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- 1 Algorand is a digital currency and blockchain platform.
- 2 This open-source blockchain is designed to make quick and fast transactions.
Algorand is a digital currency that has been crafted to facilitate transactions. It is also a blockchain platform, so it can host many cryptocurrencies and blockchain-based crypto projects. This makes it a direct competitor to Ethereum.
It resembles the major payment processors like Mastercard and Visa. The native currency of Algorand is ALGO which is used to secure a blockchain. It is used to pay fees for transactions that are made on this blockchain. This is an open-source and permissionless blockchain that anyone can view and contribute to the platform’s code. This blockchain uses the proof-of-stake mechanism.
History of Algorand
Algorand was founded in 2017 by Silvio Micali, a professor at Massachusetts. He is a noted cryptographer at the Institute of Technology. It features a technology that can finalize blocks in seconds. It is focused on providing quick transactions while preventing the forks. The platform does not reward validators with newly minted tokens.
The blockchain platform is based on developers’ needs and is publicly available. For enhancement, it facilitates developer tools and dApp analytics through a partnership with Flipside Crypto. It also has many other partners such as OTOY, Syncsort, etc.
The test net was launched in April 2019 and the main network was launched in June 2019. Algorand technology provides a collection of high-performance layer 1 blockchain that offer security, scalability, privacy, and transaction finality.
A layer 1 blockchain is a collection of solutions that improve the fundamental protocol to make the system more scalable. The consensus protocol changes as well as sharding are the most prevalent layer 1 options.
Algorand blockchain is managed by the Algorand Foundation. Any company or individual who wants to use it gets easy access to this blockchain. The technical innovation development of this blockchain is highlighted through its scalability, interoperability, and layer 2 smart contracts.
What Makes Algorand Unique?
Algorand is a public blockchain platform that has a decentralized network. It utilizes the proof of stake mechanism (Pos) to reach a decentralized consensus. It includes different types of improvements like the pure proof of stake (PPoS) which is crafted in such a way that it avoids the issue of the rich growing richer. Pos pays miners with the highest stake whereas PPoS selects miners randomly despite their investments.
It has a combined Byzantine Agreement Protocol. When PPoS is combined with Byzantine Agreement Protocol then the mechanism decides how people can join the decentralized network, removes the incentives of fraudulent activity, and produces a single source of truth that can be verified.
This agreement scales to many users and allows Algorand to reach a consensus on a new block with fast speed and no forks.
It has two tired blockchain architectures. This helps in maintaining the speed while running the application. The layer 1 tier allows for creating the Algorand Standard Assets (ASA). ASA consists of smart contracts, new and existing tokens, and atomic swaps.
The layer 2 tier consists of complicated smart contracts and dApps that run off-chain. In this way, it authorizes the Algorand blockchain to handle transactions comparable to that of large payment networks like Mastercard etc.
Anyone who holds the native currency of the platform (ALGO) can help secure the network and declare their interest. The chances of being selected depend on the quantity of ALGO one has in the account in comparison to the user who expressed interest in participating.
Algorand faces three types of hurdles. The first is that it must protect from Sybil’s assaults. In this, the user creates a large amount of pseudonyms to affect the Byzantine agreement(BA) protocol. BA must include millions of users, significantly scaling to what the current Byzantine agreement protocol can handle. The third one is that Algorand must be resistant to denial of service assaults which permits it to continue functioning even if the attacker disconnects certain users.
How Does Algorand Work?
There are two types of Algorand. The first one is the participation node and the second one is the relay node. The participation node gives computing power to validate transactions and this is the node that gets the most important rewards. The relay nodes work like network hubs which maintain a link between Algorand and the rest of the system’s nodes.
To connect and keep track of the ledger the relay nodes are used by the participation nodes network. Anyone can run both nodes but the difference is that the participation nodes are paid for the efforts while the relay nodes are not as they cannot mine ALGO.
The foundation of Algorand has made a reward system for relay nodes that will expire in two to five years. An Algorand Virtual Machine (AVM) is needed to connect with the Algorand network. Evaluation of the smart contract is done by the stack engine of the AVM before deciding whether to execute or not the AVM assesses all the logic of the smart contract.
Algorand handles the smart contract in 2 layers, on-chain and off-chain. On layer -1 the smart contract functions on-chain just like Ethereum. This clarifies that smart contracts add traffic and this can cause slow speed due to congestion.
To solve this Algorand also provides layer-2 smart contracts which are executed off-chain. As the smart contracts function outside the network it does not add traffic on the network and is recorded in the blockchain network.
How to Mine Algorand?
At present it is not possible to mine Algorand with hardware. As it is based on proof of stake mechanisms, it is possible to gain rewards by staking Algorand in crypto or Algorand wallets. This shows that Algorand is an altcoin having smart contract capabilities. The new features include deFi and NFTs.
How to Buy Algorand?
Anyone can buy Algorand from crypto exchanges like Coinbase. The process of buying Algorand is very simple. The user has to make an account on the exchange. Verify the account by filling in the details and adding a payment method. Start a trade by selecting Algorand and add the fiat amount to buy the ALGO coins. Finalize the process by checking it again. Once it is finalized, the process is not reversible if the wrong amount was selected.
Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.
