Insights on multiparty asset transfer via ‘Atomic Transfer’ on the Algorand Blockchain
In this article, I will be covering the details about the new and exciting ‘Atomic Transfer’ feature 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.
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 latency in transaction 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 but major economies are looking at introducing Central Bank Digital Currency or are exploring issuing digital currency on the blockchain. 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 were already part of the Algorand protocol.
Similar to what a trusted or legal framework provides in a traditional economy, atomic transfer provides a trustless solution in layer-1 in the Algorand blockchain. It offers a secure way to simultaneously transfer a number of assets among multiple parties. This feature is useful in cases where multiple transactions are grouped together and either all or none of the transactions are executed. Atomic transfers do not require escrow or hash time-locked contracts making complex transfers smooth and fast. The transaction costs incurred for multiparty transfers are very low. Relevant use cases which can benefit from this feature are as follows:
- Simplified and expedited debt settlement between multiple parties in a quick and seamless manner at very low costs via Atomic Transfers makes Algorand Protocol very lucrative for usage to avoid latency, high transaction costs to perform transactions.
- Efficient matched funding: With the inherent property of executing all transactions or none, Atomic transfers will make the matched funding scene quite efficient. Republic, the investing platform and technology services provider that enables inclusive investment access, has a shared vision with Algorand of inclusivity and decentralized financial opportunity for all will be looking to leverage the Atomic transfer feature for efficient matched funding.
- Decentralized exchanges: With the current trends in the global economy and the ever increasing cases of manipulation being observed in centralized exchanges; decentralized exchanges are the need of the hour to provide and to a certain extent restore the credibility to the crypto exchanges. IDEX will work closely with Algorand 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.
- Instantaneous settlement of complex multi party / multi asset transactions: Stonize plans to use the features of Algorand 2.0 to provide its customers faster and more secure clearing and settlement processes. To be more specific, the Stonize team is working on enhancing the delivery versus payment process by leveraging Atomic Transfers for instantaneous multiple party transactions and the ASC1 template for escrowing.
- Any instance of a multilateral trade such as micro-finance ecosystem platform, etc. will benefit from the Atomic transfer feature. IBMR.io has partnered with Algorand to support the Asia Reserve Currency Coin (ARCC) via the ARCC.one platform, which is designed as the world’s first ‘micro asset’ to enable the financial inclusion of the urban working poor in Southeast Asia.
- 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.
Conclusion & Insights
In conclusion, it would be apt to mention that Atomic Transfer is one of the important features of the upgraded version of the Algorand blockchain which will lead to greater adoption of the Algorand protocol for instantaneous transaction confirmation as well as execution of multi party transactions in a smooth and swift manner. Hypothetically, It would have been useful to instantaneously transfer relief funds to the citizens directly whether it be the distribution of the relief funds to citizens in the US, UK, Canada or Germany; it undoubtedly would have saved a lot of time and provided relief to the people in time of need. But we are at least a little way off from actual implementation of digital currencies globally. It will surely be interesting to see how financial and non financial companies use this feature to settle debt as well as multi asset transactions.
