Ava Labs is an avalanche of innovation and aims to turn DeFi and traditional finance upside down

The central theses

• Ava Labs recently raised $ 42.5 million to further expand its blockchain product line.
• Ava is less of an “Ethereum killer” and positions itself as a regulator-friendly platform for crypto and financial users.
• Still, the network faces hurdles when it comes to attracting Ethereum’s robust developer community.

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One of the most common tropes in the crypto community is that of the so-called “Ethereum killer. “Commentators include projects like Cardano, EOS and Zilliqa. Lately Ava Labs was also included in this list.

After raising $ 42.5 million last month, the Ava team and its blockchain Avalanche are not focused on mining blockchain number two. Instead, they hope to reinvent all of traditional funding.

Bring DeFi to TradFi

So far Most DeFi applications are based on EthereumMoving funds from various income farms, flash loan platforms, and into new digital assets went smoothly.

Unfortunately, this composability cannot last.

Layer 2 solutions are currently the order of the day. They will lessen the congestion on Ethereum, lower transaction fees and keep the network growing. ETH 2.0 also hopes to increase transactions per second and the security of the network.

However, the cost of such improvements can be the free flow of money throughout the ecosystem.

electricity Layer two Solutions hinder composability because explained by Vitalik Buterin. And the start of ETH 2.0 will further fragment liquidity as DeFi protocols will exist on different shards.

Improving speed and security can mean that Ethereum is giving up the “open” in open finance. Solving these two problems is the main goal of the Avalanche Blockchain.

So far, the protocol offers speeds of 4,500 transactions per second and a finality of three seconds. As for security, Quantstamp, a leading blockchain security company, works with Ava Labs to monitor the network.

To accelerate DeFi development, Ava Labs has set up a developer grant program to switch from Ethereum. Avalanche-X offers crypto enthusiasts various ideas, including an avalanche tilting bot, a stablecoin based on avalanche, and various plastics and derivatives.

The list of grants is clearly geared towards rebuilding many of the popular DeFi apps on Avalanche.

Synthetix and UMA have become mainstays of the Ethereum-based DeFi ecosystem. Source: avalanche

In the long term, Avalanche differs from Ethereum in its focus on existing financial companies.

Rather than convincing institutions to migrate their business to Avalanche, the idea is to get companies to use the blockchain for information- and data-intensive backend services.

JP Morgan doesn’t care about decentralization, but if they can save 2% on technology costs by moving a lot of their support activities to Avalanche, they’ll be happy to jump on board. And according to the Wall Street veterans donatet With $ 9.82 billion in technology in 2019, that jump could be lucrative for Ava Labs.

Institutions continue to be tempted to use Avalanche because of the network’s hybrid blockchain, which offers both permitless and permitted varieties. With this function, everyone can operate their own subnet and set it up for private or open governance. The latter version is most attractive to large private companies.

Suppose a stockbroker launches a subnet to coordinate with a hedge fund client. The subnet acts as a backend database for the broker’s trade transactions. One way to do this is to design network governance so that the management of the hedge fund and broker are the only validation nodes that enforce consensus.

This design allows customers to review data and make sure everything is acceptable while keeping the information private.

Subnets allow unlicensed finance and traditional finance to co-exist in the same database. Older institutions looking for a profitable place to park unused capital can take advantage of this composability by, for example, depositing stable coins on a DeFi money market that offers a higher rate of return than traditional counterparts.

In addition, accounting and compliance become easier as these processes can be adapted and integrated into the network.

Financial services on a blockchain network enable the creation of unique financial products without the opacity of the traditional system.

John WuThe President of Ava Labs and a Wall Street veteran believes this is one of the many benefits when it comes to bringing funding to the blockchain:

“Structured financing in the blockchain enables everyone to build creative assets in a transparent way. In 2008, not many people knew what was in these structured tools, which resulted in a plethora of risks. With blockchain, everyone involved in the network knows what is happening. “

Ava Labs recognizes regulations

A major obstacle to DeFi is regulation. The SEC is the newest charge has synthetic instruments against abrasion highlighted the need to quickly decentralize DeFi protocols or the risk of being shut down.

Wu believes DeFi will have to give in to regulators at some point. This belief is a Far cry of airwaves who believe that regulators cannot enforce action against a protocol until there are centralization points.

“DeFi should recognize that it has to comply with the underlying instruments and regulations. You can take advantage of institutional innovation, but these protocols need to make sure they are compliant, ”said Wu.

Stable coins are for example DeFi’s elixir of lifeand regulators are already eyes Restrictions for them.

Ultimately, Ava Lab’s vision is not to decentralize everything, but to create a platform on which any financial services company can thrive.

Finances are the most prominent and a viable candidate for immediate disruption. However, unlike Ethereum and its cohort of “killers”, the Ava team believes that blockchains are useful, regardless of whether the underlying activity is unauthorized or not.

In this way, Ava Labs hopes to cast as wide a net as possible. They hope to have on board financial engineers from Big Finance, DeFi developers building at breakneck speed, and regulators waking up to the world of crypto. Only time will tell which group will join them first.

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