last week, algorand, a little-known cryptocurrency compared to big names like bitcoin and ethereum, surged 20.76%, sparking investor interest. Algorand is up 35.44% last quarter and 357.57% last year, according to data from coinmarketcap.com on December 26.
Most cryptocurrencies claim to have a goal and solve a problem. algorand also has one goal: to solve the blockchain trilemma: scalability, decentralization, and security.
Reading: Algorand vs ethereum
what sets algorand apart is its speed and advanced capabilities. “algorand is fast, low cost, decentralized, carbon negative and has advanced smart contract capabilities. algorand can process thousands of transactions per second with instant finality and fractional-cent transaction fees. other blockchains can be much more expensive,” says kristin boggiano, a member of the cryptocurrency and blockchain assets council (bacc) and co-founder and president of crosstower, a global cryptocurrency trading platform.
let’s find out what algorand is all about, how it tackles the blockchain trilemma, and why it’s known as the ethereum killer.
what is algorand?
massachusetts institute of technology professor silvio micali, who is also a turing award winning computer scientist, made the algorand blockchain accessible to the general public in 2019 with a maximum supply of 10,000,000,000 algo (his native token). The Algorand Foundation is the umbrella organization, which houses the core blockchain research team for cryptography and computing led by cryptographer Tal Rabin.
“algorand serves as an infrastructure layer on which we can build crypto networks, decentralized applications (dapps), and crypto tokens. it is one of the most prominent layer 1 blockchains available in the ecosystem,” said santosh yellajosula, member of the blockchain and crypto assets council (bacc) and CEO of xfinite, a decentralized entertainment ecosystem based on algorand blockchain. p>
what is algorand trying to solve?
Three issues are plaguing the cryptocurrency industry: network scalability, transaction speed, and network security.
Major cryptocurrencies like bitcoin and ethereum have been trying to solve the problem of speed and security to some extent, but the only thing left to address is network scalability, which is measured by transactions per second or tps.
“algorand is a smart contract platform that attempts to solve the blockchain trilemma (scalability, decentralization, security) and help democratize finance,” says boggiano.
Bitcoin is the slowest in this department at just 5 tps. the ethereum network can do up to 13 tps. algorand can currently process up to 1,300 tps and intends to process up to 3,000 tps in the future. algorand is about to add “instant finality” to the blockchain, meaning transactions can never be contradicted, modified, or reversed. this feature will significantly improve the scalability of the network.
“bitcoin, ethereum and other traditional cryptocurrency networks are often very congested. transactions are processed slowly and are expensive to perform. The Algorand Network aims to solve this problem by lowering gas fees and making transactions faster,” says Sharan Nair, Blockchain and Crypto Assets Council (BACC) Member and Chief Commercial Officer of Coinswitch Kuber.
how does it work?
All cryptocurrencies work with a consensus mechanism to approve or disapprove every user-initiated transaction on their network. Legacy cryptocurrencies like bitcoin and ethereum work on a pow (proof of work) mechanism which requires a lot of computing power and therefore consumes more electricity. there is another consensus mechanism called pos (proof of stake), which consumes less power.
ethereum is trying to move to more energy efficient pos mechanism but not fully operational yet but algorand and some other alt crypto coins like polkadot and solana are sometimes called as ethereum killer as they are more profitable. and more energy efficient than ethereum.
algorand works with the pure pos mechanism. “The pure pos system that algorand employs randomly selects committees of participating algo holders to validate and approve the next block in the chain. this randomization is the result of a unique cryptographic tool called vrf (verifiable random function) invented by the founder of algorand, which seeks to solve the blockchain trilemma,” says gaurav dahake, CEO and co-founder of bitbns.
On Algorand’s blockchain network, only a select set of miners will receive a reward block of their token sometime after they have successfully lent their computer’s processing power to the network. users are chosen randomly, regardless of the size of the assets they have pledged to the blockchain, thus maintaining a fair shot for all. this modified mechanism is what enables algorand its amazing transaction processing speed feature.
“It is a mechanism to achieve distributed consensus. ‘pure’ refers to users not having to lock or bind their algorithms to participate in this process, which differs from other pos blockchains that require participants/validators to lock tokens in order to participate in transaction validation. in pure pos, the power of users is proportional to their stake and participating users are randomly selected to propose/validate blocks,” says boggiano.
how has 2021 been for algorand?
algorand was selected as a strategic partner to provide network infrastructure and technology ecosystems for a $1.5 billion fund managed by hivemind equity partners. this was an important milestone for algorand, which is trying to get more use cases out of its native token algorithm.
algorand has also launched its decentralized crypto ecosystem application protocol called algofi, which has two main functionality services included in its ecosystem: tinyman, an algorand-based decentralized exchange (dex), and algomint, a digital asset miner. which provides a bridge. between algorand and other blockchain networks. algofi will also start mining its own stablecoin called algostable (stbl).
“Our goal with Algofi is to develop projects that support real-world financial activity at scale, projects that institutions can ultimately use,” Algofi co-founders John Clarke and Owen Colegrove said, as reported by several research organizations. means.