Algorand (ALGO) is a blockchain network and cryptocurrency that attempts to solve the “blockchain trilemma” – the ability of a network to be scalable, secure and decentralized. Transactions cost 0.001 ALGO and the network already offers L1 smart contracts. However, the network will be upgraded in Q3-Q4 2021 to 45k/s TPS and 2.5s finality, ranking it toward the top for speed and scalability. ALGO is currently experiencing ~1m transactions per day, placing it close to ETH in usage.
Algorand was founded by the Turing-award-winning, MIT professor Silvio Micali – and is backed by an excellent team with solid peer-reviewed academic prowess and publication record. Silvio Micali conceived of and pioneered zero-knowledge proofs – an critical piece of cryptocurrencies. ALGO’s respectable and trustworthy development team boosts ALGO’s chances of mass adoption, especially in the financial/institutional sectors – which appears to be ALGO’s target demographic.
Algorand uses pure proof-of-stake (PPoS) as a consensus mechanism, which employs algorithmic randomness and an improved form of Byzantine agreement to achieve decentralization + security. PPoS differs from regular, delegated PoS (dPoS) in a number of ways, including:
- No pooled validators. Theoretically, this minimizes the drive toward centralization.
- ALGO node running is permission-less (i.e. anybody with >1 ALGO can run a node, be a validator and participate in consensus).
- PPoS is lightweight (an ALGO node can be run on a low energy, $50 Raspberry Pi 4).
A key feature of PPoS is the use of a randomized, weighted lottery that selects validators – known as VRF. This prevents any malicious actor(s) from attacking the network since the identities of the currently selected validators (who must be corrupted in order to carry out an attack) are not known until the block is already finalized. At 1-4k validators, PPoS is paradoxically superior to dPoS in terms of decentralization – even if the latter had 50,000+ nodes. This is because validators under the dPoS system are long-lived and known. By contrast, ALGO’s random selections vary on both a round and subround basis – that is, block proposers, voters, vote certifiers all vary, across all steps of creating a block – making it incredibly secure and decentralized.
Governance, Rewards, Carbon Negativity
ALGO currently offers liquid and seamless staking with an APY of ~5.75% – you simply hold ALGO in a non-custodial wallet and there is no lock-up period. On Oct 1st 2021, governance is launching and this will gradually replace staking. In exchange for voting on proposals, you will be rewarded with 7.5-33% APY (depending on the number of participants). For the initial 3 months, this APY will be in addition to the passive 5.75%, meaning you could theoretically earn up to ~38.75% APY. Governance will allow ALGO holders to vote on changes to the network, consensus mechanism or tokenomics – and also select projects to receive developer grants (see below).
PPoS is extremely lightweight – consuming ~0.000008 kWh per transaction. That’s ~70,000x less energy than ADA, and 116,250,000x less energy than BTC. The energy that is used by ALGO is 100%+ offset via carbon credits. An on-chain sustainability oracle analyses the energy utilised by each node and a partnership with ClimateTrade (and others) then channels this funding into reforestation, peat management and wind-energy projects. ALGO is eco-friendly, and the world’s first carbon-negative blockchain network.Developer Friendly & Ecosystem
Developer Ecosystem and Decentralized Applications
A number of high profile projects, including ALGO’s first DEX are launching shortly this year. Tokenized real-estate projects (e.g. Lofty) are currently operating successfully on ALGO.
Forking Mechanism and Adoption
A key feature of Algorand is that it is forkless – it is mathematically impossible for ALGO to fork. Businesses accepting ALGO as a cryptocurrency will not only experience rapid finality but can trust that the transaction is not on a forked branch of the blockchain that can be lost. This is even more important for NFTs. So far, ALGO has seen major adoption, including:
- 70M South Americans (potentially 200M soon) using ALGO to issue + store COVID-19 passports.
- BNext adopting ALGO for its $100b/year Spain<->Latin American remittance service.
- MAPay adopting ALGO to power $800m/year in healthcare payments for Bermuda.
- SIAE, one of the largest and oldest digital rights management companies in the world, launched 4.5m NFTs onto ALGO – representing the work of 10,000 artists and which will involve $100m/year in royalties.
- ALGO was recently featured in a World Economic Forum (WEF) cryptocurrency report – listed as a recommended “VIP” blockchain that solves issues with BTC/ETH and proof-of-stake. This document will be seen by institutions, banks and economists worldwide.
ALGO has a maximum supply of 10,000,000,000 (10b) coins, and ~57% of the supply has been released so far. In addition, ALGO operates an ‘accelerated vesting’ algorithm: if the 30-day moving average (30MA) reaches a new ATH, the rate at which new ALGO is introduced into circulation is accelerated. The combined effect of this is a significant rate of annual inflation – and artificial suppression of price i.e. ALGO is a solid long term cryptocurrency investment.
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