Algorand Transactions

Pablo Yabo
May 28 · 3 min read

Whereas most cryptocurrencies to date are based on push technology interfaces where spending is always initiated manually by the buyer, Algorand has brought a new paradigm shift to blockchain based transactions through a simple yet innovative design solution.

Algorand Transactions: Validity Period

Algorand transactions contain a validity period which determines the sequence of blocks where they are valid. In Algorand, it is not possible to submit a transaction in a block outside of its established validity period nor add the exact same transaction twice (since both have the same hash). Additionally, transactions cannot exceed the 1,000 blocks (less than 90 minutes) of their validity period.

By not requiring the addition of an index (like the nonce in Ethereum) or a reference to a previous transaction (like UTXO design in Bitcoin), Algorand’s transaction design allows for the creation of multiple transactions in advance.

Creating Vesting Schedules in Algorand

Using this feature, one can create a vesting schedule by simply creating multiple signed transactions with different block periods, and send them to the payee. Similar to a deferred check, when each transaction becomes valid (current block is within block period), the payee broadcasts it getting the accorded payments in the correct period. As they are valid only during the specified validity period, transactions that are not cashed out/broadcasted before the end of the period will stop being valid. Furthermore, as the period is specified in blocks, network issues can have a direct impact on the actual timing of the transaction.

Verifying Scheduled and Recurring Transactions

The simplicity and novelty of Algorand’s approach are remarkable. By adding this feature through normal transactions containing a From, To, Amount and the Block Period, any user can verify them using basic tools. Verifying multiple transactions will require some additional tools that we are developing for internal tasks in Randlabs.io and AlgoExplorer. Simply put, it entails making the same verification a user does multiple times and then illustrating the information altogether (e.g.: show a graph with all the payments and the total amounts).

Vesting Schedules in Ethereum

As a nonce field is required in Ethereum transactions to avoid replay attacks, the only way to make scheduled transactions is through the creation of a smart contract. There are vesting implementations such as this one from OpenZeppelin to vest ether or tokens. However, Ethereum implementations add significant complexities to a simple task. Despite how straightforward this process is, considerable risks are present in Ethereum based implementations that require the employment of a developer and a security auditor to do them. Moreover, even though it is possible to create a platform to issue deferred checks and other scheduled transactions on Ethereum, trust in an external actor would be needed, adding another layer of complexity, and possible security issues on what should be a pretty simple and straightforward task.

Future Use Cases

The innovative design of Algorand transactions that enables scheduled batches of transactions opens the door to countless new use cases that we are excited to explore. Apart from simple payments or vesting schedules, this new transaction family can be used to create subscriptions and recurring payments, dividends and much more complex payment workflows. For instance, using this feature, entities can issue loans with embedded capital repayments. An address-based reputation system can be created with proof that the address did pay back or did not have enough balance on the period. Decentralized Finance, or DeFi, can evolve significantly with these simple features in addition to Atomic Swaps, without requiring the development of complex solutions or platforms. For these use cases, I think the 1,000 blocks validity period is a bit small and I’d prefer the option to sign transactions valid for months.

Even though we are just in the early stages of Algorand’s development, we are already appreciating how they are leading the way in terms of revolutionary innovation. At Randlabs, we cannot wait for the exciting surprises Algorand will keep bringing to the future of this nascent industry.

Pablo Yabo

Written by

Coding next blockchain technologies at Algo.Capital, Randlabs.io and Coinfabrik

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