Algorand is a decentralized permissionless blockchain that was created to provide a platform for making instant payments without having to worry about security. And since it is an open-source blockchain network, anyone can build on top of it to enhance the user experience.
Algorand launched in 2019 and is one of the most advanced blockchains in the market. Algorand uses Proof-of-Stake as its consensus mechanism and allows developers to build decentralized applications within its ecosystem.
Algorand can process over 1,000 transactions per second (TPS) and has achieved to keep the finality at less than five seconds. At such speeds, it eases transactions for its users with low transaction fees.
The rising gas fees and scalability problems on the Ethereum blockchain have led developers to other alternatives and Algorand is one of them. The project has hosted many dApps while maintaining high-throughput requirements of widespread global usage.
This review of Algorand (ALGO) was created for informational purposes. This article is not intended for promotion.
We have listed down a few use-cases of Algorand which will help you understand the structure and prospect of the project in brief.
As I mentioned earlier the cost of executing smart contracts has been increasing and this is due to the rising number of DeFi applications. In fact, low speeds and inflated costs have always been bad for any network in the market.
So, with an intention to break down these barriers Algorand has introduced Layer-1 Stateful Smart Contracts. Algorand developers can write smart contracts in either a stateless or stateful manner. The layer-1 stateful smart contracts are prominently used for DeFi applications which features lending, borrowing, investments, insurance, gaming, customized assets, and so on.
Algorand enables developers with Algorand Standard Asset – ASA protocol for representing any asset on the platform or to transfer existing tokens to the Algorand ecosystem. ASAs can either be fungible or non-fungible tokens – NFT’s, which can be used to represent stablecoins, loyalty points, system credits, and in-game points.
This feature may look less impactful but is a very effective one because it allows you to change your authorized private key while letting you maintain the same public key.
Let me explain, for example, you have an account on Algorand which is used as a personal wallet for receiving ALGO tokens for your services. Now to receive your tokens you will be sharing your public address with your network. But at the same time, you use that wallet for investment purposes, and you do not want your private keys to be compromised.
For this reason, rekeying allows you to issue a customized feature that registers a new private spending key and maintains the existing public address, thus providing high security to the funds of a user.
Atomic Transfers simultaneously allows you to transfer a number of assets among several parties. Since the fees on Algorand are low the Atomic Transfers are very cost-effective.
It supports the transfer of all the assets on the platform and allows multi-party transfers.
The progressive nature of the Algorand ecosystem is visible through the innovative projects that it has been hosting. We have listed a few projects so that you can understand how each one of them is utilizing the Algorand blockchain.
Tether is a blockchain-based cryptocurrency that is pegged to the US dollar, Euro, and offshore Chinese yuan. Tether (USDT) is widely used by crypto traders around the world because of its stable nature.
The Algorand network can support over 1000 transactions per second and USDT has been utilizing this to its advantage. This has helped USDT to scale in a secure and decentralized atmosphere.
IDEX is one of the leading decentralized exchanges which supports trading with high transaction throughput. Algorand platform has enabled IDEX to develop a solution with full finality, tokenization of assets, and programmatic transfers at Layer-1.
Algorand has worked closely with IDEX to develop advancements for financial tools and has helped IDEX gain the focus that is required to flourish.
Republic is a private investing platform and technology services provider made up of numerous operating entities, that let anyone invest in early-stage companies. Spun out of AngelList, Republic’s private investing platform features more than 500,000 users investing as little as $10 in over 170 vetted companies.
With Algorand’s simplified asset creation, instant financial exchange, and immediate transaction finality, Republic is leveraging technology at the forefront of open financial innovation.
Silvio Micali is the founder of Algorand, a professor of computer science at the Massachusetts Institute of Technology (MIT). The team also includes Steve Kokinos the CEO of Algorand and former CEO at the global enterprise communication platform Fuze. The entire project mainly consists of researchers and scientists from around the world.
The Funding and development of Algorand are administered by a non-profit organization called Algorand Foundation. According to the 2021 performance blog, the foundation plans to reduce the block finalization time from 4.5 to 2.5 seconds.
It plans to increase finalized TPS from 1,000 to 46,000 and they have also proposed to increase the block size from 5,000 to 25,000 transactions. However, this will have no impact on the finalized latency. This will be achieved through pipelining, a powerful tool used for block generation.
Algorand raised over $60 million by selling 25 million tokens at $2.40 each through an ICO Dutch Auction in June 2019. Algorand uses the Pure-Proof-of-Stake mechanism, which is a highly democratized PoS consensus mechanism that has low minimum staking requirements for participating in and securing the network. In the case of Algorand, only 1 ALGO is required to participate.
ALGO coins are required to be staked if you want to take part in the proposing and voting procedures and if you want to become a Participation Node.
Algorand’s protocol design is structured in such a way that the rewards paid to validators for producing blocks are split and distributed among all ALGO coin holders. This gives ALGO coin holders a chance to earn a 5-6% annual percentage yield – APY.
Algorand was created by a world-class cryptographer who won the Turing Award. The efficiency and architecture of the blockchain have made it unique in the market.
Recently, El Salvador signed a cooperation agreement with Koibanx in which it states that it will help in developing the Government’s blockchain infrastructure on Algorand. The project has also sponsored Drone Racing league, a New York-based firm with $100 million, and in return, Algorand will have the naming rights to the drone league’s championship series.
The project is positioned distinctly with its partnerships but comes along with few disadvantages. Firstly, the low staking requirement may affect the security of the network, as network participants are less prone to behave optimally when they do not have substantial value staked on the network.
Secondly, Algorand Foundation currently holds the maximum ALGO coins which critics argue makes the network centralized. Even though we agree with this argument, Algorand has a reward distribution system that is built to mitigate network centralization in the long run.
Since the foundation of the project was laid, the team has surprised the world with its technological advancements and partnerships. It is one of the projects that is being closely watched by many in the blockchain arena.
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