Daily Mover: Interview Series

What does the future of global money transfers look like?

Committed to enabling frictionless finance, Algorand talks about its efforts to revolutionize the way we transfer money: quickly and cheaply without a third party, in much the same way we transfer data on the internet. 

Algorand was one of the first blockchains to join the Flipside Data Cooperative. View their on-chain activity here to understand what users are doing with their ALGOs.

TL; DR: 

  • Blockchain technology, in general, is faster, less expensive and more secure than current payment and transaction systems. 

  • Algorand’s platform is especially well suited for retail payments due to its speed: it can process transactions in 5 seconds with a throughput of 1000 transactions per second. 

  • A point-of-sale solution includes a community created solution of a  transaction gateway, a component that facilitates the process of creating decentralized apps for businesses, and orchestrates all types of transactions. 

  • Algorand wants to enable the next generation of blockchain applications to be built, the ones that can actually make a real impact on our lives. The challenge remains spreading awareness about their protocol’s potential. 

Rochelle: Why would a business want to use blockchain technology to process payments or sign digital documents, when they already have systems in place to do so? 

Eric: Blockchain technology promises to facilitate fast, secure, low-cost international payment processing services (and other transactions) without the need for intermediaries such as correspondent banks and clearing houses. Credit cards charge high fees (2% - 4%), promote consumer debt, and require a settlement period of up to 30 days. They also require users to open a bank account, which excludes 1.7 billion adults worldwide who don’t have the means to do so. Additionally, current payment systems are subject to many types of fraud, totaling over $24 Billion worldwide in 2018. 

Rochelle: What is different or new about Algorand’s new concept around a payment solution, compared to what other blockchain platforms out there can offer? 

Eric: Algorand’s consensus protocol is based on pure proof-of-stake, which enables it to process transactions in 5 seconds with a throughput of 1000 transactions per second. This allows real-time payment that is not possible with slower blockchain systems based on proof of work, like Bitcoin. In addition, Algorand’s efficient transaction processing results in nominal transaction fees, currently less than $0.0001.

The concept includes a community created solution transaction gateway: a framework to help streamline the development of decentralized applications using the Algorand blockchain. It coordinates the interaction between the business application and the blockchain. The point-of-sale app sends unsigned transactions to the transaction gateway, which then forwards the transactions to the appropriate wallets for signing. After signing the transaction, the wallet sends the signed transaction back to the transaction gateway, which commits it to the Algorand blockchain. The transaction gateway notifies the point-of-sale application when the payment is complete.

Rochelle: How difficult would it be for a regular software engineer, who isn’t familiar with blockchain technology, to build a point of sale DApp without this gateway? 


Eric: Pretty hard - or at least it would take months. We worked with application developers to identify the common challenges in developing blockchain applications and found that they were losing a lot of time with smart contracts, as well as with ensuring security. That’s why with the transaction gateway we removed the requirement to create smart contracts, and provided the coordination needed to ensure transactions went to the correct wallet for signing, and that consumers’ signing keys were not exposed. 

Rochelle: Could an established company use this gateway to move their application onto blockchain? 

Eric: Yes, established payment systems can integrate with the Algorand blockchain. Consumers can register for Algorand payment, share their public account address, and then the payment processor can create and route transactions via a transaction gateway. Billing and subscription systems can also benefit from faster, lower cost, and more secure transaction processing. 

Rochelle: How can individual developers who build these apps get compensation for their work, if they are not working for a bigger company? 

Eric: We thought about this, which is why we added the Atomic Transfer feature to our blockchain. This allows transactions to be grouped in a single atomic transaction. In addition to the payment transaction from consumer to merchant, an additional transaction can send a subscription fee from the merchant to the business application developer. This helps create a virtuous circle for the consumer, merchant, and application developer.  

There are also other opportunities for individual developers to build novel and disruptive solutions that turn into startups of their own. Networks like the Algorand Blockchain and the Interplanetary File System (IPFS) provide the building blocks to create the next generation of decentralized applications. Promising business domains include payments, billing, subscriptions, lending, digital asset management, and document signing. These are all multi-billion dollar and fast-growing markets. Forward-thinking investment funds like Borderless Capital and the Andreessen Horowitz Crypto Fund II are available to help fund startups in this area.

Rochelle: Blockchain transaction storage is limited, and many business transactions include a receipt, invoice, bill, or other forms of agreement that exceeds this limit. How can the agreement information be included with the purchase, so that it is clear to consumers what they agree to when signing transactions?

Eric: Well because the space available in an Algorand transaction is limited to 1KB, these agreements must be stored off-chain. IPFS provides decentralized and immutable storage, which can be linked by the transaction. In this way, consumers can verify what they are paying for prior to signing a transaction, similar to reviewing a check at a restaurant prior to paying. 

Rochelle: Have businesses been using this new solution yet? 

Eric: Yes, we are now working with some early adopters who are using the Algorand blockchain to develop point of sale solutions. The feedback is positive, by abstracting the transaction processing, application development is ~4X faster. Also, in many cases, the Transaction Gateway can negate the need for the creation of a smart contract which further simplifies the solution. 

Rochelle: What would you say is Algorand’s biggest challenge at the moment for gaining traction on this project? 

Eric: The biggest challenge seems to be helping businesses visualize the next generation of decentralized applications. The current generation of blockchain applications are mostly variations of crypto kitties and gambling apps. There are much bigger and promising opportunities, with the potential to make a positive impact on the world. I think it is just a matter of time before this becomes clear to more people. 

Rochele: Do you have any way of knowing who is using Algorand to build their own dapp? 

Eric: We are currently working with some development teams. If anyone is interested in building solutions with Algorand like the point of sale application, please reach out to me at eric@algorand.com