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Balthazar Research Report: Algorand’s adventure to GameFi

Written by Nicholas Korsgård, Chief Gaming Officer, Kim Bjerkeli and Sigurd Thomassen, Game Strategists, Balthazar Alpha Team, and Heidi Anette Laugsand Johansen.

Introduction

In this report, we will present our research on the Algorand Foundation. We will discuss Algorand’s partnership with ClimateTrade and its new CEO, saying goodbye to Sean Lee and welcoming Staci Warden.

We will also investigate gaming on the Algorand blockchain, focusing on Algorand’s entry into GameFi. Of note the $500 million borderless ALGO FUND ll, Algo Hackathon, and Alchemon, which is the first monster-collecting NFT staking, crafting, and trading card game on the Algorand Blockchain.

We will also discuss statistics, socialnomics, and the bull case for the Algorand blockchain. What can be said about Algorand’s founder, Silvio Micali, and what does Algorand’s future potentially look like?

Disclaimer: Algorand Foundation is a backer of Balthazar. However, the following content is the subject of the authors’ thoughts, speculations, and our attempt to connect the dots.

Algorand Partnerships and news

Algorand x ClimateTrade

Since early development, the Algorand network has been designed to impact the environment minimally. As the consensus is not based on energy-intensive proof-of-work, it has been a leader in minimizing the environmental impact of blockchain technology.

The founder of Algorand, Silvio Micali, stated that the partnership with ClimateTrade on June 4, 2021, is to double down on Algo’s eco-conscious efforts. He acknowledges the importance of striving to become as green as possible and having a carbon-neutral, or even negative, blockchain technology.

Francisco Benedito, CEO of ClimateTrade:

“Clean energy and addressing climate change are priorities for the United Nations, global organizations, and governments alike. Algorand has a very low carbon footprint, to begin with, and we are inspired by the leadership role the organization is taking to ensure the next generation of blockchain adoption is environmentally friendly.”

To achieve the goal of having a carbon-negative network, Algorand and ClimateTrade will implement a sustainability oracle in the blockchain, which will cause Algorand to become a green treasury with a protocol that runs as carbon-negative. With this green alliance, Algorand and ClimateTrade will have a positive impact on the environment while also leveraging several new projects such as:

  • The Southern Cardamom REDD+ project was initiated by Wildlife Rescue and Wildlife Works. These organizations protect rainforests by reducing more than three million tons of carbon emissions annually.
  • The Vichada Gold Standard Climate Project aimed at reforestation in the Orinoco Department in Colombia.
  • The Oaxaca Wind Project by Acciona, which covers the electricity demand of 700,000 Mexican homes, avoiding the emission of 670,000 tons of CO2.
  • The Sumatra Merang Peatland Project by ForestCO2 which aims to protect and restore the peatland ecosystem in Indonesia.

By the looks of it Micali is serious when he says having a green blockchain is one of the main objectives of Algorand. From its relatively new partnership with ClimateTrade, we are excited to see what choices will be made in the future for green blockchains.

Staci Warden, new CEO of Algorand Foundation as of 2022

Big news took place on February 10, 2022, when the Algorand Foundation announced the appointment of Staci Warden as the new CEO. She has a big role to fill, as Algorand states this is the year of development of the Algorand network, broader crypto ecosystems, adoption of crypto-based industries, DeFi, and NFTs.

Another big goal is that the Algorand blockchain network is a crucial building block for creating a new, inclusive economy and that the financial benefits of blockchain technology are accessible to everyone. Warden stated that Algorand would focus on scalability to global partners. She hopes to solve the issue of the 1.7 billion people in the world without access to finance, to give them an entry through Algorand.

https://finance.yahoo.com/news/algorand-appoints-ceo-staci-warden-155149641.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAGhgyhttspfYwtCvbWI9InzjENwp43wexwddnpr_PYj9fc8iRRwOeEVxYHNuOqqk8ZrOnyq34lV7RqIyNxypFitEDcI1RK8g60eUe6xSLUP56vqtCoyWsoP_Xwc6UqEq1CopmBk2ipEIyJ7beJUUSrnm4RKsof9E9KzNv0BvjysB

Its prior CEO, Sean Lee, which has spent 18 months at a critical time in Algorand, has decided to explore new career opportunities. Kieron Guilfoyle, Algorand Foundation’s Board Chairman said that Warden has the understanding, experience, and expertise to shift Algorand Foundation into its expansion phase.

Judging by Warden’s experience having led global teams at the Miken Institute, JP Morgan, the Nasdaq Stock exchange, and the U.S Treasury Department while also doing business in more than 50 countries, we have no reason to fear the change of CEO in the Algorand Foundation.

Gaming on Algorand

Algorand has, from the start, focused very heavily on building the tech and improving its blockchain’s security and operations more than anything else. Because of this, there has not been a big focus on pushing gaming on Algorand, but recently there seems to have been a change in the wind on both Algorand’s focus and attention on the GameFi space.

It would seem that Algorand has gotten to the point with its blockchain tech, where it is ready for new challenges. As we are diving deeper in our research, it’s becoming more and more apparent that Algorand is paving the way for gaming on its chain moving forward.

https://algorand.foundation/about-us

We had the chance to speak to Piergiaccomo Palmisani, Algorand Foundation’s Ecosystem Development Manager, who elaborated on this:

“Algorand is committed to becoming the de-facto blockchain for gaming, and we’ll be scaling our efforts in fostering a strong ecosystem throughout 2022. The next generation of crypto games that want to attract dozens of millions of users needs a high-performing, secure, and carbon-neutral blockchain that never forks and never goes down. We are uniquely positioned to empower game developers to build the next wave of AAA games while lowering barriers to entry for billions of players around the world.”

Why GameFi, and why now?

So far, it seems that Algorand has had its primary focus on finance, by bringing blockchain technology to the traditional financial world. But because of technical advantages that we’ll come back to later in this report, Algorand has set its focus on the GameFi space. Some of these advantages are transaction speed, scalability, and low gas fees.

Algorand is also working on integrations with game studios and companies like Unity and Unreal Engine. Integrations like this would make it easier for game developers native to the respective game engines to create games on Algorand.

Because the focus for Algorand has been elsewhere until now, the gaming ecosystem is relatively small. This means that there is a lot of untapped potential for a game studio deciding to build on Algorand. The technology within the ecosystem will also allow developers to make games that have a seamless interface with zero interaction between the user and the blockchain. This allows for a 4.3 second finality feature that will hide the latency for the end user so that they won’t feel the blockchain at all.

Borderless Capital

On November 30, 2021, Borderless Capital announced a $500 million Borderless ALGO Fund II focusing on investments in digital assets powering the next generation of decentralized applications on Algorand. Borderless Capital is one of the leading Algorand investors, and already launched its first ALGO fund with $200 Million in 2019. Now it is doubling down on its commitment to the continued explosive growth of Algorand.

“We started Borderless Capital back in November 2018, even before the Algorand MainNet was live. It amazes us to see how the ecosystem has expanded since then, but we believe this is just the beginning, and there is a lot of room to keep growing,” – David Garcia, Founding Managing Partner at Borderless Capital.

Algorand Gaming Hackathon

Then there was Algorand’s own “Gaming Hackathon,” which took place November 1 to December 7, 2021. During this hackathon, Algorand looked for game studios with experience in building indie games and wanted to integrate blockchain functionality into an existing game or build a new game. The options were play-to-earn games, NFT-based games, or metaverse games.

Requirements being the inclusion of Algorand’s layer-1 features as NFTs, standard assets, smart contracts, smart signatures, and Atomic Transfers. As long as these criteria were met and passed Algorand’s quality evaluation, four game studios were awarded a $250,000 bounty for each successful submission.

Alchemon

In our search to find upcoming or existing good quality games built on Algorand, we couldn’t stop ourselves from coming back to Alchemon time and time again. The first impression instantly took us back to the glory days of Pokémon on Gameboy, especially by the immensely nostalgic tune playing on Alchemon’s homepage.

So we got Pokémon on Algorand, or as they explain it, Algo + Alchemy + Monster = Alchemon.

Alchemon is the first monster-collecting NFT staking, crafting, and trading card game on the Algorand Blockchain. You can collect, evolve and craft Epic and Legendary Alchemon. Interactions with the project earns you AlcheCoin, evolutions, prizes, and more. Alchemon claims to be “the next step” in evolving the play-to-earn model. This is based on the intention to be a play-to-earn game creating engaging NFTs and an excellent gaming experience while handing the economics over to the community. As they very simply explain in their current Litepaper.

Alchemon is still in its infancy, but we enjoy the idea of being a grassroots game with a heavy focus on the community without promises of overdelivering a AAA game. To begin with, the game will be starting out with a 3v3 battling system, with more game modes in the works.

The beta launch is right around the corner and is expected to be out by the end of March at the latest. We are looking forward to taking a closer look at the game once it is finished and playable.

After the beta launch, there are quite a few exciting launches to look forward to throughout 2022 and 2023. Some highlights include the full game release, marketplace, mobile release, renting system, land presale, more game modes, and last but not least, Alchegold DeFi and Metaverse.

One thing is for sure; the art is nostalgically beautiful, the music takes us back to the Pokémon glory days and just makes us want to start playing the game already. We will be watching this one closely.

Statistics

Let’s look at some Algorand statistics. All charts were pulled directly from https://algoexplorer.io/.

The number of accounts with a balance of more than 1,000 Algorand has seen dramatic, steady growth since 2019.

Total accounts look very similar in the dramatic growth we’ve seen on the chain over the last few years.

Transactions per second are slowly but surely rising, further testament to a chain with heavy and continuous growth.

Socialnomics

Social media followers count

Algorand by social volume

According to LunarCrush, Algorand is currently coin #28 on social volume with 5.95K unique mentions across social media. It is notably beating out Atom #52 and Chainlink #37.

Some competitor chains that are beating out Algorand include Fantom #25, Solana #17, and Tezos #3. The top 10 currently require 26.6k social volume, and the top five require 38.9k.

When comparing the social volume of Algorand to the market cap of Algorand, which is currently #29, we see that they’re not too far apart.

A bull case for the Algorand blockchain itself

Algorand is a Layer-1 blockchain based on the Pure Proof-of-Stake (PPoS) principle. What separates this from most other PoS blockchains is that every holder of Algo is participating in securing the network. You don’t have to stake the tokens actively.

At the time of writing, the current annual yield of staking is between 4-6%. The staking reward varies depending on several factors such as your current balance, total circulating supply, and incentive program changes which the Algorand Foundation is managing.

Algorand sets out to solve the trilemma of security, scalability, and decentralization. It does this through the PPoS consensus mechanism. What also makes Algorand quite unique is the Algorand Virtual Machine (AVM).

The AVM supports smart contracts with Turing-complete languages, larger program sizes, more state, has many new additional opcodes, and offers developers the ability to use functions, loops, and recursion.

Algorand caters to developers by enabling them to quickly write smart contracts in both Python and Reach. Smart contracts can take the position of an escrow holding NFTs, tokens, or Algos. It can also facilitate financial transactions based on the contract logic.

One of the hard-hitting facts about the Algorand blockchain is that it currently can operate at over 1,000 transactions per second (TPS) and reaches block finality in under five seconds. This is the second-fastest for a Layer-1 blockchain, only beaten by Solana with its 50,000 TPS. However, Solana has received a lot of critique regarding the decentralization of the chain.

As with several other PoS layer-1 blockchains, Algorand also has meager transaction costs. The transactions cost 0.001 Algos, which at the time of writing equates to $0.00082.

Algorand Standard Assets (ASA)

The Algorand Standard Assets (ASA) provide a standardized layer-1 mechanism to cover any asset on the blockchain, including fungible, non-fungible, restricted fungible, and restricted non-fungible assets. ASAs are directly built into Algorand’s layer-1 and leverage its speed, security, and low cost of execution.

An example of asset types that the ASAs can represent is found in the picture below from the Algorand website.

Atomic Transfers

In computer science, an atomic operation or transaction is a way to assure that the transaction is executed entirely or not at all. No half-completed procedures. Algorand implements this with atomic transfers, which provide a trust-less solution to the Layer-1 blockchain. It offers a secure way to transfer assets among several participants simultaneously. In short, several transactions are grouped, and either all are executed, or none of them are.

Rekeying

As with most, if not all, blockchains today, public and private keys go hand in hand. This goes back to the early days of blockchain, but it has become inefficient in some manner and not always secure. When a private key gets compromised, that key needs to be changed. This means for most blockchains that you also need to change the public key; in short, you have to make a new wallet. This is tedious, as the new public key needs to be provided to others for identification purposes. It’s like changing your email address. You have to tell all your important contacts that here is my new email; use this instead.

Algorand has a solution for this. It allows users to change their private key without changing their public address. This is called “rekeying,” enabling continuity, flexibility, and operational efficiency.

NFTs

Algorand enables several types of assets through the ASA mechanism. NFTs are one of them. Through ASAs, they can be built directly onto the Algorand Layer-1 in just a few seconds. They can be highly customized and leverage Algorands’ Layer-1 perks like stateful smart contracts and atomic transfers.

ARC3 vs. ARC69

Algorand supports two NFT standards, and those are ARC3 and ARC69. ARC3 is used for both fungible and non-fungible tokens. It is built to handle large amounts of metadata, for example, videos. Its data is stored on the IPFS (Interplanetary File System), a peer-to-peer system for storing and accessing applications, files, data, and websites.

The ARC69 asset type stores data directly on the Algorand blockchain. Most NFT marketplaces support ARC69. As of now, most NFTs are digital art or, in some cases, playable characters in an NFT game. But in general, the amount of data in an NFT is not unmanageable for the blockchain itself, and we can see that the ARC69 asset type is used the most for now.

When games become more complex and the NFT scene matures, we will see more demand for the ARC3 kind of assets, as they can store a lot more data on the IPFS. A JPEG image will be limited in size, but a playable character in a content-rich game could rack up a lot of data as history through hundreds of hours of gameplay. This data will add to the rarity and value of the NFT character. Another case for ARC3 could be to tokenize video clips of a game-winning play or some other jaw-dropping moment in-game that one would like to share or sell as an NFT in its own right.

Below are some statistics on Algorand NFTs taken from this TechDreams.

Here we can see that the ARC3 NFTs aren’t as popular as the ARC69 ones just yet. With continued development in the NFT space, and more games getting built, we believe we will see an increase in the use of ARC3 NFTs.

Co-ownership and royalty sharing

Due to Algorand’s smart contract system, the NFTs could have complex contracts and arrangements built into them. This could make solving problems around commission and royalty sharing a lot easier. One could also make co-ownership of an NFT possible. Fractionalized ownership of NFTs is very intriguing and will most likely play a central part in any guild and scholar business model in the years to come. The NFT owners will share the profit with the scholar, and the owner-share will be distributed between the different owners accordingly.

Interoperability

Algorand has focused on interoperability since its inception. All tokens or assets built on the Algorand Layer-1 will have universal interoperability through the ASA. Besides this, Algorand also enables cross-chain interoperability through partnerships. Here is a list of partners that promote their cross-chain interoperability.

  • Stacks – A decentralized platform with a goal to let users control their data and identity. The programming language Clarity enables the networks to communicate directly.
  • pNetwork – A blockchain project that aims for universal blockchain composability (a broader term for interoperability). And is creating cross-chain bridges for the Algorand ecosystem.
  • Circle – The project behind the leading digital dollar stablecoin USDC. This partnership adds support for USDC on Algorand.
  • Yieldly – DeFi platform built on Algorand, connecting major chains like Ethereum, Polkadot, and Binance.

Due to Algorand’s effort to integrate interoperability internally and externally, it is poised to become one of the leading platforms for CeFi (Centralized Finance) and DeFi (Decentralized Finance).

Algorand State Proofs

One way Algorand is pushing the boundaries of interoperability is through “Algorand State Proofs” or ASP. ASPs attest to the state of Algorand through an immutable chain of proofs. Through ASPs, anyone can keep themselves updated on transactions, balances, and application data without compromising security. This is because the Algorand consensus mechanism makes each ASP.

What makes ASPs even more remarkable is its low power consumption. It can be run even inside a blockchain smart contract. Due to this lightweight nature, ASPs are used to update Algorand clients in other blockchain ecosystems. In ecosystems where gas fees are an issue, for example, Ethereum, Algorand will make even more compact zk-SNARK proofs to keep clients up to date.

In the illustration below, you can see an example of how this process would look when sending something from Algorand to Ethereum through a trustless bridge.

The illustration is taken from this article on Algorand State Proofs.

ASPs strengthen cross-chain applications with security built to handle post-quantum situations. Using advanced cryptography, it can withstand powerful attacks by quantum computers trying to alter the state of the blockchain. Developers intending to build on Algorand will be able to leverage the fast, reliable, and cheap protocol in their creations without having to trust anything but the underlying security of the Algorand blockchain itself. ASP’s launch is imminent, as the first milestone of going live is in March 2022.

Quantum Resistance

The research and development within quantum computing has had significant progress in recent years. And quantum computers like the IBM Eagle may soon prove to be a worthy adversary to most blockchains. Due to this, Algorand sets out to be one of the thought leaders within next generation cryptography, which should withstand potential future quantum attacks. Even though they might not be there yet, it is something the developers seem to be taking very seriously as they have onboarded experts in the field to find ways of integrating post-quantum cryptography into Algorand’s protocols.

Silvio Micali

Algorand represents a new public ledger that offers both the convenience and efficiency of a centralized system without the inefficiencies and weaknesses of current decentralized implementations. Silvio Micali founded Algorand in 2017 and manages all research, security, and finance within Algorand.

He has been a professor of the faculty of Massachusetts Institute of Technology (MIT), teaching computer science since 1983. He works in the department of electrical engineering and computer science. Micali’s research focuses on cryptography, secure protocols, blockchain, and pseudorandom generation.

In an article written in April 2021, Algorand pledged to be the greenest blockchain available. Since its inception, Algorand has had sustainability as a core component. It is also designed to minimally impact the environment because of its consensus protocol, which requires minimal computational power or electricity compared to other blockchains. Creating and transacting on Algorand created two million-times less CO2 emissions, according to Algorand.

Fransisco Benedito, CEO of Climatetrade, which is a partner of Algorand, says this about climate:

Clean energy and addressing climate change are priorities for the United Nations, global organizations, and governments alike. Algorand has a very low carbon footprint to begin with, and we are inspired by the leadership role the organization is taking to ensure the next generation of blockchain adoption is environmentally friendly.

Micali received the Turing award in 2012 in computer science, generally recognized as the highest distinction in computer science and is often referred to as the ‘Nobel Price of Computing.’

In 2021 he also received the Italian scientists & scholars in North America foundation (ISSNAF) lifetime achievement reward. ISSNAF ‘acknowledges outstanding individuals of Italian origin who, thanks to their pioneering spirit and lifetime commitment, have honored their country of origin and given a significant contribution to research, leadership, and mentorship in any field.

Other rewards Silvio has received include the Gödel prize (1993) in computer science and the RSA prize (2004) in cryptography. The Gödel prize was given to him based on his invention of Zero-Knowledge proofs together with Shafi Goldwasser and Charles Rackoff. This is a method by which one party can prove to another party that a given statement is true or not without sharing internal information.

In addition, we would like to include that he is also a member of the National academy of Science, The National Academy of Engineering, the American Academy of Arts and Sciences, and Accademia dei Lincei.

Having a person with such merits leading the team clarifies that Algorand is serious business. From its whitepaper, we can also see that there is hefty research going on, and with the background from MIT, we expect nothing less. Our eyes have indeed been opened to what is happening inside. This project builds its fundamentals on science and research and has solved the blockchain trilemma of scalability, security, and decentralization, which most other blockchains struggle to do.

Having the fundamentals in place, it now seems like Algorand is branching into the NFT and gaming space, and we believe it can be a real contender with its high transaction throughput and diverse asset classes.

Algorand’s future

Algorand’s journey into GameFi is just getting started, and we are very excited and curious to see what will unveil itself on the chain over the following months and years. Algorand is welcoming games and developers with open arms and support, and we believe there is a good chance many will answer the call.

As the GameFi space evolves, the need for high security and operational stability chains will increase, and we believe Algorand is ready to meet the masses. The winds of change have brought Algorand to GameFi, and they intend to stay

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