Created by Silvio Micali, Professor Emeritus of the Massachusetts Institute of Technology (MIT) and winner of the Turing Prize in 2012, Algorand aims to become a super-fast, carbon-neutral and safe blockchain for its users. Let’s discover together his principle of “Pure Proof of Stake”, developed by his team, which consists of directly involving the owners of ALGO tokens to ensure the security of the network.
What is Algorand?
The Algorand project started in 2019 under the direction of Silvio Micali, then a professor at the Massachusetts Institute of Technology (MIT). It is a blockchain serving as a support for the creation and development of decentralized financial products and services.
Algorand is divided into two distinct parts: on the one hand, the Algorand Foundation, which manages the overall growth of the ecosystem, funding, cryptographic research and the decentralization of the Algorand network, including the nodes. On the other hand, the Algorand blockchain itself.
The blockchain seeks to stand out from its competitors by the speed of its transactions (4.5 seconds on average) while ensuring relatively low fees.
Algorand also describes itself as a ” green blockchain ” since the Pure Proof of Stake (PPoS) method under which it operates, which is an improvement on the classic Proof of Stake (PoS), requires much less energy than Proof of Work (PoW) for example, insofar as it does not require minors.
In terms of efficiency, the network aims to solve the famous blockchain trilemma, a theory developed by Vitalik Buterin, the founder of Ethereum (ETH). According to this theory, it would only be possible to mix 2 of the following 3 major principles always at the expense of a 3rd: security, scalability and decentralization.
Also, in order to help as many people as possible to be able to develop applications on its platform, Algorand provides interested developers with a dedicated site called ” Developer Portal “, on which it provides all the tools necessary to code with Java, JS, C++ or Python.
Algorand Logo (ALGO)
The Algorand ecosystem
The problem of the Byzantine generals
Algorand’s particularity is that it uses the Pure Proof of Stake process developed by its founder Silvio Micali, a process based on the Byzantine Consensus, also called “the Byzantine generals’ problem”.
Other blockchains use this technique, but its operation is taken a little further here.
Before going further, we must first understand what this famous problem consists of.
It is a question of evaluating the reliability of the transmissions from one interlocutor to another when several of the latter must transfer the same information. The problem is: how do you get consensus on the right information while having traitors spreading the wrong information?
The metaphor is as follows: generals of the Byzantine army encircle an enemy city. They must communicate via messages in order to coordinate their attack.
However, it is possible that some generals are traitors who seek to sow discord among the troops by spreading bad information.
We must therefore find a solution that would allow the right message to be sent to the majority of the generals while identifying the traitors.
The same problem can be transposed with blockchain or computing, sometimes called “fault tolerance”.
It has been established that for a consensus to be found to solve this problem, at least 2/3 of the generals must be loyal generals, which leaves 1/3 traitors. The consensus is of the same order in the computer world.
The year 2008 also saw the appearance of Nakamoto’s consensus algorithm, also called proof of work (PoW).
Application on Pure Proof of Stake (PPoS)
Algorand defines the PPoS rule: “ Decentralized Byzantine consensus protocol based on pure proof-of-stake.”
Thus, the system can tolerate a certain number of malicious users as long as the honest users respecting the protocol represent more than 2/3 of the total participants.
The process goes as follows:
Any online user can be randomly selected to participate in the consensus.
When a new block appears, a new seed will randomly and unpredictably determine which users will participate in developing the next consensus.
An automatic calculation is operated by a verifiable random function (VRF) thanks to the secret key obtained by the selected participants. The VRF calculation will produce a proof of security that any user can use to verify the result and thus ensure that it is the right participants who will allow the creation of the new block.
Diagram of the anonymous selection of consensus participants – Source: Medium
Note that the users participating in the protocol are chosen according to the number of ALGO tokens in their possession. To make a metaphor, it is as if each ALGO was equivalent to a lottery ticket. The more tickets a user has, the more likely they are to participate in the creation of a new block.
The selection for participation in the development of new blocks using the VRF is carried out secretly, without any communication with users.
This way, a malicious user will never know who to target. And by the time he learns which user has been chosen, it will be too late, and the latter will have already accomplished his task within the protocol.
When a block is proposed to the Algorand blockchain, a committee of voters is appointed to validate it. If at least 2/3 of the voters respect the protocol, then the block is certified.
Algorand’s network architecture
The protocol must rapidly propagate information throughout the network to ensure that all participants have the most recent blockchain, and this with a necessarily growing number of users. The difficulty is to combine this with maximum security: hence the famous blockchain trilemma.
Decentralization and scalability
The first challenge for Algorand is to combine decentralization and scalability.
A decrease in the propagation speed would de facto lead to a reduction in block size or an increase in latency between each block, which would result in longer transactions.
The different data is distributed through the network via nodes.
To solve this first challenge, the Algorand network has two types of nodes: relay nodes and participation nodes.
Relay nodes serve as the hub of the core network and maintain connections with other types of nodes. They have high-speed network connections that help ensure the highest quality communications possible within the system.
In addition, they accumulate protocol messages from other types of nodes, perform deduplications (an IT technical term for eliminating excessive copies of data to optimize storage), signature checks, and other validation steps, and then re-propagate all validated messages. Algorand being an open network, anyone can create a node from home.
The participation nodes are connected to far fewer different nodes and are essentially connected to the relay nodes. They contain and distribute the participation keys as well as the voting keys, both of which are used for the consensus algorithm that we saw in the previous chapter. Anyone can also host Participant nodes.
Security as the third pillar
We have previously seen the technique used by Algorand to protect network funds via PPoS. To ensure the security of the network itself, Algorand has chosen to diversify its hosting locations geographically.
Different organizations located in different countries internationally volunteered during the launch of the Algorand blockchain to host the relay nodes.
Location of relay nodes in 2021 – Source: GitHub
The fact that the relay nodes are hosted on different continents allows for increased security and makes attacks on the network much more complicated to implement.
The said organizations that host the nodes also bring their resources and different perspectives to the network. These organizations include, among others, universities, financial infrastructure providers and non-profit organizations.
This relay contingency thus translates into high-resilience global support.
What is the ALGO token used for?
Algorand’s native cryptocurrency, ALGO, is called a utility token. The staking of the latter by the users of the blockchain makes it possible to operate the PPoS protocol specific to the network, as explained above.
It is also a governance token, which means that users owning the ALGO can choose which direction the Algorand ecosystem will take by giving them the possibility to vote on proposals for the evolution of the protocol. The “governance periods” last for a quarter and require the prior registration of interested users.
The only condition requested is to possess a certain amount of ALGO tokens defined each new quarter.
ALGO is also used as a classic transfer currency and can be divided into tiny amounts (e.g. 0.0001 ALGO). This is possible thanks to PPoS, which makes transaction fees very low.
The number of ALGO tokens minted in total is 10 billion units.
The project received seed capital of $4 million from Union Square Ventures (which notably participated in the financing of Coinbase) and Pillar Project in February 2018.
In October of the same year, Union Square Ventures and other investors such as VLane Capital, Lemniscap and Polybius Capital reinvested $62 million during the second round of financing.
Algorand also benefits from the financial support of investment funds such as Lemniscap, Nirvana Capital, Bixin Capital, Alumni Ventures Group, Foundation Capital, Visary Capital, Multicoin Capital, Eterna Capital, Pillar VC, Struck Capital and Iconium.
Algorand team and partners
The team behind Algorand
The founder of Algorand is none other than Silvio Micali, one of the creators of the zero-knowledge proof theory (zero-knowledge proof, abbreviated ZKP), a well-known term in the world of cryptocurrencies.
His whole life was devoted to work in cryptography and, more broadly, in mathematics. His work has focused mainly on asymmetric cryptography, pseudorandom functions, and digital signature or unconscious transfer.
To this end, he has received several awards and titles, such as the prestigious Gödel Prize in 1993 and Turing Prize in 2012. He is also a member of the National Academy of Sciences and the IACR (International Association for Cryptologic Research), among others.
Algorand’s managing director is Steven Kokinos, co-founder of the Fuze company, which operates internationally in software development, where he served as executive director.
He is also the co-founder of BladeLogic, Inc., a company recognized as a leader in the data center automation market. Their clients include Microsoft, Walmart, Sprint and Time Warner.
Sean Ford is the company’s chief operating officer. He graduated from Harvard University and has served as chief marketing officer for other large companies before.
Algorand also has many cryptographers, mathematicians, scientists and algorithm experts in its ranks.
Algorand blockchain partners
Algorand has more than 500 partnerships with companies operating in various and varied sectors. These are all players in the financial sector, developers, blockchain applications and even universities who participate in the development of the ecosystem.
Algorand partner applications – Source: Algorand
The Opulous project, the music industry’s first decentralized platform, had signed an agreement with Algorand in May 2021. The project aimed to remove the various intermediaries between brokers, lenders and borrowers, in order to help young artists to get started more easily.
The Marshall Islands had also chosen Algorand to enable the implementation of their official local cryptocurrency, the SOV, during the year 2018.
We also remember the $100 million partnership signed between Algorand and the Drone Racing League in September 2021. The blockchain made its services available to the DRL in particular to allow the purchase of tickets online, tokens, not fungibles (NFTs), collectibles and more.
In June 2020, Algorand had also obtained the rights to host the FIDE Online Arena Chess Player Rating on its network. The blockchain was chosen for the security of its network, ensuring total transparency of player data.
Algorand benefits from many other partners; you can consult the list of these on their official website.
How to Buy ALGO tokens?
Given its age, the ALGO is available on many platforms, including Binance, Coinbase, Huobi Global, KuCoin, Kraken, Bitfinex, Bithumb and ByBit.
Explanations for buying ALGO on Binance
- Register on Binance;
- You will receive an email and need to click on a link to verify your account;
- Deposit funds on the platform;
- Click on the Market menu and look for the pair ALGO/USDT;
- All you have to do is buy ALGO for the amount of your choice;
- Congratulations, you are now in possession of ALGO tokens.
Ratings and reviews on Algorand and its ALGO token
Led by its founder, emeritus, and a team specialized in the development of the blockchain environment and the world of mathematics, the project seems to be in very good hands from a technical point of view.
The price of ALGO rose sharply following the partnership between the blockchain, the neo-bank Koibanx and El Salvador in August 2021.
Algorand stands out from other ecosystems by its open source format and its site dedicated to developers who would like to add content to the blockchain ranging from the addition of decentralized applications (Dapps) with Python to the creation of non-fungible tokens (NFTs) through the creation of smart contracts and tokens.
Its wish to reduce its carbon footprint to a minimum, thanks to Pure Proof of Stake (PPoS), is also a significant point insofar as more and more jurisdictions and regulators accuse cryptocurrencies of being very polluting (in particular because of the mining and the electrical consumption that this induces).
It should also be noted that Algorand made its own “Algorand Wallet” digital wallet available to users in June 2021, strengthening interactions within its own network.
However, the blockchain does not really bring anything new that could interest a large mass of users.
In sum, Algorand is a project with excellent foundations from a development, technical and security point of view. Unfortunately, it does not have much that stands out to offer at the moment to attract new users.