In this article, we will discuss how smart contracts can make the decentralized finance used in the blockchain system be faster, better, and secure.
Today, most financial transactions have been made through contractual agreements using paperwork, or even verbally which can cause a lot of catastrophic consequences between the parties involved. These methods are slow, less secure, less transparent, outdated, time-consuming, and less cost-effective. This results in third parties being required to validate the terms in the agreement for both parties.
Smart Contracts are basic lines of code that are stored on the immutable blockchain and automatically execute when certain predefined terms are met and validated. This removes the need for third-party validation.
Smart Contracts will replace these outdated traditional agreements as an essential blockchain functionality that allows modern, frictionless transaction methods and gives end-users more control with fewer intermediaries.
A lot of developers using smart contracts to develop applications on the first-generation blockchains have been facing issues preventing their applications from being adopted or used because of how slow, unscalable, and costly it is.
Some advantages of using the blockchain are:
- Greater Transparency
- Enhanced Security
- Improved Traceability
- Increased Efficiency and Speed
- Reduced Costs
Algorand Smart Contracts
With the adoption of Algorand Smart Contracts, transactions are now secure and highly reliable as they are executed on a tamper-proof (trustless), secure and decentralized network, with no forking making all transactions final. ASC1's also provide faster, error-free, immutable applications that are cost-effective for financial organizations.
The disruption of the financial industry will be redesigned by new technologies, mainly led by blockchain.
Blockchain offers a vast range of opportunities with the transparency, speed, security, and efficiency that customers demand, thus, leading the next evolution of financial applications.
Algorand’s Smart Contracts (ASC1) offer the foundational attributes of security, scale, and decentralization found in Algorand’s Layer-1 protocol, allowing developers to take advantage of the network’s speed, cost-effectiveness, and simplicity. Enabling complex governed transactions with simplified tools that can build a wide range of applications, and removing the technical barriers that undermine blockchain adoption providing benefits with unique features and functionalities that include:
- Ability to build seamless complex applications that solve real-world use cases across different industry segments
- Scalable, fast, and secure execution
- Transaction latency under 5 seconds optimizes the end-user experience
- The Algorand blockchain never forks, which means all transactions are final
- Low transaction costs, Negligible transaction fees represent significant savings over time
- Reduces risk with instant settlement through trustless execution
- Flexible as ASCI1s can be applied to specific transactions, all transactions from an account, or full power rich dApps
- Increased speed to market with comprehensive development resources such as simplified templates for Stateless Smart Contracts and examples of different complex custom dApps for Stateful Smart Contracts
- Low cost to execute – ASCI1 transactions have the same fee as any other transaction on the Algorand blockchain at .001 Algos
- It is fully Decentralized, Decentralization by means there is no de facto central authority
- With over 1,000 transactions per second throughput offer a point-of-sale speed that scales billions of transactions with ease
Algorand is the first to provide immediate transaction finality, opening up exciting new use-cases and applications and is delivering the speed and ubiquitous infrastructure that financial institutions require to maintain control and governance over their operations. Enabling complex governed transactions with simplified tools that can build a wide range of applications, and removing the technical barriers that undermine blockchain adoption.
Algorand provides both stateful and stateless contracts which are also known as TEAL (Transaction Execution Approval Language):
- Stateless TEAL Contracts: Stateless Contracts are efficient and reliable logic programs designed to either approve a transaction if conditions are met or deny a transaction at the point of submission if the conditions are not met. Stateless TEAL Contracts are very robust, powerful, and flexible allowing one to configure his or her transaction restrictions and as such, it makes transactions transparent
- Stateful TEAL Contracts: Stateful Contracts as the name implies, programs maintain their state, this will allow programs to store states in Layer-1, and inspect account balances and other blockchain states for even more expressive power.
These smart contracts provide access to on-chain state values and can be combined with other Algorand layer-1 features to implement dynamic and unique applications that take advantage of Algorand’s scalability, performance, and quick transaction finality. These smart contracts are thus as reliable, efficient, and secure as ordinary payments.
What Algorand Smart Contracts at Layer-1 can be used for
Algorand Smart Contracts at Layer-1 is also known as ASC1s, ASC1s can be used in valuable applications such as:
- Crowdfunding: Crowdfunding is a method of raising capital through the collective effort of friends, family, customers, and individual investors.
- Accredited-Only Transactions: You enable only qualified users to execute a certain kind of transaction, without having to approve each transaction separately
- Securitized Loans: You make a loan, secured by the collateral of the borrowers so that you automatically get the collateral if the borrower fails to make payments according to a specified payment schedule
- Post-and-sale transactions: You enable any other user to purchase an item of yours at a given price, without any further involvement from you.
Benefits of using Algorand Smart Contracts
Algorand offers unique benefits and flexibility over other smart contracts, some of the benefits are:
·Flexibility: Flexibility as ASCIIs can be applied to specific transactions, all transactions from an account, or full power rich apps
·Reduced Risk: Reduced risk with instant settlement through trustless execution
·Fast and Secure Execution: ASC1s operate at over 1,000TPS and are final under five seconds on a platform that is verified not to fork
Algorand provides a common, scalable, and interoperable platform that speeds up application development, increases iteration, and results in faster deployments with more cost-efficient capabilities.
Algorand Smart Contracts Use Cases
Algorand’s smart contracts (ASC1s) provides faster and scalable transactions.
Today, many services rely on intermediaries to provide trust and execution, which leads to unnecessary delays and cost in delivery to the consumer. Examples of these use cases include:
- Escrow account creation
- Limit Orders
- Decentralized Exchanges
- Cross chains Atomic Transfers
- Interface with off-chain data
- Regulated and Automatic Disbursement
- HELOC (Home Equity Line of Credit)
With the newly added features such as Stateful Smart Contracts, Rekeying, and Fast Catchup, transactions will be made seamless and faster.
Rekeying: Algorand’s Rekeying offers a seamless, easier experience for users and custody providers by allowing flexible changes in Private Spending Keys anytime without changing Public Addresses, giving Public address more continuity, and reducing operational overhead with the changes of Private Spending Keys. This is achieved by having:
- Flexibility in their ability to change the Private Spending Key anytime without needing to change the Public Address
- A Community that provides the ability to continue using one's Public Address and keeping the assets in the same Public Address
- Operational Efficiency maintain existing Public Address as identifiers for other people and custody providers that continuously transact with that Public Address, lowering operational burdens
Fast Catchup: Fast Catchup is a new feature and will rapidly update a node using catch point snapshots. A new command on the goal node is now available for catchup. The entire process should sync a node in minutes rather than hours or days.
With the secure, fast, reliable transaction processes with the Algorand blockchain, financial transactions will soon be powered by the blockchain technologies. We have seen that Algorand provides Unique features such as Rekeying that no other Blockchain offers, thus, making it Unique, Faster, Scalable, and Final.