What is Algorand (ALGO)?
Algorand’s unique features remove the technical barriers that have compromised the adoption of blockchain by the general public for years. These features are decentralization, scalability, and security. The guide explains how the platform achieved this.
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 decentralization, scalability, and speed by providing the infrastructure and tools builders need to build apps and assets that billions of people can use. Ethereum’s high network fees have prompted dApp developers and DeFi merchants to seek out Algorand as alternative blockchain solutions. Therefore, Algorand addresses the challenges faced by other competing blockchains.
Algorand (ALGO) is a decentralized, open-source blockchain network that exploits a two-tier 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 block rewards are distributed to all holders of ALGO coins, offering all holders of ALGO the opportunity to earn rewards instead of just blocking producers. It is a payments-driven network with fast transactions and a strong focus on achieving near-instant finality, which means processing over 1,000 transactions per second (TPS) and completing finality of the transaction in less than five seconds.
Algorand operates in an unauthorized and authorized environment with efficiency and security, giving all users the ability to join the system without the need for review or authorization. It confirms transactions with a one-minute latency and uses a new Byzantine Memorandum of Understanding (BA) to achieve consensus among users on subsequent transactions. Algorand uses a new mechanism that runs on verifiable random functions to change the consensus.
Evolution of Algorand
Algorand’s roots go back to 2017, when a computer scientist and MIT, Prof. Silvio Micali, invented the blockchain network through the Algorand Foundation, as an unlicensed and open source platform for building dApps. Algorand’s design is payment-driven, with the goal of quickly offering, processing and completing large transactions. Algorand was launched in 2019. Since then his team has gone beyond Micali. A multidisciplinary team of researchers, cryptographers, mathematicians and developers work on Algorand.
Usually, modern blockchain networks are preferred for achieving scalability, security, and decentralization on an equal footing. However, few can be considered successful in this regard, as some could not do so without sacrificing one for the other. This case is different for Algorand, as it sticks to its three features – scalability, security, and downright decentralization.
Algorand has a faster finality and transaction speed, which prompts developers to alternate it. It is the fastest blockchain supporting NFTs for its powerful instantaneous purpose and the completion of bulk transactions in seconds. Algorand offers the fastest finality thanks to its Pure Proof of Stake (PPoS) algorithm. In addition, he proved his ability to quickly hit millions of NFTs when an Italian copyright collection agency used Algorand, which took just a few hours to symbolize its 4.5 million rights. over 95,000 member authors. It would have been slower if the agency had used another blockchain.
So far, the blockchain network has been able to reach milestones in adoption. Currently there are dozens of live products that work on Algorand. Many more are still in development, preparing to explore the best features the blockchain promises to offer. The Algorand Foundation launched two accelerator programs in 2020 – Algorand Asia Accelerator and Algorand Europe Accelerator. Both focus on supporting ongoing projects and developers interested in relying on Algorand. These programs provide end-to-end support for promising projects, from strategy formulation to launch, to help Algorand’s ecosystem grow and thrive.
Algorand use case
Algorand’s blockchain (ALGO) has hosted and partnered with hundreds of fintech, startups, financial services, institutions, and DeFi. The strong community creates 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 partnered with Algorand. Additionally, Opulous, which brings musical assets to the blockchain, uses ALGO to enable artists to apply for funding for their next project through decentralized funding. Circle, a global financial technology company that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications around the world, also uses Algorand. In addition, the Marshall Islands uses Algorand and SFB technologies to build, create the world’s first national digital currency, known as the Sovereign of the Marshall Islands (SOV).
Structure of the Algorand protocol
Algorand’s blockchain has a two-layer structure. The first layer does most of the magic seen in smart contracts. In particular, the Algorand protocol manages atomic exchanges (rapid peer-to-peer cryptocurrency exchanges). It creates new Algorand-based blockchain assets called ASA. Algorand’s second layer runs larger, more feature-rich contracts, similar to modern DeFi applications. The base layer supports smart contracts, asset creation, and atomic exchanges between assets, ensuring security and compatibility.
In particular, 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 work on the Ethereum network. Regarding security, smart contracts on the Algorand platform run as Layer 1 (ASC1) Algorand smart contracts. This means that they maintain the same level of security as the consensus protocol itself.
Algorand’s second layer 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 Layer 1 transactions are fast, without the intervention of larger and more complex smart contracts.
Algorand Staking Mechanism
Algorand’s staking mechanism is known as Pure Proof-of-Stake (PPoS). It is hosted on the Byzantine consensus. Algorand PPoS allows the user’s influence on the choice of a new block, proportional to his stake. Users are secretly selected to vote when needed. All Internet users have the possibility to propose and to vote.
The security of the whole system depends on the honesty of the whole 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 entire economy, meaning that only a few users can vote. A fraction of the users can disrupt the system. Just imagine what the effect of the majority would be if they misbehave.
Algorand’s blockchain network has its native cryptocurrency, ALGO. ALGO is the driving force behind the borderless economy and the incentive system. The Algorand Foundation holds the token to contribute to the stability of the Algorand blockchain and support the Algorand community, ecosystem building and research. The token benefited from the unique characteristics, such as the speed, scalability, reliability, transparency and security of the Algorand blockchain. This has earned ALGO a strong position among the powerful and trustworthy cryptocurrencies 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 or more people is virtually the same digital task, and it happens at the same speed. Distributing money to any number of people takes less than 4.5 seconds. Also, it can be divided into minimal amounts (0.0001 ALGO, for example).
Algorand’s unique characteristics remove the technical barriers that have compromised the adoption of blockchain by the general public for years. These features are decentralization, scalability, and security. Users do not need the approval of an authority to use the Algorand blockchain. There is only one class of users and no gatekeepers. Each participant can read each block and write a transaction in a future block. In addition, all individual participants in the network have the power of control.
There is also no risk of data manipulation, loss or destruction. Therefore, Algorand is a secure and trusted platform.
Your business sector can do better if you alternate with a better blockchain. Algorand offers a system without authorization, fast, secure, scalable and decentralized. Therefore, it is a good option.