Algorand 2.0 : Insights on Algorand Smart Contracts in Layer-1

In the current economic scenario, there are many issues when it comes to the digitization of assets with the challenges ranging from accessibility to global digital markets to instantaneous settlement to ease and enforceability of asset controls to efficiency of compliance and reporting to the recently observed dilemma to issue digital currency in place of printing huge sums of money to counter the economic imbalance caused due to the COVID-19 pandemic. As we all know by now, all the countries took the latter option. With the new suite of features built directly into layer 1, the Algorand blockchain has gone through an upgrade to allow expansion of the range of decentralized applications and processes that can be built on the Algorand platform without compromising the security or performance, which Algorand was already providing.

In this article, I will be covering the details about Algorand Smart Contracts (ASC1) at Layer-1 in Algorand 2.0 along with potential use cases as well as share how I think it will be helpful for implementation in real world scenarios.


The first question here that comes to mind is what are ASC1s? ASC1s are scalable, secure and faster Layer-1 smart contracts that automatically enforce custom rules and logic based on how Algorand based assets can be transferred. These rules are complex economic relationships made up of basic transaction primitives. With trustless execution on the Algorand blockchain, cost and risk are lower while settlement of these contracts are instantaneous. This functionality enables innovative ways to address existing inefficient and complex financial transactions that rely on intermediaries to provide trust and execution which leads to unnecessary delays and costs in the delivery to the consumer. Examples of such transactions may include escrow accounts, loan payments, limit orders, subscriptions, collateralized obligations, etc. Some of the relevant use cases for this functionality are:

  • Cross chain Atomic Transfers: Successful cross chain transactions are going to be the next breakthrough in the blockchain space to enhance true decentralization and higher inclusion. With the collaboration of ASC1s and Atomic transfer features, cross chain transfers can potentially be worked out on the Algorand blockchain platform.

  • Regulated disbursements or to simply put, timed payments governed by rules or logic mentioned in ASC1s. By automating this functionality through an ACS1 for Algorand based assets, time and cost both can be saved. For example, by supporting programmable and redeemable E-Money on the Algorand Protocol, Monerium, will be working on several B2B use cases, including cross-border transactions in euros, in which disbursements will be regulated.

  • Escrow accounts: By enforcing automated executions of terms in the smart contracts, ASC1s are credible to govern functionality of escrow accounts. Stonize will be using ASC1 for escrow in combination with Atomic Transfers for multiparty transactions to provide its customers with faster and secure clearing and settlement processes.

  • Decentralized exchanges: With the current trends of printing money in the global economy and the ever increasing cases of manipulation in centralized exchanges, decentralized exchanges are the need of the hour to provide credibility to the crypto exchanges. IDEX in collaboration with Algorand will work closely together to develop a solution with full finality, tokenization of assets, and programmatic transfers at Layer-1 advancements for financial tools and services to support the new economy.

  • Reimbursement validation: When two or more parties are engaged in an arrangement whereby the action of one party is reimbursed by the other party/parties; there may arise situations when the arrangement may or may not be honored. By laying down all scenarios of payment as well as non-payment in ASC1, these issues can be dealt away in a seamless and instantaneous manner. For example — PLANET tokens, a utility token to be issued by Planet watch, will be distributed as reward contributions to the sensor owners in the ecosystem as per the ‘Global Air Quality Monitoring Initiative’ which will be the world’s first immutable air quality ledger utilizing the Algorand blockchain and IoT technologies. The data will be gathered from air quality sensors onto the Algorand blockchain.

  • Delegated / high security account management: Providing a trustless, secure sovereign identity management system, copyright management and a provenance management system are few of the applications of ASC1s which provide a highly secure account management system that can be trusted and at the same time be scalable as well as cost effective to maintain. For example, by using Algorand’s Platform for Identity management, FlexFinTx envisions to facilitate the recording of more than 400 million digital identities across the African continent, to provide self sovereign identity, with the user having full control over their data, using nothing but a mobile phone so that no organizations can access a user’s information without gaining permission from the individual. SIAE, the sixth largest collecting society in the world, will be partnering with Algorand for the development of a new open ecosystem for copyright management. DUST, Identity’s innovative and secure interface for physical objects and the digital world and Algorand together are developing a platform to ensure digital integrity, physical security and end-to-end visibility of supply chains;to provide scalable and tested methods to authenticate physical objects and validate genuine transactions on the blockchain.

  • Interface with oracles or other off-chain data providers: ASC1s will be helpful for data-driven enterprises to leverage decades of technology investment to solve specific challenges around data movement, data quality and more. For example, Syncscort plans to use Algorand as the next-generation platform to leverage decades of technology investment.

Features such as fee execution and collateralized debt can also leverage ASC1s to allow seamless execution of terms with respective transactions. Eagerly looking forward to analyzing companies which take up these use cases.

Conclusion & Insights

To summarize, ASC1s are auto-executable smart contract agreements which can be used to enforce laid out terms and regulations for better governance in transactions. Exploring ASC1 applications in sustainability initiatives such as soil carbon sequestration, planting trees and preemptive actions to face pandemics could be really useful and are a need of the hour. Looking forward to the exciting times ahead for development on the upgraded Algorand blockchain.