What is Algorand?
Algorand is a blockchain network founded in 2017 by Silvio Micali, a professor at the Massachusetts Institute of Technology who received a Turing Award for his work in cryptography. Algorand is an unauthorized decentralized blockchain protocol that anyone can use to develop applications and transfer value. The Algorand protocol is based on a new consensus algorithm that enables fast, secure and scalable transactions.
Algorand solves common problems that most legacy blockchains face, especially when it comes to scalability and consensus. The blockchain uses pure Proof of Stake (PPoS), a consensus protocol that randomly selects validators based on the weight of their stake in ALGO coins.
What is Algorand trying to solve?
The Algorand protocol is designed to solve the three biggest problems most blockchains face: security, scalability, and decentralization. The Algorand network, called the “blockchain trilemma,” claims to solve the following three major problems.
The Algorand protocol is protected against malicious attacks, making it ideal for transactions, storing valuable assets, and building secure enterprise applications. It maintains security at the network level and consensus protocol level, as well as protecting individual user accounts.
The Algorand protocol can process a large number of transactions per second, making it a more scalable solution than Bitcoin or Ethereum. The Algorand Consensus protocol eliminates the need for the computing power used in bitcoin to solve cryptographic problems.
Instead, the protocol account fee per user is used only for creating and confirming signatures, and for operations that require a simple account. According to Algorand, it can “scale to millions of users and support high transaction rates at no significant cost to participating users.”
Algorand is completely decentralized, with no central authority or single point of control. Transactions are verified by the nodes participating in the network, and each node has the same say in decision-making. This makes Algorand a very decentralized system.
Everyone on the network also has the opportunity to be part of a panel of users who agree to each block because the selection is random and secret. There is no permanent commission, and the contract is run by people from all over the world.
How does Algorand work?
What distinguishes Algorand from other blockchains is the use of PPoS, a consensus algorithm that uses the Byzantine protocol protocol. If the node is compromised, the original ALGO token held by network participants is automatically protected with unique keys.
Bitcoin’s consensus mechanism, Proof of Work (PoW), requires a lot of power and processing power to create and validate new blocks. On the other hand, PPoS allows you to create and validate new blocks faster and more efficiently. This is done by randomly selecting ALGO holders to verify and approve each block in the chain. For each new block, a new group or committee is elected.
Through the PPoS protocol, only users with significant ALGO resources could theoretically engage in malicious activities that could compromise the security of other users. However, since the system is dependent on the interdependence of participants, malign actions can also degrade their ALGO. Therefore, such malicious activity will not be beneficial to any controlling contributor.
Algorand can process 1,000 transactions per second and all transactions will be final and instant. Algorand also has a fixed supply of 10 billion tokens to add an anti-inflation mechanism to the network. Most of these tokens are currently locked and not yet distributed.
Structure of the Algorand Protocol
The Algorand Protocol is based on three basic principles:
Transactions: Transactions are the basic unit of account for the Algorand network. They are used to transmit values and are validated by all nodes participating in the network.
Blocks: Blocks are groups of transactions that are grouped together and verified by a consensus algorithm.
Consensus: The consensus algorithm is responsible for validating the blocks and ensuring that they comply with the requirements of the Algorand protocol. It also rewards users who participate in the work.
Algorand Staking Engine: Pure Proof of Effort
In the PPoS Algorand approach, a user’s influence on choosing a new block is proportional to the number of tokens they have in the system, also called their stake. Each user has a chance to be chosen, while the weight of his suggestions and votes are directly related to his efforts.