for their power bills because all the power was going into mining. So these are all issues. But luckily, these are issues that I don't personally have to face.

I know how to do all of this better. So that's what I'm excited about. I got my lakes mixed up. Cayuga, not Canandaigua. Now I'm going to remember that, obviously. There's a lot of lakes. Canandaigua is the one on the other side. On the other side. Absolutely. So interesting. You just gave a beautiful segue. Right. Obviously, Bitcoin was first. I think that we all agree that it's solidified its case for digital gold, a store of value. And I don't know why it's viewed as heretical to think that something else could perform well. Cryptocurrency is such a broad space. There's so much potential. It doesn't all have to be Bitcoin. So when did you see that? And what

are you building in response to that idea? So that's a great question. So I first realized this when I was working closely with Vitalik and Vlad on Ethereum's technical backing and the transition to ETH2 and consensus protocols for futuristic systems. And it takes a while for people to realize that this is not a winner takes all game. So the reason why this is kind of heretical is because there are maximalists out there. They think, oh, there's only going to be one chain. And all these things are, you know, they're not technically savvy enough to realize these things are doing and carrying out different tasks. Things that Bitcoin does are so different from the things that Ethereum does.

Totally different value proposition. Look at DeFi. You can't do DeFi on top of Bitcoin right now. Look at NFTs. You can't really issue them on top of Bitcoin. It's, yeah, you could maybe retrofit and put other chains on top of Bitcoin, et cetera, et cetera. It doesn't really help Bitcoin underneath,

nor does it help the community. And in fact, the Bitcoin developers have been very clear that they don't want those things layered on top, cluttering up their chain, so to speak. It was many years ago, maybe four or five years ago, that I realized, hey, we're going to move to a multi-chain world. It's going to be a system of systems where certain chains are specialized, and either for technical purposes or because of the social environment

surrounding them, they will end up having cornered the market on certain areas. And that's exactly where I think we're going to be. And that's when it hit me that, in fact, around that time, I was proselytizing, going to my friends and saying, hey, guys, you need to work on blockchains. Academics, everybody who's an expert in finance, in computer science, in economics, needs to take a close look at blockchains. And when I say this, everybody would ask me the same question. And that question is, well, what's the killer app for blockchains? And this is exactly the same. I lived through the late 90s. It's exactly the same question as my friends used to ask me when

I was a graduate student. And I would go around and say, guys, the internet's going to be really big. And they'd be like, oh, yeah, what's the killer app for the internet? Well, I'll tell you the killer app for the internet. The killer app is the very first app. Messaging was a killer app. The internet by now has many killer apps. But messaging and ease of communication is the biggest killer app there was for the internet. For blockchains, the killer app isn't just competing with the US dollar. It isn't replacing euros. It is not just programming a giant world computer out there, Ethereum style.

It is creating and transferring value. That's where the killer app is. You know, it sounds kind of trite. Maybe it sounds kind of obvious when I say it now. But when I realized this, it was a bunch of years ago, as I mentioned, it wasn't really shared at all. There were the maxis telling you that, no, Bitcoin is it. We don't need anything else other than Bitcoin. Well, that's true if your only goal in life is to replace the dollars in your pocket, but there's much more to do. And then of course, the Ethereum folks at the time were trying to go for this programmable, it wasn't called programmable money. It was a computer. It was a world computer. And that's a very different vision. So our vision with Avalanche is different. It's to digitize all assets.

That's our byline. And I don't know of anybody else trying to do that, actually. I don't know of anybody else who has the technical wherewithal to actually support the diversity of assets out there and the diversity of legal jurisdictions that you need to operate in, the compliance you need to deal with in order to be able to actually digitize and allow people to transfer these assets worldwide. So I'm really excited about our vision. I think it's unique, even though we're fairly late into this revolution. It's been about a decade since Bitcoin. We really haven't had, we've had a gazillion copycats. Everybody just copies Satoshi's initial ideas, and they just try to compete in the same stupid game.

They're trying to outdo Bitcoin at being Bitcoin. Nobody will be able to do that. Bitcoin has cornered that market, just like you said. And when you can't just be an Ethereum copycat, that too is a dead end game. Ethereum is the king of Ethereum like things. It's like there is going to be no Ethereum killer that's going to be a copy of Ethereum. Right. It's just that's a silly thing to try to do. So what we're doing is unique and distinct and different.

It's different technically. It's different vision-wise. We're doing something far greater than Ethereum and Bitcoin combined. We're allowing programmability at the network level. We're allowing multiple virtual machines. Like there's a whole bunch of technical things we do that make us entirely different from what others are trying to do. I mean, it seems so ambitious to say tokenize everything, right?

But when you really dig in and think about it, it's actually a much simpler and superior way to approach transactions, especially transaction of value, as you mentioned. But you got to start somewhere, right? So what are the first things that you see becoming tokenized in this world that sort of starts that revolution where the mainstream begins to see that, wow, this is a better way? Sure. The very first things are, of course, crypto-oriented.

So you start at this game by going and doing all those things that we know are big successes. So what are those things? Well, the DeFi space is, I think, a cornerstone of this. So DeFi is powered by a couple of things. It's powered by a highly scalable infrastructure. This is one thing that you must have. The second thing that you need are stable coins so that people can actually have some way of transitioning in and holding value in a denomination that makes sense in the external world. Another thing that you need are oracles. And combining all these, you need a programmable infrastructure that allows people to have smart contracts. We were, as far as I know, the first

decentralized platform that supported the entirety of the Ethereum virtual machine. One could launch Avalanche and move all of the smart contracts from Ethereum and move assets from Ethereum into Avalanche. And that is a huge, big thing. And once you're in Avalanche, the transaction fees are much lower and the transactions are much, much, much faster. So the time to complete a transaction on Avalanche is much less than a second. So in the blink of an eye, you can do things that take many, many minutes to finalize on Ethereum. So the cornerstones of this start with crypto oriented assets like stable coins, like smart contracts, like all of the DeFi infrastructure. And then they branch out. There are lots of exciting other things to do on top. Things like NFTs are something that we're very big on at Avalanche.

So we've been we've done a partnership with with Topps and our latest announcement, one of many to come, involves our partnership around Bundesliga, the German Soccer League. And so we're going to be issuing NFTs for the German Soccer League. If you know anything about Germans and soccer, you know how popular that's projected to be. So I'm really excited about the NFT space. And I see that as just the first step. There are many other announcements in that space. But beyond NFTs as we know them now, there are also bigger games to play with NFT-like unique tokens. So in general, they can be used as credentials. And so once you start using crypto credentials on the blockchain for interacting with the real world, then suddenly a whole new universe appears to you.

So there's a whole path ahead of us, a big, big vision that encompasses everything crypto and then starts branching out into things that actually click with mainstream people. And NFTs, we're just getting a glimpse of what's possible. I think normal people, they have difficulty understanding what Aave is. It's a complicated thing, but they understand an NFT. And that's a great gateway drug, if you will, for them to come into this brand new world where assets are traded globally,

easily worldwide and very, very cheaply. When you talk about NFTs being a gateway drug, I would argue that the current use case of NFTs is the gateway into all that NFTs can actually do, right? Because everybody understands collectibles, they understand scarcity, they understand these things, but that is not nearly the most exciting use cases of NFTs, right? I mean, anything that can be transferred from one person to another that currently has a third party in between and needs to be proven authentic can be an NFT. Absolutely. Every single handbag you buy, every single pair of shoes must come with an NFT. Absolutely. Every single key you have. What's a key? It's a metal authenticator. It's archaic. It's from 100 years ago. I don't know why I carry as many as I do. All of those things need to fold into a form that we understand and can be carried around electronically. And should that apply to the deed on your car, your mortgage? Absolutely. All your IDs. What the heck are those? Why should anybody do?

You know, they do all sorts of hooky things at bars in the US, as you know, to see if your ID is authentic. Who's ever heard of that? That's crazy stuff. What you really need is electronic identification that's trustworthy. And that's where blockchains come in. And what would that look like? Would it be a QR code on your phone that shows who you are and proves your identity? Would it be just basically a digital copy of a license that's a one-of-one? How does that actually play out in the real world? Oh, OK. So that's a great question. One on which I've thought quite a bit because there are so many cool tricks you can do with crypto.

But the right way to do this is not the way we do it, because at the moment for me to purchase anything, I end up having to reveal my credential to the other side. So, you know, a website will ask me for my name, last name, address, etc, etc. At the end of which I've left behind all this electronic detritus. And then they use that to profile me and collect information about me. What you can do with electronic credentials is you couple them with zero knowledge proofs, so that you have some predicate you want me to fulfill and i have some credentials and for example you want me over to be over some some age and the old school way of doing things would be that i show you the credential and you know like an idiot i say hey this is my name and address and this is where i live and if

you want to stalk me or whatever, this is how you do it, which is a completely unacceptable way, given what we know now. The right way to do this is I produce for you a zero knowledge proof that says, Scott, you know, you want to be satisfied that I am over some age. Well, here is how. I am over that age, and yet you don't know anything about me. You don't know my date of birth. You don't know where I live. You don't know, you know, whatever I reveal to you is something that I choose to reveal to you. And that's as things ought to be. We have the tooling for this. We've had it for a while now, but we did not have the infrastructure to build this at large scale. And this is one of the many things we're building at Avalabs on top of the Avalanche system. So effectively, for zero knowledge proof, you pass on something that is a confirmation of the validity of all of the information that would be on your driver's license without showing the actual driver's license. Exactly right. You have a predicate you want me to satisfy. And I say, yes, I am the kind of person you want me to be, but I will not reveal to you the exact information.

I won't reveal to you my birth date, but yet I will prove to you that I'm over some age limit, for example. Or you want me to be a resident of Tompkins County? I will prove to you that I live in Tompkins County without revealing my address to you. These are the kinds of things that one can do with zero knowledge proofs. It's, I mean, it's such a, it seems so simple, but it's such a massive innovation. If you can prove all of the information that people need from you without sharing that information, it seems so obvious. Yeah. The time has come. We've had like, we've had tooling like this. Academics have built the underlying infrastructure for this. And I don't know why, for many years as an academic, I watched the practitioners in the crypto space talk about

these things without making them happen. And I'm really excited now to be working on a very dynamic, very fast moving system that is just sort of plowing through the space and checking off these boxes. I'm really excited about this thing to come. Yeah, it really is so exciting. So I'm curious, you talked about earlier the fact that certainly in your early days that you pushed very hard for sensible regulation, and you talked to politicians and you talked to everybody. And the big story, obviously, recently has been the infrastructure bill, how it almost had a bit of consensus in the Senate and then was passed without it. We'll move on to the House. We don't need to talk specifically about what happened with

that bill. I'm curious where you think the state of regulation is, if you think that there's a threat of heavy-handed regulation, or do you think that they will come up with something more sensible? And do you really think that this is something that could debilitate the crypto industry in the United States? So let's see. I've often said, I get this question a lot. I've gotten it a lot over the years because as you know, once a year we get the China regulation scare, once a year, once every two years, Russia and India, right? Those are the three that sort of circulate. And every time I say the same thing, the adoption dance is going to involve regulatory steps that sometimes are forwards and sometimes are backwards. But the adoption curve will always be up and to the right. Why? Because this is unstoppable technology. So those people who tried to regulate in a heavy-handed fashion have always been shown wrong. This is what I told U.S. regulators as well. This is what I told U.S.

politicians as well. And if you look historically, Russia, China, India all did things and then undid those very same things because they look silly because in the trenches on the ground, when you look at what's happening, the people can just simply bypass these kinds of things. There's so many easy ways to get around things. But what can happen, and the reason why we do have to fight bad bills, is that innovation can leave our borders. People who cannot comply with heavy-handed regulation because it's impossible to comply with will just be like, okay, well, then we will have to pack up and relocate. And that would be a disservice to the country. It would be a disservice to the U.S. if such a

law were to pass in the U.S. I'm confident that American lawmakers are very sensible at the end of the day. They're practical and they will not do overtly unworkable. They will not enact overtly unworkable legislation. So, and if they do, there are ways within our system of correcting it. So I'm hopeful that we will arrive at a reasonable solution, but that doesn't absolve the community. We have to fight it. We all have to spend some of our time away from our mainline activities to fight this.

I do, My company does. And I hope that everybody will join me in pushing back against lawmakers who every now and then they get antsy. You know, they have reasonable demands. Nobody wants these systems used for tax evasion. That's not good. Nobody wants people to do whatever it is, the societally unwanted things using blockchains. And if they understand the technology and the use cases, they will know that these unwanted things, et cetera, are actually a very small percentage of what actually takes place.

So it's actually not as dire a problem as one would imagine. And then of course, it's almost always possible to meet the lawmakers' demands using sensible legislation, as opposed to something unworkable that would just cause people to000 page bill. This was just another way to raise taxes. And some aid or assistant probably wrote this quick language. And then obviously the cryptocurrency community were the ones who noticed how potentially damaging it were. But my feeling was not that they slid it in there so that they could eventually crack down on everyone. I think it was just sort of a miswritten line. Yeah, exactly. I think it's always best to assume that they are, they don't know the domain, but they have good intentions that are aligned with everybody. And, you know, all the normal

people that you and I, you know, that people that you would invite to your, your, your Christmas dinner, you know, everybody is aligned on what we want out of our society. And so, yeah, they just don't know the area and we just need to guide them better. It was Bitcoin first, and then people got threatened by Ethereum, right? And then all of a sudden we started hearing about the Ethereum killers, right? The threats to Ethereum and all these new chains. As you've mentioned, I think personally that we will live in a multi-chain world, that chains will have their ideal use case, they'll be interoperable, and that will probably be it. But that said, do we have too many chains? We have too many coins and too many systems. We have too little innovation. So we have a lot of chains that talk a big game and then don't deliver at all.

And so all of these are very, very problematic. I think this will lead to, I mean, this is the kind of thing that invites regulation, right? Because people are actively misled by what's going on behind the scenes. So, and also from a technology point of view, you know, there are 8,000 coins. You know, how much innovation is there? It's just maybe a handful of these systems have actually advanced the science and engineering of blockchains. So, yeah, no, absolutely.

I agree with the assessment that a lot of these coins are essentially zero value coins. So you can make money off of them because of momentum investing. If you think everybody's going to go into a coin, you jump ahead of the curve, you get out, and then any given individual can maybe do a couple of these hops. But after a while, they'll get wiped out. And that game is also very hard to play, and efforts that are going to be around in the long term. And then I don't actively manage my investments. I just don't, you know, I have a job to do. I can't be doing that. So, you know, so my style is just look for long-term value, look for innovation. You're absolutely right.

There's just way too little innovation. I know what Avalanche stands for, and I know what we brought to the space. I know a couple of my competitors that genuinely worked hard to bring novelty into the space, novel new ideas into the space. And then there's, of course, as I said, there's 8,000 coins. So there's a lot of copycats, people who just take other people's systems, tweak a few parameters and issue coins. So there will obviously be a culling then, right? I mean, at some point, like you said, there'll be a handful that rise to the top and probably dominate the market. Maybe we see some of these other coins remain tradable, but I don't think that they push the ball forward sort of as

you spoke. What does it take for us to see that internet boom and bust of the late 90s in the crypto space where we really see 90% of these projects actually go to zero or disappear. So that's the funny thing, Scott. These projects, you know, no project ever really dies. It's so hard to kill a blockchain, right? They wax and wane. And a very interesting exercise that I suggest everybody does is go to the Internet Archive, look up coin market cap from, say, five years ago. It's a totally, totally different game, right? It's just a whole bunch of names you won't recognize. And then try to just go through the exercise of how could I have seen back then that these coins would drop and some of them would just, you know, percolate up? Bitcoin's at the top.

Okay, that's great. Why? Because obviously the first one that it's got the biggest liquidity, etc. But, you know, how would you have seen that Ethereum would slowly go up and inch its way into Ripple, et cetera. And I suspect that most people, once they sort of calm down and stop trying to do momentum investment and they look for long-term value, they will realize that the coins that percolate up have three things going for them. They have some technological advance that's fundamentally different. They didn't just take a ready-made solution, tweak a few parameters and just enter with it. You know, Litecoin, it's still around.

It was a test case, a test net for Bitcoin. It's just the Bitcoin code. There's no difference between those two things. So, you know, that's the kind of thing that I don't think would have gone up. And let's see. So one, number one, technological innovation. Number two, a vision, a use case that's distinct and different from others you can only have

so many you know so many coins dedicated to getting rid of the dollar doing away with the state and having one big giant world community using that coin okay so bitcoin's doing that right if you believe in that ultra libertarian da da da go that way that's that's your coin and uh you know maybe it'll go up from here. Hopefully it will and et cetera, et cetera. The space needs to be, I think, I think it's pretty clear that there are lots and lots of coins out there that are just copycats of each other.

They just don't add all that much. And of course, we recently had the explosion of layer twos. There are a lot of copycats that simply say, hey, I'm going to be just like this coin, but I add something on top or I run one of their nodes. You know, here's a big system like Ethereum. It has like 30,000 nodes. I run just one and I run things off the chain and I put them back onto the chain every now and then.

OK, I mean, that's an idea. That's a fine idea. That kind of a system, you know, you're not really adding anything to what Ethereum used to do. You're taking some load off maybe, but you're not really adding any new use cases into that ecosystem. So I think in the long, long term, it's the people who brought in new assets into the space. It's the people who brought in fundamentally different approaches, fundamentally different smart contracts, fundamentally different other kinds of people

into the space that won this game. I'm really happy about where we are with Avalanche because we bring in a different sensibility. We bring in the finance crowd. We bring in a very different approach. We're science-backed. We're backed by the latest academic bring in a very different approach. We're science backed. We're backed by the latest academic developments in a way that no other chain can even come close. So anyhow, I'm really excited about where we are. And I can't wait to see how the space shakes out in a few years. Do you love sports collectibles or fantasy sports as much as I do? SoRare is blending this together to create an entirely new gaming experience powered by its community. SoRare cards are officially licensed NFTs for over 160 clubs, including Real Madrid,

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is if you look back to really 2020, I guess, when every coin in existence that had even been in existence for two or three years somehow became a DeFi coin. Yeah. Everything became a DeFi platform one way or another. DeFi became the catchphrase and everybody scrambled to repurpose themselves into DeFi in some manner. Exactly that. Exactly that. I think 2020, I don't know how many people realize this, but the bull market got kicked off. The defining event that kicked off the bull market was the Avalanche crowd sale we did our public sale on january on um on july 15 of 2020 and um it uh everybody told us that we would be we would be

incredibly lucky to have you know eight million dollars we raised uh more than 40 in uh in the space of a few hours and um and then yeah exactly that and then immediately or shortly thereafter once the bull market got going everybody just became copycats of each other. There's too little innovation in this, in this game. And, and, you know, the easy thing is take someone else's code and just run a single node for them and call yourself a layer two. And we're going to see a lot of sort of hyperbolic visions of what DeFi can be, right? Replacing all global banks. Banks cease to exist. DeFi replaces it. All those sort of things. A, maybe you feel that way, so you could tell me. But B, if you don't feel that way, at its best, if DeFi really becomes a global competitor or a system, how do you see it interacting with legacy systems? Do you see it as a replacement? Do you see it as a parallel rail for that large percentage that are unbanked or underbanked? Where does it fit? Okay, let's see. In general, I find the unbanked

narrative in crypto to be highly duplicitous. So typically, the crypto space overall serves the first world. And that's really the only crowd it's going after. And the Ethiopian farmer narrative, it's not something that I find. It's so hard to penetrate into the unbanked efforts that I don't think that's where you're going to see the breakout systems. It's very, very early. And let's see. So what I suspect will happen in the future with us is that we're currently in the infrastructure building and capital accumulation stage of crypto. We have some of the bare bones systems available, and these systems need to be funded well enough to be able to support the current user base.

And they have to be technically advancing enough to support the capacity required to uphold that user base. We saw just very recently that the existing systems that we have are just not up to this task. They cannot handle the amount of the scale that moving TradFi, more TradFi, more of the normie operations onto their current platforms. So the game moving forward is going to be one primarily of scale. We're going to see a lot of different approaches to how to obtain scale and we're going to see clashes of some really simple ideas and proofs of their shortcomings. I mentioned, I alluded to one of these before. The easiest way to scale is you don't scale at all. You allow somebody else to do something on top of you and you move, you settle back onto the main chain. This I view as throwing in the towel. The systems who rely on layer two

have typically not scaled at all. Look at what's happening with Bitcoin and the Lightning Network. Yeah, sure. Someday soon, maybe the Lightning Network will be a big thing, but it's always 18 months away. And it has been so for the whole time that the Lightning Network has been around. I was there when it was first announced. We are still as far from it as we were on the first day. So the same is going to be true for Ethereum Layer 2 solutions. They're very, very far away. They're slow. And they have all sorts of externalities of negative effects that people will slowly discover. Whoever is running your Layer 2 is in a position to collect a lot of extractable running your layer two is in a position to collect a lot of extractable value. And they're in a position to potentially censor transactions,

reorder them, and so forth, to potentially sit on the funds. And so these are really, and take them for ransom. They might not be able to usurp them, but they can take them for ransom. So we're going to discover this very slowly, but for mainstream adoption, as I mentioned, the first fight will be scale. So we're going to see a big fight between technologies that brings scale to the table. We're going to see another fight of cheap replicas. There'll be a lot of people coming up with coins and systems

that look like the real thing, but aren't. They're centralized. So I'm not going to name names, but- Pancake swap next to Uniswap or Binance Smart Chain versus Ethereum. I think everyone understands that. I don't even think that that's a negative. I think you're making the choice between something decentralized and more centralized, but continue. I know you didn't want to say it so i'll do it right well you said it it's all good so uh so yes i i think that fight is going to be a harder one i think for that um for us to win that one i think the decentralized platforms have to uh have to band together and educate the user community that these centralized solutions are counter to the entirety of the value proposition in crypto. So that's going to

be interesting. And we're going to start seeing normal financial instruments move their way slowly into blockchain space. And the amount of assets out there is immense. There are $72 trillion worth of financial instruments out there, and they're just not traded in electronic form. They're traded very sparsely. They're not accessible. And there are many, many, many financial transactions I could imagine wanting to partake in that I just can't because of jurisdictional limits, because they're off, like I don't have access to those systems and so on. So that's going to change. And it's going to be a fantastic world as that changes, as these rails become scalable, as assets start moving in, and as people around the world start seeing the value of decentralized

platforms. So we don't replace global systems. No. It becomes a better option. Oh, yeah. So let me say a few words about that. I think there are people out there who thought that we would build systems. And at some point, let's say Wall Street would say, oh, what a nice thing you've got.

Let me take all of my stock certificates and put them on your thing. I don't think that's going to happen. And I think the way this is going to work out is as follows. Wall Street is Wall Street. They've got whatever they've got. And if you're familiar with those code bases, they are many, many, many, many layers thick. They are very fragile, very complicated, and very expensive to maintain. And that makes them impenetrable. It's not going to be like overnight where people just patch up. Instead, on the side and separately from this, we will see a flourishing ecosystem of new companies, new projects, new efforts coming to be and issuing their coins to fund themselves. Those coins will be the stock certificates of tomorrow.

So there will suddenly be a different ecosystem here that grows bigger and bigger and bigger. And at some point, this thing on the side for like all these like legacy companies will be will be too small to matter. And every every new project will have will have shifted over to this new base. That's, I think, the right vision. And so this might not be so obvious in the US. But if you look around the globe, the this is this is exactly what's happening in many countries. The crypto volumes are exceeding their national stock market volumes. And that's just the first sign of this. So we're going to start seeing all these companies issue their coins, issue not stock certificates, but coins and get traded globally.

And finally, one last thing, maybe I should mention this, the pandemic and the economic devastation abroad. It has created liquidity crises around the world. We don't see this as much in the US, but if you're in any kind of a smaller country, everybody needs access to capital. And getting that capital to flow is going to be very, very, very difficult. So crypto kills all boundaries. It makes everything accessible. It increases the reach of any company, any effort, any business. So I'm really excited about what's going to happen as a result of, as a result, when people realize this, that if you're a small, you're in any kind of a company, you know, you're

whatever, Czech Republic or whatever else, instead of trying to go on the national stock market, you can just go on a blockchain and your reach is far wider. That makes perfect sense. So you said that number one in that process is scale, right? A Bitcoin maximalist would probably argue that with scale or speed, you sacrifice the security of the network, things like that. So how do you scale to make much faster transactions on this bigger network and still have a secure network? That's an interesting question. So Bitcoin maxis say a lot of things, but if you look into their backgrounds, you will find that I know of maybe just maybe one or two Bitcoin maxis that I would consider technically competent and in command of the technology.

So if if anybody says that scale necessarily reduces security, they don't know what they're talking about. I've heard maxis say that scaling up reduces decentralization. That's patently false. So let's talk a little bit about proof of work coins. A proof of work coin like Bitcoin or Ethereum, it's mined by a small number of mining pools. These mining pools are groups of people who've come together, they collaborate, they're kind of like a company. And if you control the mining pool, then you control it all. So Bitcoin's blockchain is produced by just a few dozen mining pools. That's the amount of decentralization they have over there. If you use a different

protocol, one that doesn't require mining, one that doesn't require specialized mining rigs, one that doesn't require you to have access to huge amounts of cheap electricity, then suddenly the number of participants is much larger. And if you have such a protocol, then you can suddenly have a system that has thousands, tens of thousands, maybe millions of participants around the globe. And you have true, real decentralization that's quantifiably orders of magnitude better than what we have with a first generation protocol like Bitcoin or Ethereum. So that's my short answer. Now, another thing they say, let me just kill this one off as well,

is they say something like, well, look, if you make your coin scale a lot, then your mom and pop operator will not be able to participate in it. And so therefore, you're going to need a bigger machine to participate, and that will make it out of the reach of normal people. And so there is merit, some merit to that argument, but it's broken as well. Your mom and pop cannot participate in any meaningful fashion to the Bitcoin system or to Ethereum's mining. So to participate in those things, you need to own mining rigs. Good luck buying the mining rigs. It's not easy to buy them.

It's not easy to set them up. Certainly, it's not easy to set up the power agreements with the local power companies. So that wasn't an option available to you in the first place. But what you can do is you can, and we've demonstrated this with Avalanche, you can build protocols that are so efficient using the latest technology that don't require one to own a data center's worth of equipment. So one can, for example, participate in Avalanche with a Raspberry Pi. My laptop, through which I'm talking to you right now, is quite capable of being a meaningful participant in the avalanche network. It has been a participant in the avalanche network before. So it's entirely within anybody's ability to join. And the systems that result are more decentralized than proof-of-work-based systems. And so the net effect on the environment is lower.

You end up having a green system, a sustainable system, and it works much faster than anything else. If you've ever seen an Avalanche transaction, it happens in the blink of an eye. You click and it's done. There's no waiting. It's not like, oh, I need to wait for six confirmations from six miners. No, it just happened for you. It's not like, oh, I need to wait for six confirmations from six miners.

No, it just happened for you. It's immutable. It's done. So I'm really proud of where the technology has come. It's very different from 10 years ago. Maxis are they typically tend to be people who, you know, learn something new, but are unable to keep up. And so they've discovered something and then they got stuck on that thing and they want to refuse to believe what their eyes are telling us, which is this technology has moved on. It's much bigger, better than what it used to be. And the vision is different too. I mean, you talked about sort of the experience of, you hinted at, I mean, when Ethereum was really being pushed, I mean, even with just NFTs, but certainly, you know, in the peak of the bull run, sort of April and May, the fees were insane. I mean, insane, unsustainable, like you said, sort of very first world, first world blockchain, because if you could afford to use it, you had to be wealthy. Does that get fixed? I mean, like you talked about the

Lightning Network being 18 months away, Ethereum 2.0 is always 18 months away. Yeah. Oh, that's definitely true. So Avalanche fixes this. And on Avalanche at the moment, you can run every single Ethereum smart contract for a fraction of what it costs on Ethereum. Why is this? Because Avalanche has much higher scale.

It can handle many, many more transactions per second and it can complete them far faster. Just to give you an idea, the Avalanche network is three times faster than Visa. Now I'm not saying we're three times faster than Visa's peak capacity. We sadly are not that good. Visa can handle 50,000 transactions at its peak

on Black Friday and Avalanche cannot. But on an average day, Visa handles 1,700 transactions per second. This is a single entity. They can take your money, et cetera, et cetera. And this avalanche in contrast is a truly decentralized layer one blockchain, three times faster than Visa. So that's what fixes this. Once you have scale of that kind, then you can clear transactions. Blockchain space is not at a premium. And so we don't have to pay immense amounts of money to get our transactions into a limited resource. The resource just got upped. It's much, much, much bigger. And it doesn't cost all that much to participate in the network. So what if you go through a disk per year? A disk is 50 bucks per participant. So we reward everybody for far more than that per year to participate in our network. So you make back the money that you spend on the storage. So this is entirely doable. And I know that the Bitcoin maxis don't believe it. That's fine. They're also going for a different use case. And Ethereum folks,

for various reasons, have committed themselves to a different path that even if ETH2 succeeds, would not be competitive with what Avalanche can do. That was the question. Right, right. I'm aware that Avalanche can do it. I'm aware that there are other protocols that have the transaction speed, right? You're talking about 5,000 transactions a second at three times what Visa's doing. That's pretty astounding. I guess my question was, even with 2.0 being 18 months away, is Ethereum, which I love, too much of a hulking giant to ever scale to that level, even if it eventually gets to 2.0 at its best case scenario? Yeah, that's an interesting question. So Ethereum, I consider myself a part of the Ethereum community. All my best friends are in Ethereum. So it's wonderful what they're trying to do.

But Ethereum and ETH2 are different things. And sometimes people call Avalanche and Ethereum killer. We're far from it. We love Ethereum. We want it to succeed. We're doing so many other things not being done by the Ethereum community that we're just going to go our way. We're going to love doing what we do. We're on a different path.

The true Ethereum killer is ETH2. It has to kill ETH to succeed. And ETH2 has been in the making for many, many, many years. And I think at this point, we have to ask ourselves, is there a structural problem with the way it's being developed that it's unable to come to fruition? Why is this thing not coming out? You know, two years ago, Avalanche was a gleam in our eyes. It hadn't been built yet. And a year

ago, it got launched. So it's possible if you have a clear technical vision, you can do it. And ETH2, the technical vision changes so much that I'm afraid to make any statements about ETH2, because if I do, then the ETH maxis get on my case because I get some little detail wrong. Like, don't you even know what you don't, you don't know, even know what you're talking about. You just like number is clearly wrong. You're misinforming the public. And I say, well, okay, well, I'm so very sorry about this. When did this change? And it turns out it changed in the last month. ETH2 is constantly subject to evolution. Nobody can pinpoint what it is.

I don't even know what the sum set of technologies that will go into it and what will be kept out of it. So overall, I'm kind of a down person on the ETH2 effort. I mean, the history is enough for me to be down on it because a lot of time has passed. It's not here. And we're now waiting for 2023 for it to come to full fruition.

So, but I wish the ETH2 folks luck. But Ethereum, that's a different thing. The Ethereum community is vibrant. It's awesome. It's got a fantastic thing going. I want them to succeed and they're doing a wonderful job. So I'm curious, what does Avalanche look like in 10 years? Okay, that's a great question. So one of the many innovations in Avalanche is this idea of

multiple subnets. So Avalanche is not a singular solution. So almost everybody who starts out in this space, what they do is they copy the Bitcoin vision and they add a little tweak. So they have a single coin, a single virtual machine, and a single network. And then they say, hey, buy my coin, it's going to do this, that, and the other. Maybe they changed a little thing in the virtual machine and they say, oh, you know, I added this, that, or the other. Now I've got something new. Avalanche is not like this. Avalanche, think of it as a network of networks. In Avalanche, you have the AVOX coin, but you also have any other numbers of coins. All of them are at an equal level. And you can introduce new virtual machines. And most importantly, you can create new networks for those virtual machines

and those new assets that you created. What does this mean? This means that an enterprise can build something on Avalanche that is dedicated to their own use. They can restrict who participates in their network. If they want, they can close it off and they have a private permission chain. If they want, they can open it up. They can say, hey, you can participate close it off and they have a private permission chain if they want they can open it up they can say hey you can you can participate in our network and they can have arbitrary limits if they want so you know to participate in my network you have to have a beefy machine or i design my network to to appeal to small machines you know you can have raspberry pies and raspberry pies only but most importantly a legal perspective, you can say things like to participate

in my network, you have to uphold the GDPR in the EU, or you have to be an American node, or you have to be under Chinese jurisdiction or Indonesian or whatever else. And that opens up an entirely different world because now you can program your network in the same way that Ethereum opened up the programmability of the asset that Ethereum opened up the programmability of the asset, we open up the programmability of the network. And that is incredibly key. And I think it's something that a lot of people don't understand just how important that is. Talk to your lawyer friends and talk to anybody who understands an enterprise or any kind of a digital asset and say, hey, or any kind of an asset, Say, I want to digitize this asset. What are your

concerns? And they will say, I want control over its lifetime. And if you can't control the network, you cannot control the asset. So 10 years, Avalanche will have on it many, many, many, many different coins. It will have many different subnets. It will have subnets dedicated to assets in different legal jurisdictions. It will have all kinds of supra jurisdictions, if you will, jurisdictions that span multiple legal jurisdictions. It will have all kinds of exciting new assets. We are beginning to get a glimpse of this with ILOs. We have assets on top of Avalanche that nobody else has or has even thought of called initial legal offerings. It will have many different revolutionary things, assets that can be

traded very, very cheaply because of the underlying protocol. And that means that the systems are open to use by a much bigger user community. So in 10 years, much, much bigger system, many different subnets dedicated to different use cases and more and more assets than anyone can shake a stick at. So interesting because effectively you can build a, you have the decentralized blockchain that's fast and has thousands, hundreds of thousands, you said maybe millions of users, but then you can build a very small private blockchain on it that can be very insular and never touched by anyone else. So a bank could come to you and create their own coin that's for cross-border transactions that nobody else uses except for the bank and their clients, but they still get the benefit of the decentralization of Avalanche as a whole. Is that accurate? Exactly right. And that in fact has happened not for cross-border transactions,

but for a different use case, but exactly that has happened. Absolutely right. And so that gives them that shielding. So if you do that, if a bank were to do that, they would shield themselves from transaction fees on the outside network, on the main network, default network, they would better control what happens on that network. They would have perhaps different rules and maybe a different virtual machine that supports activities on that network. So yes, absolutely that. And that's exactly- You just mentioned the term ILO. So listen, we have IPOs, ICOs, IDOs, right? We have all the I something, choose your letter O. ILO, I've never heard until you just said it. Oh, you've never heard of ILOs? An initial legal offering. Maybe somehow it just, maybe I saw it and it skipped past me, but could you talk very quickly about what that is? Of course, it's a new asset that we invented at

Ava Labs in conjunction with some lawyer friends of ours. And an initial legal offering is designed to essentially finance lawsuits. I think all too often we end up seeing cases where one side has a good legal case, but they lack the financial resources to see it through in court and they settle. And so what one can do is one can raise funds in the best way we know how, which is over a blockchain, such that those funds go not to the person. You don't want the funds going to any individual because then there's suddenly risk of that individual doing a rug pull on you or doing an exit scam of some kind. So the funds go to a legal fund and that funds the lawsuit itself. So for example, there's a person expert versus versus person Y, or person X has a claim against the state, whatever else. And, and I put a dollar towards X's legal case. And they use that to pursue their interest in court, if and when they win,

then their winnings come back to the people who funded them. Because the money flows entirely within the legal system and is not in the hands of the individuals, there's no risk that the individual will take the winnings and disappear. The court will order how the payment will be done. It's going to go through the law firms and the law firms will, of course, pay back to the funders. So it's a fascinating idea. That's really cool. It's a form of escrow. So I mean, I've actually been down that road. Interestingly, my father, my father invented disappearing sun block, which was a very popular thing, it would like be purple, and then it would disappear on your skin. So you wouldn't miss any spots presented it to a large pharmaceutical company,

they stole it. And it was a similar situation. My recollection, I was much younger, but he, you know, there was a lawsuit there. But how can you sue a giant like that? So then there's huge VCs in this space. People don't realize that just fund lawsuits, but then they make all the money on the lawsuit at the end of the day, right? It's the person who funds the lawsuit, but really, really interesting to hear. And it's such an obvious application of this technology I never heard of. And when you talk about that, it leads me to all these other sort of things that I think we're going to see, like distributing royalties. You know, like all the funds for something go into a pool and they're distributed, like music royalties, not waiting six months to get your check because your song was played three times

on Spotify. You know, really, it just seems such a deep rabbit hole of what's possible when you start talking about these things. It is. It really is. I'm sorry to hear about your dad's case. Yeah, you are right. Litigation financing is a really big space. I think it's one of the most profitable spaces, by a very, very lucrative thing. We're kicking this off. And so expect to hear from us in the next month or so with our first ILO offering. It's going to be a very colorful case. Our second offering promises to be even more colorful. It's a case that almost every person in crypto is potentially familiar with. So it's a really exciting space. And there are many other uses of crypto, right? So you mentioned a couple of different ideas. Income sharing agreements of all kinds. The royalties is one of them. They get distributed automatically. Yeah. Yeah. Like imagine that, you know, I want to fund a young kid who's just starting out in his career.

I'll pay him up front, but I want to share of his later revenues. And I want to cheer for him. Whatever, if it's in the NBA, NFL, wherever they might be. And there are many other cases like this. Fan tokens are fantastic. I mean, there are so many cool things one can do with this. We're at the very beginning of a very long road and a lot of innovation up ahead. Yeah, those are huge. But then just the fact that you can democratize funding these things, that I can fund a case that I believe in and have, you know, economic incentive for the case

to go my way rather than it being some big, you know, blood sucking VC, I guess. Yeah, I know. There are so many different cases that I know I would just be like, take my money. Don't even pay me back. Just take my money and fight those guys. I know a couple of phone companies for which this is true. A lot of other cases are like, just do it.

Just go after these guys. So, and there are many other cases like this. It's just, it's going to be an interesting space. I'm really excited about it. We are after these guys. So, and there are many other cases like this. It's just, it's going to be an interesting space. I'm really excited about it. We are the pioneers in this. Absolutely love it. So where can everybody follow you after this, follow what you guys are doing? And I guess most importantly, how can they participate in Avalanche? Ah, so the very first starting point would be avalabs.org, our website. And that's going to send people to all sorts of interesting directions one of them is avox.network so that takes you to everything that's related to the

avalanche system and you know you can download the wallet you can play with the faucet you can take a look at the testnet and there is a huge big wiki of sorts that points to all sorts of things on top of us, the DEXs and the various other things on top, you know, the landing platforms, et cetera, that are built on top of Avalanche. So that's a good starting point. If you want to follow me on Twitter, I am EliteHacksaur on Twitter. I know it's an ironic name. It's spelled funny, E-L-3-3-'s it's uh it's it's not meant to be all that serious anyway so that's me online and uh and otherwise uh you know just follow along with avalanche and if people want to want to take a look at uh what the system is doing i think we're on coin market cap and coin gecko and that also contains a lot of

pointers to exchanges. Well, you were far ahead of the trend of DJs and rappers replacing the vowels in their names with numbers. Oh, yeah. No, this is, it comes from, right, it comes from hacker culture. It goes back to the 70s and 80s. And, you know, I was a teenager in the late 80s. And that's when I picked up my Elite Hacksaw handle. So there are a bunch of other people who use like different spellings of it. There are a bunch of Elite Hacksaws floating around. But yeah, this is me. I love it. Well, thank you so much for taking the time. Really interesting to hear all of the potential, you know, obviously in this space and to give people an idea of what this really can

look like further down the road. So thank you very much for that. I'll look forward to seeing what you guys come up with next. Thank you so much, Scott, for having me on.