How Ava Labs is building the road to crypto ‘hypergrowth’ with AvalancheFebruary 28, 2022 | By Jeffrey Keegan
Emin Gün Sirer has a major beef with the crypto economy: It’s not growing fast enough.
He is an early cryptocurrency innovator who co-founded the blockchain startup Ava Labs with the modest goal of digitizing all the world’s financial assets. But, he believes, the underlying technology of today’s buzziest digital coins are not equipped to handle that kind of volume.
Like with any piece of software or internet app, the process of transferring digital assets like NFTs from a buyer to a seller needs a reliable network with strong speed and security guarantees. And for years, this foundational layer had lagged behind innovation at the application layer.
“Even a high-performance sports car can only go so fast on a bumpy dirt road,” explains Ava Labs President John Wu. “What crypto needed was a racetrack.”
In 2018, Sirer, an associate professor of computer science at Cornell University, set out to build that racetrack when he launched Ava Labs. The goal is to push crypto into a new phase of “hypergrowth,” bringing the transparency and efficiencies of blockchain-based smart contracts — programs that execute automatically when certain conditions are met — to traditional finance and other industries.
He is uniquely qualified to take on that challenge. Sirer was creating virtual currencies in 2003, long before the birth of Bitcoin. Since then, his work as a researcher and advisor to blockchain startups, Fortune 500 companies and governments has made him one of the most prominent figures in the crypto world outside of mysterious Bitcoin creator Satoshi Nakamoto. In fact, Sirer is well known for poking holes into the security of Bitcoin.
Throughout this work, Sirer continuously struggled with the “trilemma” that defines inherent trade-offs in smart contract platform speed, security and performance. Blockchains can be decentralized – ensuring no one entity can control them – they can be fast or they can be secure. But the nature of early protocols prevented them from being all three. A typical decentralized blockchain network needs most of the nodes, or computers in its network, to agree a new transaction is legitimate before it gets approved. That can often be a time-consuming process.
What is a smart contract
A smart contract is essentially computer code stored on a blockchain that completes the terms of an agreement or triggers an action automatically and immediately and can’t be undone. Either the terms of the contract are met, or the transaction doesn’t happen. So, for example, if a smart contract in an NFT says that the original artist will be paid 2% of the sale price every time that NFT is resold, that payment happens automatically with every sale. The artist might still need a lawyer to negotiate the specific terms and make sure they are enforceable under applicable law, but the smart contract would automatically execute those agreed-upon terms.
It’s this trilemma, Sirer says, that’s holding back blockchain tech from becoming more mainstream. Solving that, crypto backers argue, creates the potential to speed up cross-border transactions, reduce their costs and give more people access to basic financial services.
Then in 2018, Sirer and his team at Cornell University built a new algorithmic “consensus” that uses random sub-sampling of these nodes to build confidence in the transaction. The Avalanche consensus protocol was a pioneering process that could create a fast, decentralized network without sacrificing security.
Through this new consensus algorithm, transactions that would take an hour to settle on the Bitcoin network are completed nearly instantly on Avalanche. The platform is proving to be so robust and efficient that it could easily scale to millions of participants, bringing the benefits of smart contracts to more people.
Avalanche launched in 2020 and is compatible with the Ethereum blockchain. It’s also vastly more eco-friendly, consuming the equivalent energy of just 46 U.S. households annually, as compared with 1.6 million U.S. households for Ethereum, according to research by the Crypto Carbon Ratings Institute. To offset those emissions, Ava Labs’ team buys carbon credits.
Ava Labs has attracted funding from big-name investors including Andreessen Horowitz. The project itself has entered a phase of hypergrowth, expanding from just 10 people working in a single room to a team of 150 employees around the world in the span of 24 months, Wu says.
While Avalanche’s earliest adopters hailed from the decentralized finance and gaming industries, there are many more applications coming online. Last year, consulting firm Deloitte partnered with Ava Labs to create an Avalanche-powered platform that helps speed disbursement of Federal Emergency Management Agency (FEMA) funds during natural disasters, and it is also being explored by global pharmaceutical and insurance companies for critical business functions. In late 2021, Ava Labs joined Mastercard’s Start Path, a program that helps startups grow through access to Mastercard expertise and resources.
One of Ava Labs’ primary goals is to apply crypto-based innovations to traditional businesses. By blending these two worlds, Ava Labs thinks it can make everyday transactions such as paying for coffee or even buying a house cheaper and easier.
“Working with Mastercard gives us the opportunity to bring the benefits of the blockchain to regular consumers,” Wu says.
Work like this may make it so that someday soon, when you’re buying a digital good online, you’ll be using Avalanche as the racetrack to do it.