- Algorand is an eco-friendly public blockchain that addresses blockchains’ scalability problems without compromising security.
- It is the first blockchain network in the world to utilise the pure proof of stake consensus mechanism in its blockchain.
- ALGO, the native cryptocurrency of the Algorand blockchain, is an altcoin used to secure the Algorand network by staking the token and a medium of transaction on the blockchain.
Table of Content
- What is Algorand?
- Who created Algorand?
- How does it work?
- What is Algorand used for?
- What is ALGO?
- Where to buy ALGO?
Algorand is a highly reputable blockchain network. It is an innovative & eco-friendly blockchain that solved the blockchain trilemma experienced by earlier blockchain networks like Ethereum & Bitcoin.
It is the first blockchain network in the world to utilise pure proof of stake as a consensus mechanism while maintaining decentralisation, scalability, and security on its network.
ALGO, the native cryptocurrency of the Algorand blockchain, is an altcoin used to secure the Algorand network by staking the token and a medium of transaction on the blockchain.
In this article, we delve into Algorand, uncovering the essence of its technology and everything else you need to know about this blockchain technology.
What is Algorand?
Considered Ethereum’s biggest rival, this carbon-negative blockchain platform is an open-source, permissionless platform that operates and validates transactions in the same manner of speed as prominent fiat payment platforms like MasterCard.
Speed, decentralisation, scalability, and security are the features this blockchain boasts of. It can process thousands of transactions in seconds and has a 5-second finality speed.
The Algorand ecosystem consists of crypto and blockchain applications in various fields, such as Decentralised Finance (DeFi), Non-fungible Tokens (NFTs), blockchain oracles, and blockchain bridges, to name a few.
Algorand uses the Byzantine Agreement (BA) protocol, which provides high security on the consensus level. Users will be eligible for minting new blocks and getting rewards based on the amount of staked tokens.
Algorand community members can also propose their changes, which will be voted upon. The Algorand consensus algorithm is built to allow users to reach an agreement on any matter, either a suggested change or a new proposed block of transactions.
Algorand also supports the development of smart contracts, and developers can develop their decentralised applications on the Algorand blockchain.
AlgoKit is the development kit provided by the Algorand Foundation, which allows developers to set up their development environment and start coding in less than 10 minutes.
Note: Algorand can not be mined like Bitcoin.
Who Created Algorand?
Launched first in 2017 before launching its main network and native cryptocurrency in 2019, this green blockchain network was developed by Silvio Micali, a highly recognised MIT professor and a member of its Electrical Engineering and Computer Science Department.
Micali is an innovator and has achieved multiple awards, including the Turing Award, the Gödel Prize, and the RSA Prize.
Alongside its mainnet launch, Micali launched the Algorand Foundation, which is responsible for the development and growth of the Algorand ecosystem.
Currently, The Algorand Foundation has launched the Algorand Centres of Excellence (ACE) program and the Algorand Blockchain Club for Students (ABCs) to help university students and blockchain and crypto enthusiasts with their education and research in the field.
However, in October 2020, Algorand launched its community governance initiative. This initiative allows all ALGO holders to decide the future of the Algorand blockchain.
To be part of this governance initiative, users can pledge their ALGO tokens for the 90-day voting period while voting on the ideas made. After this, users can receive rewards when the voting period is over.
How Does it Work?
Algorand is a decentralised, permissionless blockchain protocol that creates and uses the pure proof-of-stake (PPoS) consensus mechanism for secure, fast, and scalable transactions.
With its high-security standards, this network guards against malicious attacks, catering to secure transactions, high-value assets, and robust enterprise applications.
The Algorand blockchain offers a few innovative features:
On each round of the block selection, the user will be selected from a new group of users secretly and privately.
No one knows who the selected user for block production is until the block is broadcasted to the network. This feature protects the users from attackers and malicious actors.
Algorand has two types of blockchain nodes to ensure high throughput and decentralisation.
Relay Nodes are used for fast communications, while Participation Nodes are responsible for proposing new blocks and confirming the new ones.
Immediate Transaction Finality
Once a block is proposed and confirmed on Algorand, the transactions within the block are considered final.
This is because, unlike Proof of Work (PoW) blockchains, there is no chance of two valid blocks being proposed simultaneously.
Vault-Fast Bootstrapping for the Algorand Cryptocurrency
As a blockchain compression technology, Vault helps Algorand with its storage cost by decreasing the cost through transaction expiration or distributing it across the network through sharding. At the same time, the security of the system stays untacked.
It also helps the new nodes to join the network quickly and easily by not requiring them to check all the existing blocks on the chain.
What is Algorand Used For?
Algorand offers various use cases across multiple sectors, especially in the financial payment sector. As a blockchain platform, Algorand’s use cases include:
Home For Stablecoins
Algorand’s platform supports the creation and maintenance of stablecoins like Tether, bridging traditional finance and crypto markets.
These stable digital currencies address volatility concerns, enabling seamless transactions, decentralised finance (DeFi) activities, and cross-border payments.
Efficient Cross-Border Transactions
Algorand enables cross-border payments via stablecoins.
It powers platforms like Six Clovers, which plans to replace the outdated SWIFT network with a faster, transparent, and cost-effective solution.
Algorand’s collaboration with Koibanx brought blockchain-based vaccine passports, as seen in Colombia.
This highlights the platform’s potential in the healthcare sector.
Asset Tokenisation for Accessibility
Algorand supports asset tokenisation, democratising access to traditionally illiquid investments.
Realio’s tokenised real estate investments and the realioUSD (rUSD) stablecoin exemplify this.
Payment Solutions for eCommerce
Algorand powers Bleumi Pay, a non-custodial crypto payment platform tailored for eCommerce, emphasising its role in enabling digital transactions.
Its ability to finalise thousands of transactions within 5 to 8 seconds makes it an ideal blockchain for payment processing.
Because of its flexibility with smart contracts like Ethereum, Algorand can host various Dapp developments. Developers can build multiple decentralised applications on this blockchain and be assured that it will scale.
What is ALGO?
ALGO is the native cryptocurrency of the Algorand blockchain, enabling participation while facilitating transactions on its blockchain.
This native cryptocurrency was created in 2019, and one unique strength is that Algorand does not impose gas fees on its users, unlike other blockchains like Ethereum.
This largely depends on the amount to be transacted. If it is a huge transaction, Algo charges a 0.01 gas fee.
Currently, there are over 10 billion Algo tokens created, and only 7 billion are in circulating supply. The Algorand Foundation is the largest holder of the Algorand token and determines how the token is distributed.
Below are some use cases of the ALGO token:
Staking for Rewards
This is one unique feature of the blockchain. Users of this blockchain can become stakers in this blockchain thanks to its Ppos consensus mechanism.
This means you don’t need to stake an amount of Algo to become a block validator and earn rewards, just like Ethereum and other blockchain networks work. Instead, Algo allows all holders of Algo in their wallets to participate in staking and be block validators.
Algorand randomly selects participants to validate blocks on its network, and once blocks are validated, the participant is rewarded. ALGO holders who are chosen to validate blocks tend to warn over 5% APY.
This move enables Algorand to maintain a decentralised ecosystem whereby anyone can benefit from the blockchain instead of only whales.
Unit of Account
For transactions within the Algorand blockchain, users employ ALGO tokens to settle transaction fees, mirroring the utility for DApp developers.
Medium of Exchange
ALGO tokens function as the bridge for settlements between distinct applications on the blockchain—a dynamic medium for diverse transactions.
As a Governance Token
Holders of the ALGO token can be part of its governance community by staking. This gives anyone interested in the blockchain to air their opinions on the innovation made on the platform.