Avalanche Subsumes other Blockchains: A Perfect Solution to Boston Federal Reserve and MIT Research on CBDC
Everything is happening so fast around Avalanche and Avalabs these days- enough to get you excited and pumped about the future of blockchain technology and cryptocurrency. Emin Gun Sirer, Kevin Sekniqi, and other team members at Avalabs are appearing on different shows and podcasts to create awareness and educate people about what Avalanche stands for.
Avalanche Everest and News about Mainnet
This week Avalanche mainnet candidate- Everest was launched so that people all over the world can test and see how efficient the platform is. More than 650 validators are participating; some have created assets so easily and distribute them to their friends. The community has been very active and enthusiastic about the developments around the platform and future deployment. A particular community member carried Avalanche to the summit:
According to an update about Avalanche mainnet from Kevin Sekniqi on 27th August, the mainnet will be around mid-September, 2020 because they want users to be able to interact (access, store, and hold) with AVAX tokens via “reputable third parties”. In my opinion, this means more time to be able to reach more enthusiasts and people of the world to be able to explore this outstanding platform.
My Focus concerning Avalanche
Anyone who has followed my previous articles about the Avalanche platform will understand that I love to explore the potential of the platform by unveiling use cases that fit it perfectly. I have also explained in simple terms with illustration everyone can understand what subnets and nodes are on the Avalanche platform. Prateek, a content writer, also did great justice in an article on August 24th about how the platform reforms “finance” as an ambitious blockchain. In the article, he explained what the platform stands for- very easy to understand and relate with.
This article will put more focus on another use case of Avalanche concerning recent strategic happenings in the world of finance.
US Federal Reserve Bank Research on CBDC
This week I stumbled on a speech by Lael Brainard, the Governor of the United States Federal Reserve, on August 13th. In her speech, she revealed that financial transactions in the US had sharply reduced early in the COVID-19 pandemic. When relief funds came, there was a subsequent sharp rise in the spending of many households. This spurred the Federal Reserve Board into the research of a new technology that will eliminate the waiting days for clearing checks. She stated that the Board has been researching Distributed Ledger Technology for years to see its potential use cases and in the exploration of Central Bank Digital Currencies- CBDCs, United States has to be leading.
This, in her words, is the reason why the Federal Reserve Bank of Boston is collaborating with researchers at Massachusetts Institute of Technology (MIT) to “build and test a hypothetical digital currency oriented to central bank uses”.
Opinions from a Founder
Jared Tate- the founder of Digibyte Blockchain, in a tweet thread, opined on the speech made by Brainard:
2/7 Instead of creating a brand new protocol/ currency its best to use existing/ proven blockchain crypto assets & networks w/ scarce/ finite properties such as #Bitcoin #Litecoin #DigiByte to back a new type of fiat crypto. Like gold backing but with digital crypto gold.
- Jared Tate ©️ (@jaredctate) August 25, 2020
This statement is reasonable because starting new research from scratch, when there are other established researches in the same field, is just a waste of effort. Building on the current research methodologies is a great way to attack challenges. He revealed that no single blockchain can handle the world’s transaction loads, therefore the Federal Reserve should consider using multiple Blockchain Crypto assets:
5/7 The truth is there is no 1 single #blockchain out there that could handle all the worlds transactions w/ out introducing some serious security & data risks. Using a basket of crypto reserve assets to back fiat as well as their #blockchain protocols to handle txs is a win win
- Jared Tate ©️ (@jaredctate) August 25, 2020
AML/KYC and other compliance can be carried out in the banks, he continued in his explanation, there will be no single point of failure.
What do I have to say about that…
While I partly agree on his views, there are other critical points to be taken into consideration if the Federal Reserve will implement his ideas. The question is: What about the inherent challenges of the ‘established’ blockchains? Take for example the power demand in mining, huge transaction fees, and long confirmation periods in Proof of Work coins like Bitcoin, Ethereum, etc. These are problems that will be more pronounced if they are used as CBDCs or Crypto Reserve Fiat, CRF as Jared called them. The codes might be great and established but the implementations, the fees, the power demands, and waiting times make them ineligible. But what if this can be corrected?
A potential solution in Avalanche Platform
Avalanche platform is built to allow the digitization of assets like fiats, real estates, stocks, etc. It is created in such a way that it allows network-level compliance to law no matter the jurisdiction. It means blockchains and crypto-assets can be created in compliance with the laws of the country of origin. Avalanche is a collection of subnets, subnets are a collection of validators who come together to reach consensus and create Blockchains. Subnets can be created in a way that validators who wish to join must comply with certain laws like KYC/AML, possession of certain qualifications, etc. if they will be accepted. This makes easy what Ethereum couldn’t do with its D’apps- compliance.
The platform completes transactions in a split second (milliseconds) and nodes do not need huge or powerful machines to be able to validate or secure the network. A tutorial on how to join Everest reveals the minimum system requirements to run an active node on Avalanche. The requirements are very low and the operations require far lower power than in mining. This is apart from the fact that the platform supports Virtual Machines from any existing blockchains, thus any blockchain (even existing ones) can be created on it.
More Insight on the Avalanche Platform from the founders
Emin Gun Sirer and Kevin Sekniqi, Professors at Cornell University and Co-founders of Avalabs were interviewed in a podcast this week by Tomer Federman on the Blockchain VC. In the podcast, they revealed that Avalanche is focused on Digitization of Assets that are not yet on the blockchain. When asked about the project being a competitor to other blockchains, Kevin stated:
It ( Avalanche) is not a competitor because AVA strictly subsumes both Bitcoin and Ethereum in its capabilities
ETH and BTC are both “monolithic blockchains” but Avalanche can be used to create these other blockchains. It is not competing with fiat as it is working towards digitization of assets that are not yet on the blockchain — a completely new implementation. AVAX is hard-capped in supply. Emin also agreed that there is no single coin to dominate all and we might see in the future how the stock market comes on the blockchain so that stocks are held like tokens in wallets.
When asked about stablecoins, Emin Gun Sirer stated that the platform itself is an infrastructure to “technically and legally launch stablecoins”. This is because it supports network layer programmability. It has a whole lot of other use cases that we will be seeing in the future.
How does it fit in as a solution
With all these attributes, the matter Jared Tate raised in his thread can be achieved on Avalanche. How? You ask.
These multiple established blockchains and their codes can be created with Avalanche without the weaknesses I stated above. This forms a foundation for the Researchers and makes it very easy for them to decide how to create their own CBDC. The issue of compliance at the network level is an advantage since it is also a point identified by Lael Brainard. The Federal Research should build on the existing research by professors who have contributed immensely to the field so that they can reach a solution very soon. Since the venture stated above is based on building and testing a hypothetical digital currency for Bank use, I believe the Avalanche Test net will be very useful to serve as a sandbox to see the capabilities of blockchain technology. In the future when they implement CBDC or CRF, it can be built effectively and efficiently on the Avalanche platform.
The facts stated
- Avalanche is a platform that can be used to create other blockchains (both existing and new). This supports the issues raised by Jared that a single blockchain might not be enough.
- AVAX has a maximum supply thus fitting for a CBDC or CRF.
- It supports network layer programmability, thus compliance to laws of any jurisdiction is not a problem.
- It doesn’t require mining therefore far less demanding of power.
- It is created especially for the creation of assets (that are not yet on the blockchain)
- It is in collaboration with Chainlink to help connect the blockchain to real-world data. So, CBDC or CRFs that are created like assets can really mirror their real-world value.
What do you feel about this matter?
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This article is meant for information and education purposes only, please take and use it as such!
Originally published at https://cryptostocksreviews.org on August 28, 2020.