Algorand: Interoperability and Ecosystem Expansion
In the early years of human life, people preferred to live in siloed villages and were not aware of what lies beyond their ‘circle of safety’. But the inquisitive nature of a few adventurous few led to the expansion of horizons, intermingling to cultures to be compatible with others which has continued over the years.
Deviating towards blockchain, in the legacy blockchain systems interoperability was not sought after with security, scalability and immutability being on the top of the priority list. Now, the cross-chain and multi chain communications have become imperative to expand the ecosystem further with interoperability high on the priority list for most blockchain protocols.
Why is interoperability required?
This is a relevant question which I feel needs to be addressed. A major hurdle for adoption of blockchain has been the trust level to stake large sums of money on smart contracts (due to its siloed approach of working with the applications only on the blockchain on which contracts were developed) which have been proven to be error prone and limited in the past due to either the consensus protocol or the programming language being used for the smart contracts (among other things). Faster execution, easy settlement, low cost transactions and easier adoption in the mainstream are features sought with the interoperability feature.
How is Algorand placed to handle it?
Algorand has the inherent feature of interoperability for all tokens issued on ASA making it well placed to handle such transactions. And yet, it has not been resting on its already existing features; rather the Algorand team has taken it on themselves to expand the horizon with interoperability initiatives with other blockchains such as multi-chain, co-chain and consortium — some of which I have shared below.
Initiatives already taken by Algorand to work on Interoperability
Collaboration with Blockstack: In an effort to promote interoperability, Algorand and Blockstack joined hands to develop a new smart contract language, Clarity, that delivers safety, security and predictability with the vision to help the industry to mature, to remove a significant barrier to achieving the levels of adoption smart contracts arguably deserve and to preventing user funds from being put at risk. Algorand and Blockstack are working on improving inter-blockchain communication, their collaboration makes perfect sense to make cross-chain interactions direct. The goal here being pursued is creating smart contracts which are resilient and can be used to handle large ticket financial transactions as well as improving inter-blockchain communication — an initiative open for other blockchains to join as well.
Joining the multi-chain consortium: Algorand was one of the first blockchain to join the multi-chain & Co-chain consortium headed by Circle. With all tokens issued/created on the Algorand blockchain having inherent Algorand Standard Asset (ASA) characteristics (token issuance or swapping to the Algorand blockchain) adds features such as increased core security, simplified usage, low transaction costs and transaction finality. Compared to others, ASAs are fast, interoperable and secure as they are built directly into Algorand’s Layer-1. For Circle’s vision to support a multi-chain framework to enable multi-chain transfers to support use cases, developers, and the ecosystems; it’s a step in the right direction. To combat the ever increasing fee of transactions and lower transaction throughput, the search for an alternative and (or) a consortium to provide low transaction costs and high throughput has become imminent. Algorand with a transaction speed of 1000 tps has negligible transaction costs but also has a high transaction throughput rate was an easy choice to be one of the first blockchains to join this multi-chain interoperable framework.
Concluding Insights
The interchain communication initiative for interoperability, an initiative open to all blockchains to join to eliminate the requirement of third-party intermediaries to settle large sized financial transactions — is not only good for the blockchain ecosystem but also the need of the hour to build a level of trust for traditional players to enter the blockchain forum. Bridges to other blockchains, collaborating with consortium will not only lead to strengthening of the Algorand ecosystem further but also lead to the next phase of features in the blockchain ecosystem.
