The Algorand blockchain offers everything you need to develop robust and scalable decentralized applications (dApps) directly on layer 1. At the heart of this functionality lies the Algorand Virtual Machine (AVM), a trustless and secure execution environment that runs code on Algorand.
Inside the AVM: A powerful tool for building applications of the future
The AVM is a secure execution environment, distributed across the Algorand network, running on every node. It contains a stack engine that plays a fundamental role in evaluating and executing smart contracts and smart signatures. The AVM offers a complete instruction set (opcodes) that make it Turing-complete, ensuring it’s maximally capable, yet with scalability and low costs. Within a single execution, the AVM offers an impressive computational budget that can enable the development of complex use cases, directly on layer 1, such as financial applications, games, or DeFi protocols. The AVM contains everything a developer or institution needs to build scalable applications on Algorand’s fast, low cost and stable infrastructure, including: Algorand smart contracts, with both stateless and stateful smart contract capabilities Large computational resources Scalable storage (with dynamic allocation) And, as of March 2024, the AVM is natively programmable in regular, semantically, and syntactically normal Python—a feature unique to the Algorand blockchain TypeScript will be the next native language, supported by the AVM compiler. Being a layer-1 execution environment, the AVM natively interacts with all the other layer-1 features, explored in more detail below.
Stateless and stateful smart contracts for power & flexibility
Smart contracts are a core feature of the Algorand blockchain, powered by the AVM. These contracts allow developers to build secure and programmable applications on layer 1. Transactions involving smart contracts are fast, confirm with instant finality, and enjoy minimal fees. There are two types of smart contracts on Algorand: stateless and stateful.
Stateless smart contracts (also referred to as smart signatures) are deterministic programmatic apps, which make no use of the ledger's state. In other words, their “stateless verification” makes use just of data submitted in the transaction, as a regular transaction verification with a regular digital signature; once evaluated “true” they stay “true” regardless of the ledger’s state. Due to their simplicity and efficiency, stateless contracts work well for specific use cases, such as cryptographic operation (which can be demanding in terms of computational budget), fee delegation, atomic transfers, payment channels, and escrow services with predefined conditions.
Stateful smart contracts (also referred to as applications) store and manage data on the blockchain. This allows them to track information, such as the contract's function, like user balances, ownership records, and game scores. It also enables them to maintain the current state of the contract, which can change based on user interactions or pre-defined logic. Stateful smart contracts are useful for decentralized marketplaces, automated marketmakers, supply chain management, loyalty programs, gaming, real-world asset tokenization, financial contracts, and other sophisticated use cases. Algorand's on-chain storage allows an application’s memory to scale elegantly (pay-as-you-store) through resizable and scalable chunks of memory called boxes.
Algorand Standard Assets for simplified asset representation
Algorand Standard Assets (ASAs) are a powerful tokenization framework at layer 1 that can be used to mint fungible and non-fungible tokens. ASA are customizable assets that benefit from the same security, compatibility, speed, and ease of use as the Algo. ASAs allow issuers to define and manage tokens with custom features, such as whitelisting, asset freeze and revoke, and asset role-based access control (RBAC). These assets can represent anything, such as real-world assets, stablecoins, tickets, in-game items, and loyalty points. Unlike other blockchains that rely on smart contracts to create tokens, ASAs are a built-in layer-1 feature, they are declaratively created, making them simpler and faster to create without potential bugs.
Atomic transfers for trustless transactions
Atomic transfers simplify transactions on the blockchain, enabling immediate settlement for a group of transactions. With atomic transfers, all the transactions within a group are treated as a single unit. If any transaction in the group fails, the entire group fails, and none of the transactions are executed. This ensures a level of certainty and eliminates the risk of one party completing their leg of a transaction while another party's leg remains incomplete. Atomic transfers are a core part of the Algorand layer 1. They can be used for escrow services, decentralized exchanges (DEXs), multi-party payments (like group payments), delivery vs. payments, and sending funds to multiple recipients simultaneously. Atomic transfers essentially function as instant and final multi-party agreements, eliminating counterparty risk and code risk. They achieve this by guaranteeing a specific and predetermined order of execution for multiple transactions within a single group.
On-chain randomness
Algorand’s on-chain randomness beacon offers a secure, trustless, and verifiable way to generate cryptographically secure randomness. On-chain randomness serves as a vital component for provably fair gaming, random NFT generation, lottery and raffle systems, and other situations where a fair and random number is required. However, blockchains are deterministic machines—you give it an input and it delivers an output, the antithesis of random! Algorand has achieved this cryptographically secure randomness through VRFs and cryptographic tools with two vital characteristics: verifiability and unpredictability. The randomness beacon calls the same VRF used by the Algorand consensus protocol to generate verifiable pseudo-random values stored on-chain. Nobody can predict the number beforehand, not even the randomness beacon, and anyone can confirm that the number was generated fairly and not tampered with. These random values can be used by any smart contract deployed on the Algorand blockchain.
Quantum-secure State Proofs for interoperability
State Proofs extend trustless transactions beyond the Algorand ecosystem, acting as a tool for outbound verification of Algorand in other blockchain ecosystems. They provide a secure way for other blockchains to check the state of the Algorand blockchain, including account balances and transactions. This is particularly useful for building trustless interoperable applications, without relying on a centralized intermediary, like a bridge or validator network. At the forefront of innovation, Algorand State Proofs achieve this trustlessly with post-quantum secure compact certificates that attest and compress the ledger's state changes happening in every 256 rounds. These State Proofs provide a compressed representation of recent transactions, allowing light clients on other blockchains to efficiently track Algorand's state without needing to download the entire blockchain.
Sustainable at its core
PPoS is designed with sustainability in mind. The lightweight PPoS selection process and block proposal system eliminates the need for multiple validators to expend energy creating several confirmation blocks, as seen in some PoS systems. With PPoS, there's no wasted energy on forks or block reorganizations: any energy spent on the validation of orphaned soft forks is ultimately wasted, whilst all energy used by Algorand is 100% beneficial to the network. Transactions are validated and finalized quickly, minimizing energy consumption. The beauty of PPoS is that it maintains low energy usage even as the Algorand network scales and processes more transactions.