Algorand - platform for DeFi

Algorand - paving the way to DeFi

By Andrzej_0xa0 | Strong Fundamentals | 21 Feb 2020

Algorand has recently introduced set of new features to its pure-proof-of-stake public blockchain network. Reading this article you will learn the progress of development of Algorand platform, including major functionalities that came along with 2.0 upgrade, as well as use-cases it enabled in DeFi space and beyond. You will also get a flavour of who their ecosystem partners are and what they are building.


In June 2019 I had a pleasure to see the talk of Head of Engineering at Algorand, who was presenting the platform in its incubation phase (version 1.0). I was pretty sceptical before attending this event, with prejudices like.. well.. another blockchain platform, probably another Ethereum killer, better, faster, etc.. but my impressions turned positive, during the presentation, which was really eye-opening to me, and intrigued me enough to start digging further. Algorand seemed indeed a solid, well developed and fast platform, and I had a hunger to learn more.


Why different than others?

 > Strong Engineering Team, straight from MIT, led by Turing Award winner (Silvio Micali).

 > Fast finality of transactions, under the umbrella of PPoS consensus protocol.

 > Multiple SDKs already available (Java, Go, Python, JavaScrip).

 > Unique and fair token distribution mechanism (via dutch auctions).

 > Pretty healthy ecosystem already, with many interesting partnerships (both in Universities and from corporate world).

I have covered that in-depth in my previous article, if you want to learn more.

Obviously I have seen that Algorand still had some work to be completed before being ready for broader use, but they had a really good starting point back then. I kept on learning further, and eventually decided to join their ecosystem, engaging as an 'ambassador' for Poland/Warsaw.



Evolution from version 1.0 to 2.0 = Revolution?

Algorand’s platform upgrade to version 2.0 came to me as a nice surprise, both because I was not expecting this pace of development, as well as the level of innovations they introduced was stunning (Release 1.0 took place in May 2019, and then the Release 2.0 in Nov 2019)

Algorand 2.0 release introduces four major developments to its layer-1 on-chain functionalities. Let’s review them one by one, and their benefits:


(#1) Algorand Standard Assets (ASA)

is a token standard to enable the creation and issuance of tokens. Nothing new? Not really, these are built into Layer-1. Implications are impactful - because of being embedded into layer-1. 

This basically provides the following capabilities:

> Fast and Secure: having same security level as a native Algos, as secure as the base consensus protocol, and pretty fast at the same time.

> Compatibility: applications built on top of Algorand platform automatically support all Algorand assets, thanks to its interoperability.

> Ease of use: you can create an asset with a single transaction. With the recent release of their new mobile wallet (covered further in this article) - we can play with those assets pretty easily.

The ASA enables developers to digitize virtually any type of financial assets (securities, regulatory certificates, real estates) on layer-1. The framework is standardized, a necessity for interoperability and regulatory compliance, and can include asset characteristics such as non-fungible, fungible and restricted assets.


(#2) Smart Contracts in Layer-1 (ASC1) + new language

Algorand believes that many of the use cases in the finance world do not require sophisticated logic, while Layer-1 implementation provides higher security at better costs than those on Layer-2.

Smart contracts can be executed virtually instantly, at drastically reduced costs. Smart contracts are designed with custom rules and logic, and can facilitate complex interactions using ASA and Atomic Transfers. This is enabled thanks to a new the language, called TEAL (Transaction Execution Approval Language).

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With ASC1 + TEAL programming, as a developer we can do “jumps” but we can not “cycle” or make function calls. This makes it fast. To make it easy to develop Algorand provided a set of smart contract templates, and you can also build your own smart contracts from scratch if you wish.

There obviously are use cases which will require more complex logic than offered by ASC1, so we should expect Smart Contracts on Layer 2 coming soon from this team (my guess). 


(#3) I think TEAL deserves a bit longer elaboration

being (surprisingly!) non-Turing complete scripting language. Why surprisingly? Well.. Silvio Micali, founder of Algorand, is also Turing-award winner, so certainly he must have had a valid reason building non-Turing complete language.

Turing complete languages introduce an additional layers of attacks and performance issues + (see the video discussing need for Touring completeness in smart-contract platforms)

Just to name a few issues caused by Turing completeness of Solidity language for Ethereum: 

> The DAO hack was possible,

> Constantinople upgrade delayed due to security gaps opening gates for attackers, 

> Impossible to estimate the cost of transactions, aka halting problem,

..and many many more..

So keeping that in mind, Algorand believes that Turing complete languages are not necessary for the majority of the use cases, hence the choice for creation of dedicated language, called TEAL.

If you are a bit technical person - and want to learn more about TEAL - and how to use it to build smart contracts on Layer-1 with Algorand, I do encourage you to visit the below website.

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My takeaway: TEAL language by Algorand is not a bad choice, providing simplicity (easy to write and debug), improved execution time and most importantly for DeFi = SECURITY.


(#4) Atomic Transfers

secure transfer of assets, also baked into the Layer-1 of Algorand blockchain. This provides a way to transfer a number of assets among multiple parties, and allows batched transactions (groups of transactions to be submitted all at the same time).

How does it work? 

<1> individual transactions are created,

<2> they are grouped into a file,

<3> the file is submitted to the network.

<4> nodes submit them all at once,

<5> if any of the transactions fail, then all the transactions fail.

So you get them all approved or none. 

There is no need for escrow - this means it is a smooth and fast approach.

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Those four major updates (above described) are the technical part, which got introduced with Algorand 2.0, but what is even more exciting = those new features facilitated development of a broader Algorand Ecosystem, as well as attracted new partners, who are building, bridging and enhancing the platform. Just to mention a few of the developments happening on top of this platform, enabling DeFi capabilities and making a difference in other industries.


Alogrand Wallet   // domain: wallets //

To support Algorand Standard Assets, Algorand released a new Algo Wallet. The design, look and feel of the mobile Wallet is much improved. I think it's worth trying to install it, check on your own, how easy it is, not only to transfer tokens, but also to add new types of assets there. 

With a few clicks and low costs, you are able to add or move assets with the easy to use mobile App = all happening nearly instantly and with negligible fees (0.001 Algo). 

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If this did not inspire you to play with the wallet yet, let me add that your coins are being automatically staked and are earning nice interest “by default”, just because they are sitting in your wallet. I wish my bank offered similar features.

Algorand's Wallet is definitely a nice development, but it is just a small step on the way to become the prime go-to platform for DeFi.

Let’s digest it further then.


Tether   // domain: stablecoins //

Grandfather of all Stablecoin, Tether, created in 2014 was the first stablecoin in existence between Oct 2014 and March 2018. Right now it is still the largest stablecoin by market cap, and as of Feb 2020 is live on Algorand 2.0.

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Tether just announced that it will leverage Algorand 2.0’s ASA technology. It opens gates for many more use cases for DeFi, all you can imagine.


IBMR   // domain: Fintech //

The International Blockchain Monetary Reserve and Algorand are launching a microfinanceplatform and a dedicated token ARRC (Asia Reserve Currency Coin) to promote financial inclusion in Southeast Asia.

ARCC token is designed to provide debt-free capital to the urban working poor in Southeast Asia, where over 300 million adults have no bank account.

People will earn ARCC by various means, like reporting corruption or as a reward through various gamified activities.  

They will also receive investments for their businesses in the form of ARCC.

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Something that we call Fintech in “Western world” is called financial inclusion in other parts of the world.


FlexID   // domain: Fintech //

In Europe, US or parts of the world where identification, banking, healthcare are easily available, we take it for granted, however, many developing countries in Africa lack secure identity records. Facts:

> Only 50% of the population in Africa live in a country where a census took place.

> Only 8 African countries have a birth registration system, covering the majority of population.

> 400 million Africans are lacking reliable identification (+ 600 million are left unbanked)

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This prevents access to services such banking, healthcare, insurance. FlexID is targeting to facilitate the recording of over 400 million digital identities in Africa, using mobile phone and Algorand blockchain platform based app.

FlexID allows users to access services like bank accounts, loans, driver’s license. 

User’s digital identities are stored on IPFS, and the hashes are put on the Algorand chain. Nice marriage of decentralized platforms = again = to enable financial inclusion.


AssetBlock   // domain: Real Estates // 

Real estate investment firm AssetBlock, has launched its commercial real estate investment platform on Algorand’s blockchain. The company has partnered with luxury hotel asset manager Lodging Capital Partners (LCP) to tokenize $60 million of exclusive hotel properties on Algorand.

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Tokenization of Securities, Real Estates, and other contracts is a bold space for blockchain applications. Tokenizing millions, if not billions (one day, hopefully) worth of assets, with the use of technology, requires underlying technology to be very resilient to attacks, making the attempts of such attacks very expensive. 

If you were a hacker, you would probably consider spending $10MM to attack a network which is securing Real Estates worth $1B, right? So for the time being most of the networks still need to grow their security measures and decentralization to be ready for those big use cases. I think Algorand is on the right path.


SIAE   // domain: Copyright Management //

The Italian Society of Authors and Publishers (SIAE) is working with Algorand to develop a new ecosystem for copyright management, based on Algorand’s blockchain platform.

SIAE is developing the project with the help of University of Rome (La Sapienza) and consulting company Blockchain Core. 

read more on SIAE / Algorand collaboration

Increasing traceability and visibility is one of the key applications of blockchains, and Algorand should definitely keep on exploring this further. I guess one day the IPs will be tokenized as well, so the first steps needs to be made first.


Shyft Network   // domain: Digital Identity //

Algorand also announced partnership with Shyft Network. Algorand DApp developers will be able to use Shyft Network’s bridging infrastructure to act as the identity layer for the Algorand ecosystem

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Shyft is one of the most prominent platforms in the blockchain industry for digital identity and interoperability, and am happy seeing Algorand joining forces with this team.


Euranet   // domain: Compliance //

Euranet is a consulting and technology company specialized in compliance management.

Euranet and Algorand have agreed to collaborate in order to use the Algorand blockchain in the compliance and traceability processes in Agri-food and Industrial supply chains.

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Again, those are just selected examples from the last few months, if not weeks, and are a good indication how much is happening in the Algorand's ecosystem.

Oh.. I would forget, worth mentioning is also that ALGO tokens are listed now on several prominent exchanges, including Coinbase Pro but also Binance, Huobi, Kraken or kuCoin.

I am looking forward to see how the platform is expanding its features even further, as well as new partners joining to build on top of it in 2020.


Final thoughts

Algorand's mainnet got launched in May 2019. As of that time a lot of updates, both in platform development space and ecosystem space, came to fruition. I keep on being impressed with the visibility this team gains, both in the “crypto world”, but even more importantly in the world of mainstream applications.

Their broad range of Software Development Kits (SDKs for Java, Go, Python) make it an interesting environment for more and more developers to build on top of it, and as we can see above, the use cases and ecosystem are indeed growing with a pretty fast pace.

Am thrilled to see the next functionalities by this team (Pixel, Self-validating transactions, Smart Contracts on Laye-2, Gov model). 

At the same time let’s keep in mind that there are many platforms in the race for dominating the DeFi market share (ETH2.0 included) so hopefully Algorand can maintain the fast pace of development - and hopefully we shall see the release 2.x or 3.x with new features going live in 2020.



// bio: I am Running Crypto Ultramarathons //

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Running Crypto Ultramarathons

Strong Fundamentals
Strong Fundamentals

On this blog I share my thoughts, analysis and deep-dives into projects in Crypto space, which in my opinion are building an interesting technology, have a healthy ecosystem, promising tocenomics and strong team with high ethics. So in general I study projects in #crytp + #blockchain space with something what I call #STRONG_FUNDAMENTALS @Andrzej_0xa0

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