Algorand: Everything to Know
By Beluga Research July 19, 2023
- Algorand is a blockchain platform that was designed to address scalability
- Algorand uses the Pure Proof of Stake (PPoS) consensus algorithm to achieve fast, secure transactions.
- Algorand is a decentralized network that supports a wide range of applications.
- One of the features of Algorand, atomic transfers, allows groups of transactions to be submitted at one time
Algorand is a blockchain platform that was designed to address scalability and uses a one-of-a-kind consensus algorithm called Pure Proof of Stake (PPoS). The point of PPoS is to achieve fast and secure transactions.
Algorand was designed to address the scalability and security issues that posed a concern for other blockchains. Algorand seeks to create a decentralized network that can support a wide range of applications, from financial services to supply chain management.
A Brief History
In 2017, Silvio Micali, a Turing Award-winning computer scientist from the Massachusetts Institute of Technology, founded the Algorand project. Prior to founding Algorand, Micali had made significant contributions to cryptography and computer science.
Micali's goal in establishing Algorand was to create a secure, scalable and decentralized blockchain platform. Algorand raised $66 million in a token sale in 2017 - one of the largest initial coin offerings (ICOs) at the time. The Algorand mainnet was launched in 2018, and the platform has grown steadily since then.
What is Algorand?
Algorand uses a unique consensus algorithm called PPoS, a variation of the proof-of-stake (PoS) consensus algorithm. The reason that Algorand uses PPoS is because of a PoS's weakness - possible centralization. PoS allows users to become validators by holding a certain amount of cryptocurrency on the network. Validators add new blocks to the blockchain and ensure that the network is secure. If a few validators hold a significant portion of the cryptocurrency, there is more opportunity for centralization.
PPoS resolves this concern by randomly selecting validators based on the amount of cryptocurrency held. This ensures no single validator can control the network. PPoS also accelerates block confirmation times. It adds new blocks to the blockchain every few seconds. This makes Algorand one of the fastest and most scalable blockchain platforms.
Algorand's unique feature, atomic transfers, allows for the simultaneous transfer of multiple assets between different parties. Atomic transfers are particularly useful for financial applications involving simultaneous transfer of multiple assets, like during trading.
- Save energy and be more efficient when validating transactions. PPoS guards against centralization.
- Utilize ALGO, the platform's native cryptocurrency. The Algorand community is governed by holders of this cryptocurrency.
- Speed and scalability. Algorand can process up to 1,000 transactions per second. This makes it significantly faster than many other blockchain platforms. It is one of the best blockchain platforms for high-volume applications like financial transactions and supply-chain management.
- Security feature. Algorand uses a Byzantine agreement protocol. This protocol ensures the network can reach consensus even in the presence of malicious actors. This means the Byzantine agreement protocol makes it virtually impossible for anyone to manipulate Algorand or alter the history of transactions on it.
- Built-in smart contract platform. Algorand's built-in smart contract platform makes it possible for developers to create and deploy decentralized applications on the network. Developers have an easier job of creating complex applications without having to worry about the underlying blockchain infrastructure.
- Unique governance model. Algorand's governance model allows users who hold ALGO to vote on key decisions related to the platform's development and future direction. This way of governing the community ensures Algorand remains decentralized and community-driven.
- Scalability. Algorand is highly scalable. The platform has the ability to process over 1,000 transactions per second. This is achieved through the use of a rigorous consensus mechanism which allows for fast and secure transaction processing.
- Security . Algorand is highly secure. It has a robust security model that makes it resistant to attacks. The protocol uses cryptographic techniques to ensure the integrity and authenticity of transactions. It is designed to be resistant to 51% attacks.
- Decentralization . Algorand is a decentralized blockchain platform. This means it allows anyone to participate in the network. There is no central authority, which makes it more resilient to attacks and censorship.
- Low Transaction Fees . Algorand has low transaction fees. This makes the network an attractive option for developers and users who want to build and use decentralized applications without incurring high costs.
- Interoperability . Algorand is designed to be interoperable with other blockchain platforms. It allows for easy integration with other decentralized applications and systems.
- Fast Finality . Algorand has fast finality. This is defined as the quick confirmation of decisions with a high degree of certainty. This feature of the network makes Algorand ideal for use cases that require fast, secure transaction processing.
- Smart contracts. ASC1, Algorand's version of smart contracts, provides foundational attributes of security, scale and decentralization. As a result of this, software developers can take advantage of the network without sacrificing speed, cost-effectiveness and simplicity for applications. Moreover, Algorand provides simplified tools and examples of custom complex Dapps that can be used for a wide range of applications.
- Limited Adoption . Algorand is a relatively new blockchain protocol. It has yet to be widely adopted. This could make it difficult for developers and users to find resources and support. Such parties need these tools to build and use decentralized applications on the platform.
- Centralization Concerns . Although Algorand is designed to be decentralized, there are concerns that the protocol could become increasingly centralized over time. This could happen if a small number of large stakeholders acquire a significant portion of the platform's tokens. That would give them undue influence over the network.
- Complexity . Algorand is a complex protocol that requires a deep understanding of cryptography, distributed systems, and other technical areas. These features of the network make it harder for developers and users with limited technical expertise to build and use decentralized applications on the platform.