Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockchain?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
Financial Indep.
Posts: 5
Joined: Sun Nov 15, 2020 12:52 pm

Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockchain?

Post by Financial Indep. »

Bitcoin and cryptocurrencies in general seem to gain corporate attention now as a hedge to a possible inflation scenario and for payment providers to get a market share of possible future crypto payment systems. Big players are especially JP Morgan who entered exploring trading business, Square Capital, Facebook (Libra), and recently PayPal.

Using Bitcoin as a global payment system?

For sure: a problem for Bitcoin are slow transactions, it’s not possible for Bitcoin to scale like Visa while providing a decentralized network. Same goes for Ethereum, which is partially similar to Bitcoin but offers to create unique assets on it (which are also limited to Ethereum features because it’s also run on the Ethereum platform).
So far, Bitcoin and Ethereum are working and Bitcoin is well known for its success history from few cents to 20k USD in just 10 years and a speculation that Bitcoin can get digital gold. A few years later, Ethereum (ETH) arrived also successfully.

But Bitcoin and Ethereum aren’t processing many transactions per second currently (Bitcoin 12 tx/s and Ethereum 20 tx/s). That is not much and won’t be enough if such a platform should serve as a global network used by almost everyone as a payment system or for business purposes (industry).

How to solve Bitcoins problem of limited transactions?

It was for a long time discussed internally how to solve scaling (processing more transactions per second) for Bitcoin and Ethereum and quite a few startups are currently trying to solve these problems and try to develop new currencies.

I was coming across Avalanche (a project started recently) when I was reading about new blockchain projects in 2020. Avalanche was launched in a decentralized way by Cornell University Prof. Emin Gün Sirer making progress to achieve a speed similar to Visa by using a novel consensus mechanism to confirm transactions.

Approved by computer scientists but publicly still very unknown compared to BTC and ETH

Different computer scientists have investigated Avalanche’s approach and confirmed it when it was published initially. Some computer scientists even call it the next big step in crypto after Bitcoin and Ethereum:

https://hackernoon.com/avalanche-ava-bl ... cdc4ee8984

Avalanche was started in August 2020 and has proven to be working as promised by Cornell University developer Emin Gün Sirer. Currently, Avalanche is searching partnerships because it’s still very unknown. Blockchain business is moving forward very fast and Avalanche has a high chance to be leading internally.

Maybe someone has already heard from Avalanche [AVAX] here or bought and used it?
User avatar
nisiprius
Advisory Board
Posts: 42231
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by nisiprius »

Wasn't this the problem that crypto fans said Lightning Network had already solved?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Topic Author
Financial Indep.
Posts: 5
Joined: Sun Nov 15, 2020 12:52 pm

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by Financial Indep. »

nisiprius wrote: Fri Nov 20, 2020 5:19 pm Wasn't this the problem that crypto fans said Lightning Network had already solved?
Lightning is currently tested but there's a lack of adoption because some issues are still not solved and some people don't like it.
After all, Lighning is only a second layer solution, build on top on the first layer (original layer), which means Lightning transactions are not verifiable on the original Bitcoin blockchain. Optimal would be a decentralized first layer solution, where also for Bitcoin some ideas are existing like taproot/schnorr.
So yes, Lightning isn't bad and could help Bitcoin scaling but it's not really the best solution.
User avatar
Nate79
Posts: 6542
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by Nate79 »

Ok, what does this have to do with investing and is actionable?
Topic Author
Financial Indep.
Posts: 5
Joined: Sun Nov 15, 2020 12:52 pm

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by Financial Indep. »

Nate79 wrote: Fri Nov 20, 2020 6:56 pm Ok, what does this have to do with investing and is actionable?
If Avalanche could gain significant traction and many people / corporate partners would use it, it could increase in price massively because it's still very unknown so far.
Avalanche is part of a large field of applicants for new generation blockchain platforms: https://medium.com/ava-hub/comparison-b ... a98f46c03b

Just saying, because for good investments it's always useful for

- still being unknown (like Bitcoin was 10 years ago)
- targeting a big user base (for Avalanche: global payment system and platform for financial applications)

There's no guarantee for gains of course, but experts are postitiv, both technically and economically.
adamthesmythe
Posts: 3850
Joined: Mon Sep 22, 2014 4:47 pm

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by adamthesmythe »

I could be wrong- so please correct me if I am.

But- my understanding is that blockchain is a way to obtain secure consensus about transactions. And that cryptocurrency is an (alleged) store of value that uses blockchain.

So the creation of a transaction procedure using blockchain does not necessarily affect the value or the adoption of a cryptocurrency.

Comment?
User avatar
rob
Posts: 3371
Joined: Mon Feb 19, 2007 6:49 pm
Location: Here

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by rob »

The sooner this digital currency trash goes away the more likely blockchain can be used for something useful. No digital currency can ever take over - no government will allow it.

Blockchain has some great uses... immutable newspapers in oppressive countries anyone?
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
Topic Author
Financial Indep.
Posts: 5
Joined: Sun Nov 15, 2020 12:52 pm

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by Financial Indep. »

adamthesmythe wrote: Fri Nov 20, 2020 7:50 pm I could be wrong- so please correct me if I am.

But- my understanding is that blockchain is a way to obtain secure consensus about transactions. And that cryptocurrency is an (alleged) store of value that uses blockchain.
Blockchain is a vague definition of the general conception of all distributed ("decentralized") cryptocurrencies; where all transactions are "stored". For example in Bitcoin, roughly every 10 minutes a new block is added to the chain. The "block" contains several transactions (up to 12 transactions per second).
A block chain is a transaction database shared by all nodes participating in a system based on the Bitcoin protocol. A full copy of a currency's block chain contains every transaction ever executed in the currency. With this information, one can find out how much value belonged to each address at any point in history.
https://en.bitcoin.it/wiki/Block_chain

This blockchain can be run in several ways like in the article explained in my OP. Bitcoin is using Nakamoto consensus (developed by Satoshi Nakamoto), Avalanche is using Avalanche consensus instead, developed by Cornell University and the Team around Emin Gün Sirer.

For now, there are existing far more than 5,000 independant cryptocurrencies, some of it using Nakamoto consensus, some Classical consensus and some aren't even Blockchains or are extremely centralized (like XRP from Ripple Labs).
adamthesmythe wrote: Fri Nov 20, 2020 7:50 pm So the creation of a transaction procedure using blockchain does not necessarily affect the value or the adoption of a cryptocurrency.

Comment?
Yes, transactions don't affect the price but the general layout of the transaction procedure is important how many users can participate in that cryptocurrency before the platform reaches its limit.
Like for BTC, that was the case in early 2018 when so many users did transactions that 12 tx/second weren't enough to confirm all transactions in the next few blocks. Users tried to pay more for their own transaction to be confirmed before other transactions and that resulted in very high transaction prices for everyone who did a BTC transaction. BTC became very hard to use because transactions took a long time to confirm and were expensive. The network was overloaded.
Experts say "Bitcoin's scaling was limited".

And this is what prevent Bitcoin or Ethereum from more adoption. If more users participate, the fees will get insane because it's only limited to around 12 transactions per second. Solving the "scaling" issue means more users can participate while keeping fees low and fast.
Of course, my explanation is extremely simplified here, there are far more parameters but the ones mentioned above are showing the issue in general.
Fantomas
Posts: 3
Joined: Sun Nov 29, 2020 2:16 pm

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by Fantomas »

Why not just buying Bitcoin?
It's working for more than 10 years now.
User avatar
nisiprius
Advisory Board
Posts: 42231
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by nisiprius »

Fantomas wrote: Sun Nov 29, 2020 3:52 pm Why not just buying Bitcoin?
It's working for more than 10 years now.
"Working" at doing what, exactly?

Serving as electronic cash, for making small casual transactions across the Internet, at far lower costs than credit card merchant fees, without requiring the participation of a trusted third party?

I'm not sure it has ever worked for that. It doesn't work for that today.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
columbia
Posts: 3000
Joined: Tue Aug 27, 2013 5:30 am

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by columbia »

Are they trying to be a credit card layer (ie skimmer) for ecurrency transactions?
TropikThunder
Posts: 2602
Joined: Sun Apr 03, 2016 5:41 pm

Re: Blockchain as a completely new payment system – Avalanche [AVAX] from Cornell University for next chapter in Blockch

Post by TropikThunder »

Financial Indep. wrote: Fri Nov 20, 2020 7:33 pm If Avalanche could gain significant traction and many people / corporate partners would use it, it could increase in price massively because it's still very unknown so far.
Something that increases in price massively simply because more people use it is a horrible choice for a currency. Extreme volatility is bad for a currency - period. If I buy something off eBay for $100, the seller gets $100. They don’t have to worry if it’s still going to be worth $100 by the time they get it to their bank account. No crypto advocate ever addresses my question: how can a stable store of value and broad accepted currency ever function as a good investment that returns anything more than inflation?
Post Reply