How Algorand Enhance The Performance of Decentralized Finance?

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Avatar for Galadima
3 years ago

Algorand is a trustworthy Boston based open-source Software Company specialized in the successful efforts towards building a borderless economy. This company has developed the pure proof of stake protocol with permissionless nature and open participation, transaction finality, security, and stability.   

You may be a beginner to this open-source public blockchain entirely based on the proof-of-stake consensus protocol designed to support the scalability as well as transaction finality. It is a suitable time to explore Decentralized Finance popularly known in the crypto space as DeFi in terms of decentralized, custody-level, inclusive, and fully open. In general, decentralized finance is the movement designed to leverage the decentralized networks for transforming the old financial products into transparent and trust-less protocols that run devoid of any intermediary.  

The DeFi ecosystem is made up of a wide range of financial applications built on top of the blockchain. These may include peer-to-peer payment systems, decentralized exchanges, automated loans, and several others. DeFi can be used for lending and borrowing, monetary banking services ( eg. issuance of US-pegged stablecoins, insurance, and mortgages), and decentralized marketplaces to facilitate the exchange of digital assets.

Explore the basics and main attractions of Algorand 

Today’s decentralized finance is not much decentralized. This is because smart contracts have central admin elements, a single entity available to control so many smart contracts, everyone in this network relies on a somehow centralized source of truth. The future of decentralized finance is even more centralized as the majority of the DeFi projects belong to the bank and finance intermediary category. 

Algorand is providing the necessary and advanced tools to carry out financial business processes much efficiently and securely. The standard asset innovation on Algorand blockchain provides limitless functionality and creates room for the tokenization of any real-life assets on the blockchain. This allows enterprises and developers to issue an asset to use it in DeFi applications and as well makes the asset usable by all regardless of geographical locations.

Not long ago, Algorand partnered with Circle to issue a FIAT backed stablecoin to Algorand to enable customers of Circle Business Account to seamlessly moves funds to USDC on Algornd blockchain. Algorand Standard Assets (ASAs) are customizable. Issuers of an asset can put constraints on an asset or define the terms and capabilities associated with an asset to conform to their business processes. These assets on Algorand are fast, secure, and low cost to execute. Issuing assets on Algorand for DeFi will subject the asset to all benefits of ASA.

The Algorand smart contract in Layer-1 (ASC1) is an execution environment designed for interpreting scripts written in a high-performance language for transaction execution. This system provides essential functions to express legal terms and conditions in the form of computer code which requires no humans supervision with regards to execution. Smart contracts play an important role in the DeFi ecosystem. The usual traditional finance business processes such as lending and borrowing are written in computer codes (smart contracts) which executes when conditions and terms specified in the contracts are met. They are preferred and used for DeFi applications due to their reliability, speed, automatic execution, security, and the possibilities it brings to encourage the development of innovative financial instruments.

Developers and teams with the desire to build sophisticated and frictionless financial applications, processes, and services can directly tab into Algorand’s pure proof-of-stake Blockchain Protocol as it’s permissionless, open, and utilize ASC1s for building high throughput, cost-effective, scalable solutions.

Furthermore, after issuing your asset on the Algorand blockchain, you can enjoy fast transactions and settlement as all ASAs inherent the properties of ALGO which is the native currency of Algorand. DeFis function without any centralized authorities and as such atomic transfers on Algorand is a perfect combination. This is because atomic transfers ensure ASAs and ALGO are sent in full or not at all while eliminating central entities acting as facilitators. Unlike exciting blockchain that is killing DeFi users with exorbitant fees, atomic transfers on Algorand are extremely low cost and still fast. Building DeFi applications on Algorand will ensure fast and secure multi-transfers in Layer 1 and at a relatively small cost.

Make a well-informed decision 

Almost every organization partnering with Algorand in our time is realizing the entire potential of this company from decentralized exchanges to asset tokenization and digital securities. This successful company supports enterprises to embrace decentralized finance. Every member of this company has proficiency and years of experience in this sector. They provide the best-expanding methods for transactions as well as the exchange of value. They provide the framework to help build new financial tools, services, and processes as per the ever-increasing requirements of their clients. They improve their routine efforts to bring new financial assets on-chain and innovate on the public and private solutions’ intersection.  

The Algorand network has relay nodes designed to let highly efficient communication paths and participation nodes that propose and vote on blocks. These nodes are designed to simultaneously optimize the decentralization and also high transaction throughput. Algorand developed the blockchain compression technology Vault to reduce storage and bootstrap costs.  A cryptographic primitive Verifiable Random Function from Salil Vadhan, Silvio Micali, and Michael Rabin maps inputs to the provable pseudorandom outputs.  Algorand uses this system to perform all secret cryptogenic sortition to choose committed and run consensus protocol.         

Algorand in our time is well-positioned for empowering the current and new businesses to exchange values devoid of intermediaries. Innovative economic models of this company pave the best way for the adoption of widespread blockchain and realize the potential of a borderless economy.  Everyone has the chance to build prosperity regardless of the location in the easy, secure, transparent, and inclusive nature of the borderless economy system.

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Avatar for Galadima
3 years ago


It's a really high performance network

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2 years ago

Another one ❤Always I learned a lot through your articles

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3 years ago