Crypto expert: ‘Bitcoin doesn’t have instant finality’

Ava Labs President John Wu joins Yahoo Finance Live to discuss the recent volatility in the crypto market, the future of bitcoin, and the moves in the Avalanche crypto stock.

Video transcript

- Welcome back to Yahoo Finance Live, everyone. How is the crypto community viewing the current losses and the fall of stablecoins UST and Luna? Well, let's get expert insight now from our next guest, John Wu, Ava Labs president. So welcome to the show. And yes, I do want to get your reaction to what you've been seeing with the current volatility and of course, what we've seen with these stablecoins.

JOHN WU: Hi, Rachel. Nice to see you. So one thing we have to recognize is even before the stablecoin collapse this past few days or a week or so was that we were in a treacherous macro environment. There were growth stocks like Peloton, Rivian, or even Netflix that were down 75%, 80%. So it's been part of the risk asset class sell off, so that was bad to begin with.

And then my heart really goes out with retail participants in the stablecoin that have lost a lot of wealth. That is the worst thing. So those two really compounded each other.

But in general, in times of bear markets in crypto, it's always been the case where innovators continue to build. The strong companies will continue to be strong and come out at the other end a lot better. And the next wave of innovation will come out of this.

- And I want to talk about the Avalanche coin because that actually became one of the largest cryptos in terms of total value locked, but it has also taken a hit this year-- over the past year as a lot of these equity stocks have as well. So how does Avalanche then stack up against some of these other tokens and-- as well as the underlying blockchain technology?

JOHN WU: Sure. Avalanche is a next generation blockchain. It's Ethereum compatible. And by all metrics in terms of speed to finality, it is one of the fastest.

In terms of the number of developers, applications, and consumer use, it's also one of the fastest growing. I mean, this past weekend, we had another scaling mechanism called a subnet where another gaming company just launched on Avalanche. The amazing thing about this was that the transactions on a daily basis after this game company launched increased by 20% to 25% on the Avalanche blockchain. And pricing went down 10 to 20-fold.

So not only did the pricing go down, but the scale continued to grow. So again, innovators are continuing to innovate. Not to make light of the asset prices, but you have to keep building and the strong companies will continue to do that.

- In terms of the way that people are viewing-- especially Bitcoin. Obviously, when these things started, they started as a currency. They've obviously now shifted and molded into other things.

And we did see the FTX founder, Sam Bankman-Fried. He said that Bitcoin has no future as a payments network because its proof of work system means it can't scale up. What are your thoughts on that?

JOHN WU: So I didn't read the article, but I think what Sam is referring to is one, Bitcoin doesn't have instant finality. It takes in the tens of minutes, maybe sometimes even up to an hour for real finality to happen as opposed to on the Avalanche blockchain, it's instant settlement. Literally seconds for a transaction. Settlement and payment are the same time.

And also, throughput. Bitcoin is a great store of value in some people's eyes and it's still 40% of the market cap or 45% of the market cap. But is it really scalable? We're talking about maybe four or five transactions per second, whereas chains like Avalanche have 5,000 transactions per second, closer to what Visa does.

- Though I do want to ask you-- obviously, we had El Salvador taking on Bitcoin as legal tender in September. Since then, it's lost about $40 million with crypto, but the president still doubling down, though. He does still believe in the coin. But what do some of the fears, then, that some of these countries had and regulators had, have they been allayed or perhaps exacerbated when they kind of see what's happening with the volatility and how it's affected El Salvador?

JOHN WU: So there's two questions in there. One is the country of El Salvador, or emerging market countries. And the second is regulation and regulators.

So on the first part, in terms of these emerging countries, what you really do have to look at was how stable the local currency was and really make a comparison. There is a lot more adoption in emerging market type countries of crypto. Until 2020, there was more adoption per capita on a lot of these emerging market countries because of inflation, because of instability in the government of their local country.

So it's hard to make that call without looking at what else the local currency would have been without Bitcoin as a legal tender. The second thing about regulation. I do think that after the stablecoin incident, unfortunate as it is, may in the long run be a good thing because I think regulators are now accelerating their look into the space. And I think most operators such as myself in this space have always said that healthy, sensible regulation and more certainty and sooner than later will be great for adoption.

- We do thank you for joining us today with your insights. John Wu, the Ava Labs president. Thank you so much.