Algorand is a self-sustaining, decentralized, blockchain-based network that supports a wide variety of applications.
Cryptocurrencies currently seem like a scam at worst and speculation at best, but they have real value and what makes them valuable is the real-time applications they offer in everyday life. To achieve this goal, their protocols need to meet the triple criteria of decentralization, scalability and security and above all win the hearts of traders and investors.
Many crypto projects aim to be at the top, but few can truly say they are there. ALGO, the native token of the Algorand network, is currently among the top 15 cryptocurrencies by market cap and has a solid support of $126 million. Created by Massachusetts Institute of Technology (MIT) Professor of Engineering Silvio Micali in 2017, the project went public two years later in mid-2019. Here’s what you need to know about Algorand and its local icon ALGO.
What is Algorand?
Algorand is an open-source blockchain platform launched in 2019 by the Algorand Foundation with the aim of changing the way cryptocurrencies are designed. It does this by increasing transaction speed, reducing transaction time, and increasing the security of the blockchain without compromising decentralization.
Like Ethereum, Algorand uses a proof-of-stake (PoS) consensus and its blockchain is secure. However, negative consequences for bad actors in the network are not imposed: in a sense, the delegated PoS (or liquid PoS) protocol “rewards” cheating, as with any other transaction. The strategy is to deter members from cheating rather than punishing them. To be honest, Algorand only needs two-thirds of the network’s members to run smoothly.
Built to improve security and scalability with a decentralized approach, Algorand is one of the protocols ready to unravel the blockchain trilogy, incentivizing many private investors to finance the blockchain. A defining advantage of ALGO is that every new ALGO token it introduces into the system is distributed to everyone who owns the currency.
What is ALGO?
ALGO, the service token of the Algorand network, can be staked and used to earn rewards in the Algorand ecosystem. All payments in the Algorand community are made with the ALGO token.
How Does Algorand Work?
Decentralization, scalability, and security are options every cryptocurrency network builder should play with. Even Vitalik Buterin, the founder of Ethereum, acknowledges that developers of a blockchain are often forced to prioritize two of these three pillars.
The blockchain triad is a term used to describe these three characteristics required for a project to be acceptable. Typically, a decentralized and highly secure network compromises scalability. Additionally, most decentralized and scalable blockchains are vulnerable to attacks. Finally, a secure, scalable network may find it difficult to achieve true decentralization.
Algorand only requires a two-thirds agreement from approving parties for transactions to be approved. You would need to own more than a third of Algorand’s token supply to have any chance of successfully breaching the system. With a market cap of almost $9 billion, this is highly unlikely.
Key Features of Algorand Platform
Cryptographic Sequence
Algorand uses a special random selection process called lottery to partition its blocks. The segments are then divided into two groups called the proposal stage and the voting round. These lotteries, also called “cryptographic sorting”, are useful in ensuring the speedy completion of the transaction and the record of certainty. That way, you don’t have to wait for 20 or more confirmations to find out if and when a transaction has taken place.
The two stages of cryptographic sequencing are as follows.
Bid Stage: A single token is randomly selected for inclusion in the next block. To avoid any manipulation or interference, this bidder is initially hidden from the network and is introduced to them only at the propagation stage, when it is clear that it would be foolish to try to interfere. The chance of a coin being selected is the same as any other coin in the network.
Voting Round: After the proposal phase, the next line of action is the voting phase, where a committee of people each holding at least 1,000 coins is selected to approve the block proposed by the first user. Unlike the familiar fixed committee system in many proof-of-work (PoW) or PoS blockchains, the randomness and spontaneity in the selection of committee members makes the protocol secure and hack-proof. The focus of any potential attack is unknown – until it’s too late to launch an attack.
Algorand is also permissionless, meaning anyone who owns the token (who is also online) can participate in node verification. The process is very easy. Participants only need to go to AlgoExplorer and the number of ALGO tokens is determined. There are two types of nodes in Algorand: transition nodes and participation nodes. Hardware-intensive relay nodes are useful in improving communication between participation nodes, while participation nodes assist in voting and other decision-making processes.
Pros and Cons of Algorand
pros
By investing in the Algorand project, investors can expect the following benefits.
Pioneer in crypto: Recently a wave of central bank digital currencies, digitized versions of the country’s fiat currency, was launched and many countries joined it. First the Marshall Islands, then China, Ukraine, South Korea, Nigeria. These are just a few of the countries with digital fiat currencies and there are many ongoing offers.
Shorter time to scale: Talk about decentralized finance (DeFi) and smart contracts, and Ethereum is probably the first name that comes to mind. With decentralized applications like Uniswap, Aave, MakerDAO, and Yearn Finance, Ethereum dominates DeFi so far.
Decentralized Finance (DeFi) takes the concept of decentralized blockchain and applies it to the world of finance.
However, despite having a first mover advantage, Ethereum generally has a slow scaling time. It runs on a PoW consensus and therefore cannot handle many transactions per second.
Transactions per second, while Ethereum performs 15-30 TPS (its upgrade to PoS consensus and upgrade to Ethereum 2.0 is yet to be made), Algorand is trading just under 1,000 TPS. This number will increase as they improve their protocol processing capabilities, with the end goal being 46,000 TPS.
Impressive use cases: Ethereum has been the foundation for more than 100 companies, startups, and fintechs overall to build their decentralized applications (DApps), games, and supply chains. In contrast, Algorand has applications in the identity security, insurance, stablecoins, crypto assets, and government industries. DApps like Opulous (used for financial solutions), Voyager, (a crypto asset broker), and Bleumi (a payment solution protocol) are all built on Algorand. One of the most popular DApps on Algorand is Chainalysis, a data and analytics platform for blockchains.
cons
Regarding the protocol, there are not many flaws that can be detected. Three seemingly significant drawbacks are listed below.
Government regulations: Various attempts have been made around the world to prevent cryptocurrencies from becoming mainstream. China, Japan, the United Kingdom, and other countries have created laws or regulations to directly or indirectly affect the local adoption of crypto.
The never-ending Ethereum threat: We would be delighted if Algorand was the first protocol to introduce smart contracts and DeFI. Unfortunately, the honors go to Ethereum again. The first name that comes to mind when developers want to work on a DApp is Ethereum, which will continue to be a valuable and fundamental element in the DeFi space. More than 300 developers are working on new projects using the Ethereum protocol.
Unseen threats: Apart from Ethereum, there is one more threat to hinder the growth of Algorand: token performance. In recent weeks, we have seen many Tier 1 blockchains come into limelight, with the total number of cryptocurrencies available with over 10,000 tokens/coins. The scalability space, in particular, is quite crowded, which could lead to long-term consolidation of token prices.
ALGO Coin Review and Future
There are a few things we need to consider to evaluate the overall performance of Algorand.
Low computational requirements: Unlike the PoW blockchain consensus, the presence of miners is prevented in the Algorand protocol. This helps two things: first, transaction fees are much lower than they would be with miners in the ecosystem. Second, the protocol passes the environmental friendliness test.
Authorization: If a participant wishes to be part of the authorization arm of the consensus, tokens can be transferred to a shareholder.
Unforkable chain: In the Algorand consensus, users can trust each block as it appears, because it cannot fork or branch into two different chains. While there are times when the network is partitioned, Algorand ensures that transactions remain consistent. Double spending is an issue on many decentralized platforms. In the Algorand network, double spending does not occur as it is impossible to persuade two different people to confirm two different transaction blocks in the same transaction round. Also, once a block is created, it becomes part of the system forever.
True decentralization: The random selection of the committee to approve blocks means anyone online can be chosen, and therefore the network is truly decentralized. Token holders can also vote against or in favor of changes in the network.
Scalability and speed: Algorand is more viable than most of its competitors.
Overall Algorand is an impressive project with a pure PoS consensus mechanism. To reiterate, Algorand is a protocol currently approaching solving the blockchain trilogy. It’s still unclear how Ethereum 2.0 will affect the Algorand protocol, but hopefully Algorand doesn’t take a major hit.
Algorand’s team has tremendous brainpower in math and computing, and has millions of dollars in investments from retail and venture capitalists. The Algorand team is changing the DeFi concept and we can’t wait to see how the project turns out over the next few months.
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