Deep Dive Into Algorand


by Kadeem Clarke

Algorand: The Blockchain Superhero That Solves the Trilemma

1️⃣ The ‘Trilemma’ – and Where Algorand Comes In

Blockchain platforms are like superheroes: they’re programmable, secure, unanimous, immutable, time-stamped, distributed, and, in terms of participant identities, anonymous or pseudonymous.

The blockchain network is built around three fundamental concepts: security, decentralization, and scalability.

But like every superhero, blockchain platforms have their kryptonite: the Blockchain Trilemma.

It’s a significant challenge that blockchain developers face when developing a blockchain platform. The blockchain trilemma concerns a blockchain ecosystem’s scalability, security, and decentralization. It’s crucial to understand the concept of a trilemma, but don’t worry, we’ve got you covered.

Silvio Micali, an MIT professor, and Turing Award winner, proposed an answer to this challenge in the form of Algorand in 2019.

So, let’s dive into the world of the Algorand blockchain!

2️⃣ What is Algorand?

The Algorand is a blockchain ecosystem that anyone can use to develop applications and transfer value. It utilizes the Byzantine decentralized agreement protocol, which is based on pure proof-of-stake (PPoS).

With permissionless access and ALGO as its native currency, Algorand solves the trilemma.

The Algorand protocol is powered by a novel consensus algorithm that enables fast, secure, and scalable transactions.

Algorand proposes upgraded Proof-of-Stake and self-validating transactions, unlike Bitcoin and other cryptocurrencies that use mining-based Proof-of-Work algorithms.

3️⃣ History of Algorand

Algorand was founded by Silvio Micali, a seasoned cryptography expert and professor at the Massachusetts Institute of Technology (MIT).

Many of the well-known cryptographic technologies used in some of the top blockchain projects, such as Cardano, were co-created by Silvio Micali. Micali has worked in the field since the 1980s, co-creating zero-knowledge proofs, verifiable random functions, and other cryptographic protocols.

Micali founded Algorand in 2017, intending to create a borderless economy. Algorand, like most altcoins, was designed to address Bitcoin’s flaws. While researching Bitcoin in 2015, Micali decided to build his blockchain network, allowing for more efficient scaling, security, and complete decentralization. Algorand then launched after two years of testing.

The Algorand testnet was open for participation in 2019, with the mainnet following shortly after.

4️⃣ Algorand’s Mission

  • Global trust through decentralization
  • Simple designs that drive adoption by billions of people
  • Elegant technology that eliminates barriers to prosperity for all

5️⃣ How Does Algorand Work?

Because Algorand employs a “pure-proof-of-stake” protocol rather than a resource-intensive proof-of-work protocol, new blocks are generated, and transactions are confirmed much faster.

ALGO, the Algorand cryptocurrency, is chosen randomly to validate and approve transactions to add new blocks to the Algorand blockchain.

According to the network’s developers, this process makes the blockchain decentralized, global, and secure. Similarly, the more Algo that a user possesses, the more likely they will be chosen to verify transactions. It also allows the Algorand blockchain to approve and process transactions in seconds instead of Bitcoin’s minutes.

6️⃣ What Makes Algorand Stand Out?

Algorand enables faster transactions by processing around 1,000 transactions in a single second and seamless dApp creation, development, and deployment.

  • Users can create and deploy their tokens as network participants build a decentralized economy with various applications and crypto assets.
  • Thanks to Pure Proof-of-Stake, Algorand ensures that all network users, including node runners and ALGO holders, can participate in network governance and that all network users, including node runners and ALGO holders, are rewarded for their participation.

With its distinct features and cutting-edge technology, it is poised to become one of the largest decentralized economies and one of the fastest blockchain networks.

7️⃣ Variety of Use Cases

Algorand can be used for the standard DeFi, and NFT use cases, which are intriguing due to the chain’s solid architecture. However, it has piqued the interest of both private and public sector players in payment systems.

Algorand, with its flexibility, has the potential to become an exciting blockchain serving a wide range of industries.

Developers are preparing to host smart contracts on a platform capable of managing digital property exchange. A Note Music, for example, will enable many publishers and investors to buy and sell royalties and rights on the Algorand network. Furthermore, the Algorand blockchain was used by Republic, an investment platform, to distribute dividends to investors.

8️⃣ Companies using its Technology

Some of the well-known companies using Algorand’s technology are:

  1. Archax is currently collaborating with Alogrand to develop financial protocols that one can sell on exchanges regulated by the Financial Conduct Authority (FCA).
  2. Tether – Tether, the company behind USDT, which converts cash into digital currency, uses Algorand to process over 1000 transactions per second.
  3. VeriTX – VeriTX teamed with Algorand to deliver a leading digital marketplace for aerospace manufacturing. By working with Algorand, they aim to remove the middlemen and streamline purchasing directly from the platform, thereby eliminating additional costs.
  4. Circle – Circle is the company behind the stablecoin USDC. Circle has partnered with Algorand to enable users to easily move funds between traditional banks and card networks to digital banks using the Algorand blockchain.
  5. Republic – Republic is a private investing platform and technology services provider using Algorand’s platform to power its profit-sharing token, the Republic Note, by leveraging the technology to enable its low-cost structure and high throughput volumes.

9️⃣ Its Native cryptocurrency: ALGO

ALGO is the native currency of the Algorand network. ALGO tokens pay transaction fees and reward users contributing to the network’s consensus process.

Regardless of how many transactions you do daily, ALGO transactions take less than four seconds. Transaction fees are also kept to a minimum. Unlike Ethereum, notorious for its high gas fees, ALGO transactions are incredibly cheap.

1️⃣0️⃣ ALGO Tokenomics

  • Token Type: Utility token
  • Popularity: #41 as on 17Mar23
  • Algorand Price: $0.22 as on 17Mar23
  • Maximum Supply: 10 billion ALGO
  • Circulation Supply: $7.10B
  • Current market cap: $ 1.5B as on 17Mar23

ALGO has a total supply of 10 billion and will be emitted until 2030. There are currently 6.71 billion ALGO in circulation. Algorand intends to reward participants participating in ecosystem governance by locking their tokens for the long term.

1️⃣1️⃣ ALGO token distribution

Here’s what the ALGO token distribution looks like:

1️⃣2️⃣ Algorand Ecosystem

With the Algorand ecosystem expanding quickly, here are some of the top Dapps currently building on Algorand.

  1. Algodex

Algodex is an Algorand-based order book decentralized exchange (DEX). The platform allows users to trade assets using limit and market orders, from Algorand coins to NFTs. They also provide an Algodex Mailbox, which enables users to send assets to multiple recipients simultaneously.

  1. Algofi

Algofi is a DeFi hub in Algorand that offers various services such as a DEX swap, lending/borrowing market, liquidity vaults, etc. Algofi has a decentralized, overcollateralized stablecoin STBL that users can mint by depositing collateral and offering flash loans to those in need.

  1. Folks Finance

Folks Finance is one of Algorand’s leading capital markets. The platform provides users with permissionless borrowing and lending via passive yield from lending out assets or loan requests made by depositing funds as collateral. They also offer liquid staking, which allows ALGO holders to earn yield without limiting their liquidity.

  1. FXDX

FXDX operates as a decentralized derivatives exchange fork on Algorand, similar to GMX. It offers up to 30 times leverage and four tradable assets, with more on the way. FXDX aims to bring liquidity sources from multiple blockchains onto its platform as quickly and cheaply as possible.

  1. Tinyman

Tinyman is an Algorand blockchain-based automated market maker (AMM) DEX. Popular DEXs, like Uniswap and SushiSwap, allows users to trade assets directly by swapping them at market rates. Users can earn rewards through swap fees and incentives by staking assets in multiple pools.

  1. Pact Finance

Pact Finance is another Algorand AMM. Their mainnet went live in February 2022. Regardless, they’re already among the top three DEXes in Algorand. Pact allows for quick and inexpensive transactions. In addition to swaps, they provide liquidity pools and a smart router, reducing the price impact and slippage.

1️⃣3️⃣ What’s new and what’s next on Algorand

A) Algorand’s New Unlimited Smart Contract Storage

Algrand introduced a new flexible form of Smart Contract storage called boxes. A Smart Contract can generate as many boxes of the size it requires (up to 32K) as it requires.

For example, let’s say Alice wants an oracle service for token prices. She creates a Smart Contract that users can use to get the current price of a token. Given the growing number of tokens available on Algorand, whether native or bridged over, Alice’s oracle contract will require more persistent storage over time.

Boxes are the ideal solution: Alice’s smart contract allows one box for each token tracked.

  • Boxes provide an easy way to implement a map that stores your key-value pairs.
  • Before boxes, Smart Contract developers who needed more storage had to resort to hacks such as creating dummy applications or accounts to use their state and carefully managing permissions to avoid introducing vulnerabilities.
  • Boxes are such a powerful and flexible paradigm that most Smart Contracts will likely use them in the future.

Replay protection for bridges is a compelling example of box usage.

  • Crypto bridges are a powerful technology that transfers value between blockchains, making the crypto world borderless.
  • However, bridges must be carefully designed to avoid hacking due to the complexities of dealing with multiple chains.
  • A replay attack is one type of bridge hack. When an attacker submits the same transaction twice, it’s a replay attack.

B) Algorand Protocol Bug Bounty

Algorand has announced a $2 million bug bounty program with Immunefi, the leading bug bounty platform for Web3. Launched in partnership with the Algorand Foundation, this program will further strengthen the security of Algorand’s core protocol.

C) Broad-Reaching Partnerships in India to Grow Web3

With India set to overtake China as the world’s most populous country this year, the Algorand Foundation is committed to promoting job opportunities and solutions that benefit India’s thriving population.

Algorand is the first layer-1 blockchain protocol to collaborate with T-Hub, India’s premier innovation hub, which boasts 600+ corporate partners such as Intel, AWS, Boeing, Meta, Microsoft, and Cisco.

This collaboration will assist startups and established businesses develop high-impact, scalable blockchain-based solutions.

The Algorand Foundation will soon launch faculty development programs, student developer training, and a master class series for companies looking to transition critical business processes to Web3 through partnerships with Jawaharlal Nehru Technological University Hyderabad and the Indian School of Business.

1️⃣4️⃣ Conclusion

Algorand addresses the technical issues that have long stymied widespread blockchain adoption: decentralization, scalability, and security.

With Algorand, you can develop on a stable platform while maintaining your privacy. It is a platform with vital technological innovation, real-world use cases, and developer support. Its consensus mechanism and equitably structured coin rewards set a new standard in the blockchain space.