Coin Perspective #10— Emin Gün Sirer

David Stancel
May 26, 2020 · 22 min read

“The problem with Ethereum is that its underlying infrastructure is slow and unscalable.”

Emin Gün Sirer is a Professor at Cornell University and one of the pioneers of P2P cash systems. Throughout his career, he contributed to the development of many different protocols, operating systems, and P2P systems. Most recently, he has been leading the development of a new blockchain-based protocol Ava. In this interview, we talk about his beginnings in this field as well as his views on Bitcoin and Ethereum, and of course, his latest endeavor — Ava. You can follow him on Twitter where he tweets a lot about everything related to cryptocurrencies.

You started to design crypto networks almost 20 years ago with Karma. How has the landscape evolved over time?

Well, it has evolved immensely. We started out by worrying about essentially self-organizing networks and resource sharing in an environment where people were mostly cooperative. It was really people versus evil corporations back then, politically speaking. Fast forward to Bitcoin, suddenly there’s all this talk about people vs. the state, this libertarian influx, and this ultra-commercialization of the space.

Then, of course, we had the wave of scam coins coming in because it was so easy to clone these things. There were a whole bunch of people who just took something that existed, put a thin veneer on it, sold tokens to the public, took their money, and delivered nothing.

Nowadays, I would say we are living through a phase where people are courting Wall Street; they want institutional money, they want legitimacy, they want to go and leave their roots behind and essentially sell a dream to finance professionals. It’s a really roundabout way of selling mostly ill-fitting technologies under circumstances and narratives that don’t actually match what the technology is capable of.

Hidden in all of this is a giant technological revolution, from client-server systems to peer-to-peer systems. From systems to where one person is in charge of the servers to systems where nobody is in charge and anybody can audit what the servers are doing and the servers are constrained from misbehaving.

So, that’s a big transformation. That’s really powerful; it will reshape the world for sure. But, along the way, you get enormous swings of ideologies, enormous changes and private audiences — enormous changes in the language used. The underlying mechanics, of course, are constant.

It’s always a grab for power, and if you don’t understand who’s grabbing which power and for what reason, then you are going to be manipulated and lose money in the process.

Back to the Karma — why do you think it didn’t take off back then? What were your lessons learned there?

I will tell you exactly why it didn’t take off. I did not have an extended vision as Satoshi did. Karma was designed for facilitating resource sharing and peer-to-peer networks. It’s incredibly well-cited academically; it’s the foundational material for a lot of other people who tried to build on it, but compared to let’s say Bitcoin, it was too small a vision, so there’s that.

The second and biggest issue is I didn’t push it. I didn’t push it because everybody counseled me and said, look, the entire world in 2002 is united against terrorists. Everybody is concerned about terrorist financing and you will never find any funding for this.

They were right. I would not have been able to find any source for funding peer-to-peer cash at the time, so I in fact gave up on the idea. I said this is not going to go anywhere. Banks are not going to want this, and regular people are not going to fund its development, and they didn’t at the time. It took the 2008 crash for people to realize that we need alternatives, and Satoshi’s timing was impeccable. He also had a more robust consensus for the call than I did in 2002. So, there was that kind of change in the middle as well.

Did you also manage to participate in the Cypherpunk Mailing List as well?

I have, since the 1990s. I was there. It was mostly crap. There wasn’t anything too exciting being discussed there, so I didn’t think it was all that valuable.

When did you run into Bitcoin for the first time and what was your reaction?

When I looked critically at it, it was shortly before I met Ittay Eyal, so I don’t know when it was; it was probably 2012 or so. I thought it was interesting and checked to see if he cited my work in Karma, but he didn’t and I was like, okay, he’s a self-taught guy and doesn’t know much of the work in this area, so I thought it is what it is.

Then Ittay Eyal visited Cornell, looking for what he called a distraction away from his major research thrusts. He and I started talking in 2013 or so. We talked about how this thing was supposed to work. There were a lot of claims made about it, but were they true?

When we looked at it carefully, we noticed, of course, that there were all these folk theorems that the core developers were pushing. They were pushing a bunch of lines that Satoshi initially had assorted, and they were repeating these lines as if they were true: Bitcoin is perfect, it has perfect incentives, which ensure that you better follow what Satoshi said or else you will lose money. It’s in your best interest to follow the protocol as Satoshi prescribed it.

These were all false. None of these are true. They are all desirable properties. The short, scientific term for them is the protocol is incentive compatible. You want incentive compatibility; you want people to have it in their best interest to follow what you told them to do as opposed to diversion from it.

We showed that Bitcoin was not incentive compatible. There were alternative protocols that you could follow that would reward you more than the protocols subscribed by Satoshi.

How has your view on Bitcoin developed over the last 11 years? What has changed in your view?

Bitcoin is, by every metric, a big breakthrough in distributed systems. Until Satoshi came along, we had one kind of consensus protocol. We called them classical consensus protocols. Two different brilliant researchers got Turing Awards for their contribution to that area. So, this is a big, big deal.

At the heart of every big service lies a consensus protocol. If you use Gmail, there’s a consensus protocol. If you use Facebook, there’s a consensus protocol. If you use anything on Earth, there’s a consensus protocol behind it; anything that’s big. All of those were in the classical fold, but classical protocols don’t scale well and they are not robust at all.

Satoshi had a big breakthrough by coming up with his super robust protocol, and that protocol is based on mining. I used to think that it was brilliant, and I used to think that it was just the biggest thing. I didn’t really think too much of the resulting cryptocurrency.

There really isn’t too much to Bitcoin; it’s just a bunch of tokens. They are issued in limited amounts using that consensus protocol and that’s really it. You can send those tokens around; they’re not useful for much more than sending around and hoarding. You can’t really use it for day-to-day payments because it takes forever, and then there are all of these patches that people are trying to apply on top, like the lightning network, but they all have their enormous downsides. That’s what I used to think.

Over time, I’ve come to believe that yes, Satoshi had a big breakthrough, but there was a much bigger breakthrough that came after him. In 2018 a Team Rocket came up with a protocol called Avalanche. It blows every other protocol out of the water. It’s the third big breakthrough in distributed systems.

I’m not sure if there will be the third one in consensus protocols, and the Avalanche protocol is everything people wanted Bitcoin to be. It is incentive compatible, it is fast, it can be used to achieve finality in a second or two — you don’t have to wait an hour. And you don’t have to pay anything to miners. There is no separate class called miners, it’s just participants and everyone can be a participant. It’s an amazing protocol, so I was blown away by Avalanche.

Bitcoin is always going to be around. It’s a fine system, but it’s what I call a hodl coin. You hodl it in the hopes that other people will want it, and it’s a zero-sum game. The money you make comes from somebody else who is paying into the system, so it’s just always going to be toxic and contentious.

You’ll always find groups of people banding together to pump the price and make money by dumping on retail at the expense of less-informed people. So, the whales will always have an advantage, the miners will always collect their share, and regular users are always going to be taken advantage of. It’s a fine system, but I don’t think much of it these days.

How have your views on Ethereum changed over time?

Ethereum is a fantastic experiment. I always thought it was an experiment and it has allowed us to explore different corners of the design space, which is not possible with Bitcoin as it is. It has kicked off this DeFi revolution. Now, the problem with Ethereum is that its underlying infrastructure is so slow and so unscalable. I don’t know that the evolved roadmap is going to take us to a scalable Ethereum.

So, if Ethereum 2.0 arrives on time by December of this year, then we get to have something that has latencies that are still significant. People don’t understand what latency means. The thing that’s hard is not TPS (transactions per second); I can achieve high TPS, anyone can fudge the numbers to get high TPS. In fact, we’ve seen a lot of shitcoins do this and there are a lot of experimental systems from people.

We saw Hedera Hashgraph to announce 1 million transactions per second before they made the system public, but as time progressed and they made the system public, we ended up seeing a system that achieves a few hundred transactions per second. It’s kind of funny to reach reality, but there are tricks for getting high TPS.

However, there really are very few tricks for getting low latency. Ethereum 2.0 is not going to get us there and the model that they break by using sharding is a huge, huge cost to them, and they will find themselves with all kinds of funny dynamics in their sharded chain. There will be multiple Ethereums if you ask me, if they manage to ship on time.

And also, it is a fragile system; I think they are going to have all sorts of failures as they tend to have anyway. So, what does that mean?

I love Ethereum, I love the community. I have a lot of respect for the Ethereum community and love their science-orientedness. I love how they are always focused on the application layer and trying to build things at the app layer, but I don’t think their strength lies on the foundation. That’s something we are trying to do with Ava — provide a much better foundation while allowing similar experimentation at the app layer.

There are now multiple competitors for Ethereum in the field of smart contracts, like Dfinity, Algorand and Solana — all of them make similar claims. How is Ava different compared to them? What is your view on these other smart contract platforms?

Ava has three big things that are different. It has a much better consensus engine, and by much better, I mean the thing that’s powering Ava is a big breakthrough and everyone else is just polishing the old toys that they have lying around.

We have known since the 1980s how to build classical protocols. So, you have a cottage industry of people finding a paper from the 1980s and 1990s, and polishing it and trying to put a shine on it and servicing it to the masses as if it’s something new.

It’s not new. There isn’t anything fundamentally different there; it’s still the fragile old thing that Satoshi looked at and said this is no good for what I have in mind. It is no good for open systems. It only admits about less than 100 participants. I don’t want a system with less than 100 participants. I want everybody to be able to participate in the future of finance.

None of these systems are any different from Libra. Libra is 28 friends of Mark Zuckerberg, designed to go up to about 100 nodes. Ethereum 2.0 is about 64 nodes per shard. Or you look at these other systems and it’s just a tiny number of people, so Algorand also comes down to a few dozen. You look at Dfinity, and again, it’s very small numbers.

So, there is a crop of these systems. A big mistake they commit is that they focus on the crypto part. The fundamental difficulties in this space are not in the crypto. The crypto that we use is mostly basic stuff that anybody uses. The fundamental difficulties are on the system side, or on the distributed systems consensus side, and on that front the Avalanche protocol is a fundamental breakthrough of the kind that has happened only three times in human history.

Only three times in the 45-year-old history of distributed systems have we had a new family emerge. Avalanche is a brand new family, as big of a breakthrough as Satoshi’s protocol was; it combines the best of Satoshi with the best of classical in scales like no other that allow anyone to integrate themselves into the consensus layer. So that’s one, and if I had only that as my value proposition, I would be in a very good spot, but I have more.

One of the bigger things about the Ava system is the second breakthrough, a second point of divergence. Every single coin out there, every single one copied the network model from Satoshi. They have a single coin, a single virtual machine, and a single network. So, you sell the coins to the public and get your army, and then those people show their coin, the virtual machine determines what the coin can do and then the network of nodes implements the virtual machine. That’s what they’ve got, that’s what anybody has. Ava is not like this.

Ava is the only system to support multiple virtual machines, and it is the only system to integrate multiple networks. Anybody can create a new coin with its own special behavior defined in a new VM. Then — and this is the most important part — they can deploy it on sets of nodes of their own choosing.

For example, if your coin requires that the validators be subject to US jurisdiction, you can deploy such a coin on the Ava network. If your coin requires nodes outside of the US, you can deploy such a coin. If you want your nodes to have some set of resources not found in the lowest common denominator, you can deploy that as well. If you want your nodes to sign a legal agreement with you, you can do that. So, the legal foundation for coins and assets deployed on Ava is very different from what happens on other nodes.

If you are deploying the ERC20 on Ethereum, it’s out of your hands. If you deploy a coin on any other system, it’s out of anyone’s hands. All of these guys have adopted the cypherpunk narrative. They adopt the cypherpunk narrative because their network can only enforce a single set of rules — it’s extra-legal, there’s no jurisdiction really — Bitcoin does what Bitcoin does.

It’s not under US jurisdiction, it’s not under European jurisdiction, and that’s okay when you are going up against the US dollar, but it’s not okay if you’re trying to fractionalize and sell assets that correspond to real estate. If you want to do that, you want to be able to say that you have this digital asset and understand the legal environment for how your asset is managed. You do not understand that if it’s in the ERC20. You do not understand that if it’s anything else, but you do if it’s an Ava coin. So, I’m really excited about the coins built on top of Ava.

The third and final thing about Ava is that it’s open to governance; it supports a limited form of governance. The most critical economic variables are not set in stone. For every other coin, these are set in stone, except for a few which allow unlimited governance. Bitcoin, for example, just mints to a set schedule no matter the circumstances, and in a couple of halvings they are going to have a big problem. Many people don’t expect Bitcoin to survive that.

Whereas if I look at people who do unlimited governance, they can change their system in any way, but then you have the lack of predictability. You don’t know what will happen tomorrow. They could have just voted and completely changed everything from under you.

Ava follows the middle path and we say certain economic parameters are subject to change, but they can only be changed by so much per time unit, so you can go on vacation and come back to a predictable universe. We believe in context knowledge in that we believe that finance should be inherently calming and inherently predictable. We have a governance model that allows us to say here are the things you can change, here are the things you cannot, and here are the rates by which you can change something.

With what you just said and the heterogeneous networks of nodes that you can do on Ava, do you consider Ava competition for projects like Polkadot or Cosmos, for example?

Absolutely. Those projects make certain flames by bridging different blockchains. Ava is not bridging different blockchains; Ava is Ava. It is creating a unified blockchain for all. The way I think of it is it allows you to create local networks and it allows you to connect those local networks to each other, so we are not trying to be a connection layer between heterogeneous networks.

Yes, you can create heterogeneous networks on top, but they all speak the same protocol. It’s kind of like the TCP/IP layer that powers the internet. There’s what we call the narrow waist of the protocol step. You can have lots of things underneath, but there’s a narrow waste that TCP IP allows you to connect through.

So, in a similar fashion, Ava allows all of these networks to connect together, and it allows, for example, somebody defined as a digital asset and fractionalizes digital real estate to trade it for digital assets that correspond to gold or other sources of value.

Ava has essentially two consensus protocols: the Avalanche and the Snowman. Can you describe the difference between them?

Sure, we’re getting into somewhat technical territory, but here’s what the consensus protocol does: it says this happened, and then this other thing happened, and then that happened and so forth. That’s good but usually what you want is to have a timeline.

You want to say this happened, then that happened, and then that happened. It turns out there are two variants of timelines. The simple one that most people are familiar with is what we call a totally ordered timeline — so I bought some lunch, then you called me and afterward I bought some dinner and so on and so forth. In the middle somewhere in between you calling me and me buying dinner, Alice paid Bob.

That’s a totally ordered timeline and it’s very useful for applications where you want to say exactly where everything happened with respect to each other, but there are many applications where you don’t have to relate everything to everything else.

For example, Alice’s payment to Bob is completely independent to you calling me; it has absolutely nothing to do with it. It’s absolutely independent of me buying dinner, and until and unless I buy dinner from Bob, I have absolutely no relationship to that timeline.

I would like to be able to establish in these cases what we call a partially ordered timeline. I want Alice to be able to pay Bob while Charlie is paying David while Eve is paying Frank and so forth because those instances can happen in parallel and they are not related to each other.

In Ava, we have two different consensus protocols: one is Snowman, which establishes a totally ordered protocol, a totally ordered timeline, and the other one is Avalanche, which establishes a partially ordered timeline. The benefit of a partially ordered timeline is that you don’t have to relate everything to everything else.

You can achieve much higher throughput and get much better latencies. The advantage of Snowman is that in situations where you do need a strict timeline, it gives you that strictly ordered timeline. We support both, so smart contracts, which typically require total ordering, can use Snowman. Payments, which typically do not require total ordering and only partial ordering can use Avalanche.

Usually what opponents of PoS argue is that you can build a chain and it doesn’t cost anything in terms of computation. What is your defense against these kinds of arguments?

So, let me restate the problem. This is a commonly encountered problem because most people came into this space from a Bitcoin perspective and they get told a lot of confusing things about what it must cost to create a chain.

So, imagine that a bunch of us are sitting in a clearing in the woods and we are all keeping a record of what’s happened. We’re all keeping track of Alice paid Bob, Bob paid Charlie and so forth, and we all have a notion of what has happened and where we are. As of this moment, Charlie holds all the cash. That’s what happened. I was there, I saw with my own eyes Alice paid Bob and then Bob paid Charlie.

Now, is it true that Alice and Bob can go back and create a timeline that looks just as legitimate as the initial one that says Alice did not pay Bob? Alice kept our money and then Bob did not pay Charlie. Bob just sat around and was happy. In fact, Alice and Bob in this case are trying to take back their money from Charlie, and they are trying to say that Charlie is not the rich one, they are rich ones. This seems like a problem, especially if someone comes into it with a Bitcoin bent. With Bitcoin there was a chain that was hard to build and cost money to build that actually consumes a lot of value out of the system.

Charlie is constantly bribing the miners to extend the chain, so it’s very difficult for someone else to come up with an alternative. In proof-of-stake that’s not happening and it’s a good thing — that’s a feature.

Instead, you can have two different legitimate-looking chains, so this is the problem. How do you guard against this? There is a very simple answer. I was there, I saw it, everybody in the village saw it. Charlie has all the cash and Alice is trying to take back a payment she made. Well, I already achieved consensus among the village. I was there, they already participated in consensus protocol to know that the first payment is the official one to Bob that later went to Charlie.

So, if she says something now, I will look at Alice and I’ll laugh at her, saying this is the dumbest attempt I’ve seen for you to take back your money. I will not dignify it with even a nod in your direction. It’s that simple. I don’t understand why this is a problem for people.

This is a narrative that comes from Bitcoiners and they really like their incredibly wasteful ecological disaster of a mining protocol and that’s what they push as the gold standard. This is actually not a good way to do things.

The simplest thing you can do is the most effective thing that you can do. You simply record the latest state of consensus, and as long as there are enough witnesses who were there, you have absolutely no problem identifying which reality is actually the one that people share and which one is a constructed, made-up thing.

So, if someone comes up to you today and says the Fort Knox gold didn’t get distributed the way it did over the last 70 years, I inherited it all, you would just look at them and say — no it didn’t, it got distributed — the government slowly sold a lot of it and it belongs to the current owners. The fact that you have a legitimate-sounding piece of paper in your hand doesn’t entitle you to anything. We all saw what happened. You can’t turn back the clock on us in that overt fashion.

You mentioned Team Rocket earlier. Do you have any idea who’s behind it?

Team Rocket decided to keep their invention anonymous. I’ve thought quite a bit about this whole anonimity thing, and it’s an interesting thing. I think we have to allow every culture, every emerging new movement room to grow. One of the most generous things anybody can do is take their names off of an invention. That is the best thing they can do.

Essentially what they are saying is judge us by the invention itself, not by who we are. The fact that they did this is incredibly generous. The fact that they are taking their egos out of the equation is an amazing thing. It must be a group that knows their maths; it must be a group that knows their distributed systems. Beyond that, I don’t know what I can say, but I am forever grateful to them for doing what they did and putting the paper out under an anonymous name.

Can you briefly summarize the latest updates for Ava. What are your plans for this year?

I built a company to commercialize Ava and we got funded almost exactly a year ago. I am super happy to say that we wrapped up the code and we wrapped up the documentation as of a few weeks ago. We are currently polishing both the code and the documentation to make it public very soon.

We plan to have a public test night with incentives for people to find bugs in it, and after that we plan to launch the main net. There is a security audit underway on Ava even as we speak. I cannot wait to unveil Ava and I cannot wait to build stuff on top. There are a couple of things we are building on top that take advantage of Ava’s unique features with this notion of subnets.

The DeFi revolution is here and it deserves a much better engine than it’s got. I’m really excited to provide a much faster, much lower-latency platform for people to build exciting applications on, and I think the future’s so bright for this space.

Blockchains really revolutionized the world. They are an extinction-level event for incumbents. They are a huge opportunity for a lot of startups and we are going to see the entire finance ecosystem change.

I used to think that institutions would switch over to use blockchains. I used to think that Nasdaq would start issuing stocks on a blockchain. We may or may not see that happen, but here’s what I think will definitely happen, no matter what the existing institutions do.

New projects will start issuing tokens and digital assets. Digital assets will become the new funding method for a lot of other new movements, so instead of old finance patching over and converting, what we’re going to find is that we have become the new finance. Old finance is still around and they do what they do, but we’re going to be the new definers of the new technology.

And I’m so excited about the area, about the space. I’m very excited about anybody who is open to scientific thinking and reasonable logical arguments. I’m not a big fan of cults or ”hodl” coins. I think they do the space a great injustice.

It holds us all back and there are so many constructive things we can do for society other than holding a coin and waiting for other people to pay cash for it. I’m excited to say we’re enabling exactly that at Ava. I’m looking forward to working with people who build on top of it.

What is your view on the development of DeFi, also in the context of the recent hacks on bZx? When do you think DeFi as a whole will really take off?

We are seeing a very interesting revolution there. We are seeing a lot of independent Lego blocks coming together and I have a lot of respect for the people who have developed these things. It is amazing to see them begin to work together.

These Lego blocks are kind of complicated, each on their own. When you combine them, you can build very complex edifices that are not so solid, and we began to see that with two back-to-back hacks on bZx. I am confident that those are not the last two hacks that we will see. There will be many more interesting exploits, attacks, and hacks.

By hacks I mean clever programming tricks, not necessarily someone doing something illegal or immoral. I mean somebody did something really cool and they deserve the winnings. We’re going to see a lot of these on DeFi. DeFi is where financial innovation is taking place, and that’s where we are going to see the next big Wall Street type companies, but there will be some unicorns coming out of the DeFi space.

It’s hampered currently by a couple of things: 1) the engines underneath are not good enough 2) the model is not good for issuing digital assets on existing platforms. I am hoping that Ava will solve both of these problems.

On Ava, one of the things we’re looking to build is better integrated DeFi infrastructure. I can’t go into too much detail at the moment on this, but DeFi today is not well integrated, and I think there are much better efficiencies to be had.

More importantly, there is untapped value to be had by combining some of the Lego blocks that we see currently that are independently developed. So, I’m really excited and I just can’t wait for the future to come. It’s upon us. This year is going to be an exciting year.

The last question — what do you think the role of Bitcoin will be in our society ten years from now?

Bitcoin is going to be a warning sign to society in the future. I think it is going to be around in ten years. There will have been three more halvings in 12 years, so is it going to be around and function in 12 years? I’m not sure. There might be something called Bitcoin, but it’s not going to function like Bitcoin does today. It’s going to change at the protocol level. By then, there will have been many pumps and dumps on Bitcoin around the halvings, so that will have washed people out of the Bitcoin community.

The Bitcoin community is very contentious, very toxic, and constantly bleeds people. It also bleeds value to the miners; there will be a lot of fortunes made on the backs of retail and Bitcoin, but in 12 years it is not going to be all that much bigger than it is today if you ask me.

It doesn’t bring value to the ordinary person and there are no companies that are building upon that chain because that chain is not meant to be built upon. It’s meant to be “hodl-ed”, so I suspect that there will be coins in the future that take over and deliver the vision that we initially saw.

Ava does not try to do what Bitcoin tries to do. It does not try to go against the US dollar. I think that’s a losing proposition. I think that’s always going to be a niche proposition. I don’t think the US dollar is about to go anywhere; it’s backed by nukes.

Instead, what we’re going to see is Bitcoin still around as a niche product, but some trillion dollar blockchain projects are waiting for us because there are trillions of dollars of value on the sidelines — not in blockchain form today but on people’s balance sheets. They need to be mobilized and traded, and their reach needs to be extended across borders. That’s very hard to do today. There are some projects that deliver this. I think Ava is in the best position technologically, infrastructurally and legally. I just can’t wait to see that future. It’s a very exciting time to come.

Thank you!

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