What Is Algorand (ALGO)?

Algorand (ALGO) is a blockchain designed to facilitate the future of finance. It is a platform that creates powerful decentralized applications (dApps) and financial primitives that will become the backbone of the future economy. Algorand focuses on offering decentralization, scalability, and speed by providing the infrastructure and tools that builders need to create applications and assets that billions can use. Ethereum’s high network fee has pushed dApp developers and DeFi traders to seek Algorand as alternative blockchain solutions, therefore, Algorand is addressing challenges that other competing blockchains are facing.

Algorand (ALGO) is an open-source, decentralized blockchain network that leverages a two-tiered structure and a unique variation of the Proof-of-Stake (PoS) consensus mechanism to increase transaction speeds and achieve finality. Algorand has a native token, ALGO. Algorand’s block rewards are distributed to all ALGO coin holders, offering all ALGO holders an opportunity to earn rewards instead of just block producers. It is a payments-focused network with rapid transactions and a strong focus on achieving near-instant finality, which means processing over 1,000 transactions per second (TPS) and performing transaction finality in less than five seconds.

Algorand works in a permissionless and permissioned environment, with efficiency and security, giving all users the opportunity to join the system without the need for scrutiny or permission. It confirms transactions with a latency of a minute and uses a new Byzantine Agreement (BA) protocol to reach a consensus among users on the following transactions. Algorand uses a new mechanism that runs on Verifiable Random Functions to scale the consensus.

Evolution of Algorand

The roots of Algorand go back to 2017, when a computer scientist and MIT, Professor Silvio Micali, invented the blockchain network through the Algorand foundation, as a permissionless and open-source platform for building dApps. The design of Algorand is payment-focused, with the target of offering, processing, and completing cumbersome transactions with speed. Algorand launched in 2019. Since then, its team has gone beyond just Micali. A multi-disciplinary team of researchers, cryptographers, mathematicians, and developers is working on Algorand.

Ordinarily, modern blockchain networks are preferable to achieve scalability, security, and decentralization at equal measure. However, few can be considered successful in this regard, as some have not been able to without sacrificing one for the other. This case is different for Algorand, as it sticks to its trio features – scalability, security, and decentralization squarely.

Algorand has faster transaction finality and speed, which makes developers alternate to it. It is the quickest blockchain supporting NFTs for its potent instant finality and bundle transaction completion in seconds. Algorand delivers the fastest finality due to its Pure Proof of Stake (PPoS) algorithm. Besides, it has proved capacity to mint millions of NFTs quickly when an Italian copyright collecting agency used Algorand, which took it just hours to tokenize the 4.5 million rights of its over 95000 member authors. This would have been slower if the agency used another blockchain.

So far, the blockchain network has been able to reach milestones in adoption. Currently, there are dozens of live products that run on Algorand. Many more are still in development, preparing to explore the best features that the blockchain promises to offer. The Algorand Foundation launched two accelerator programs in 2020 – Algorand Asia Accelerator and Algorand Europe Accelerator. Both focus on assisting ongoing projects and developers interested in building on Algorand. These programs provide promising projects with end-to-end support from strategy formulation all the way to launch to help the Algorand ecosystem grow and thrive.

Algorand Use Cases

Algorand (ALGO) blockchain has hosted and partnered with hundreds of fintech, startups, financial services, institutions, and DeFi. The robust community is creating a healthy ecosystem of organizations aligned with Algorand’s longer-term vision for the future of finance.

Reach, a platform that builds and deploys decentralized applications on Algorand and other blockchains has teamed up with Algorand. Further, Opulous, which brings music assets to the blockchain, uses ALGO to allow artists to solicit funding for their next project through decentralized finance. Circle, a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce, and financial applications worldwide, uses Algorand as well. Besides, The Marshall Islands use Algorand and SFB technologies to build, create the world’s first national digital currency, known as the Marshallese sovereign (SOV).

Algorand Protocol’s Structure

The Algorand blockchain has a two-layered structure. The first layer performs most of the magic seen in smart contracts. In particular, the Algorand protocol handles atomic swaps (rapid peer-to-peer exchanges of cryptocurrency.) It creates new Algorand-based blockchain assets, known as ASAs. The second Algorand layer runs larger and more feature-packed contracts, similar to the modern DeFi apps. The base layer supports smart contracts, asset creation, and atomic swaps between assets, ensuring security and compatibility.

Notably, on the first layer of the Algorand network, platforms and users can create ASAs, representing new or existing tokens on the Algorand blockchain. This is similar to how ERC-20 tokens function on the Ethereum network. Regarding security, smart contracts on the Algorand platform execute as Layer-1 Algorand Smart Contracts (ASC1s). This means they maintain the same level of security as the consensus protocol itself.

The second layer of Algorand is reserved for more complex smart contracts and dApp development. This bifurcation of the network between Layer 1 and Layer 2 allows Algorand to process transactions so efficiently. With more complex smart contracts taking place off-chain, simple transactions on Layer 1 are fast, without intervention from larger, more complex smart contracts.

Algorand Staking Mechanism

The Algorand staking mechanism is famous as Pure Proof-of-Stake (PPoS). It is hosted on Byzantine consensus. Algorand PPoS enables the user’s influence on the choice of a new block, proportional to its stake. Users are secretly selected to vote when there is a need. All online users have the chance to propose and vote.

The security of the whole system depends on the honesty of the entire economy. The system is secure when most of the money is in honest hands. With other approaches, a small subset of the economy determines the security of the whole economy, which means just a few users can vote. A fraction of users can disrupt the system. Just imagine what the effect of the majority would be if they misbehave.

ALGO Token

The Algorand blockchain network has its native cryptocurrency, ALGO. ALGO drives the borderless economy and the system of incentives. Algorand Foundation holds the token to contribute to the Algorand blockchain’s stability and support the Algorand community, ecosystem building, and research. The token has benefited from the unique features, such as speed, scalability, trustworthiness, transparency, and security of the Algorand blockchain. This has gained ALGO a strong position among the powerful and trustworthy crypto-currencies available today.

With ALGO, users can buy and sell goods or services, whether through e-commerce or retail. But unlike with credit or debit cards, the transaction is truly instant.

Sending ALGO to one person or many people is virtually the same digital task, and it occurs at the same speed. Money distribution to any number of people takes less than 4.5 seconds. Also, it can be divided into minimal amounts (0.0001 ALGO, for example).

Conclusion

Algorand’s unique features remove the technical barriers that for years undermined mainstream blockchain adoption. These features are decentralization, scalability, and security. Users do not need the approval of an authority to use the Algorand blockchain. There is a single class of users and no gatekeepers. Every participant can read every block and write a transaction in a future block. In addition, all individual network participants have the power of control.

There is also no risk of data manipulation, loss, or destruction. Therefore, Algorand is a secure and a trusted platform.

The sector of your business can do better if you alternate to a better blockchain. Algorand offers a permissionless, speedy, secure, scalable, and decentralized system. Therefore, it is a good option.