What is Algorand? Why is it called “Ethereum Killer”?
Algorand is a smart contract platform that allows developers to build scalable decentralized applications.
The Algorand network was founded in 2017 by Silvio Micali, a professor at the Massachusetts Institute of Technology (MIT). He is an academic decorated with numerous awards, including the Turing Prize (in computer science) and the RSA Prize for his work in cryptography.
So what features allow Algorand to thrive as a scalability platform?
What is Algorand Tokenomics?
Algorand uses the Algo token, the native token used to pay transaction fees, reward validating nodes, and incentivize other network activity. Algorand has a fixed supply of 10 billion Algo, which was minted at genesis. These tokens will be distributed until 2030, in accordance with Algorand’s Long Term Allocation (LTA) plan.
Algorand’s LTA plan details how Algo will be distributed to support the ecosystem and encourage community activities. This plan is designed to reward participants who commit to long-term network governance. Ideally, participants express this commitment by locking up their Algo tokens for a long period of time.
Algorand uses a pure proof-of-stake (PPoS) algorithm to secure transactions on its network. With this protocol, any node that stakes its coins is eligible to validate transactions on the network. The protocol randomly chooses the nodes that will participate in the validation, with each participant’s voting power being directly proportional to their staked coins.
Unlike most Proof-of-Stake (PoS) consensus mechanisms that choose only a handful of nodes to participate in validating transactions, PPoS ensures that most of the network participates in the process. This measure ensures that the security of the entire network is not compromised if only a few nodes decide to act dishonestly.
Also, if most chosen nodes in PPoS decide to act dishonestly, it will be at their peril. To act in this manner would only devalue the value of the currency, which would harm their own portfolio of assets.
What technology does Algorand use?
Algorand is an open-source permissionless public blockchain. Permissionless means anyone can join and participate in the network without prior approval from any node/anyone.
The Algorand blockchain is designed to be scalable, decentralized, and secure. It achieves scalability with its very low transaction fees (a fraction of a penny) and fast transaction finality.
Transaction finality refers to the time it takes before a transaction on the blockchain can be undone. In most blockchains, multiple forks compete to be added to the public ledger when committing transactions. This is not the case with Algorand.
On the Algorand blockchain, there can never be forks, thanks to the PPoS algorithm, which ensures this. Forks affect transaction finality time.
A good example to demonstrate this would be Bitcoin. It takes an average of 10 minutes to add a block to the Bitcoin Ledger. However, you have to wait about an hour to confirm that your transaction has been irreversibly added to the blockchain.
Such a feature is not good for a network that needs to evolve. As for the Algorand protocol, it is able to add blocks and at the same time ensure the finality of the transaction within five seconds.
Algorand has also managed to stay true to decentralization. As discussed in the previous section, it achieves this through a random selection of network validators through the PPoS algorithm.
Can you run smart contracts on Algorand?
Ethereum was the first decentralized smart contract platform. Other platforms, like Algorand, were developed as “Ethereum-killers”.
These so-called Ethereum killers have emerged due to high gas costs and slow transaction speeds on Ethereum. Algorand has, by all means, achieved its goal of a scalable smart platform, beating Ethereum at the time of writing. Of course, there are other Ethereum killers like Cardano and Solana, although both of these platforms are struggling to scale effectively.
What is Algorand used for?
Algorand is a smart contract platform, which means blockchain developers can use it to create DeFi applications, create NFTs, and create decentralized applications (DApps).
Algorand also offers its native token, Algo, which is used for several purposes. These include exchanging it for other coins, paying network fees, and accumulating rewards through staking.
Algorand paves the way for blockchain scalability
Algorand’s unique proof-of-stake algorithm ensures that it can scale quickly while ensuring security and decentralization. The Algorand blockchain has indeed championed the challenge of scalability in the blockchain industry. Its founder, Professor Silvio Micali, is one of the inventors of popular blockchain scalability technologies such as zero-knowledge proofs, and with Micali at the helm, many expect Algorand to continue its impressive expansion.