Algorand, created in 2017 by Professor Silvio Micali from MIT, is a blockchain network. The mainnet was launched in June 2019, introducing its native cryptocurrency, ALGO. Algorand focuses on scalability and smart contracts. It is a public, decentralized, Pure Proof-of-Stake blockchain that supports customized layer-1 blockchains for specific purposes. The project claims to have solved the trilemma and is beneficial for financial services, DeFi, fintech, institutions, and the creator economy.
How It Works?
Algorand’s scalability is achieved through its Pure Proof of Stake consensus mechanism, which enables it to handle numerous transactions rapidly while maintaining decentralization. While Proof of Stake (PoS) blockchains are scalable, they often suffer from a concentration of power among a small number of validators with large stakes. Similarly, Proof of Work (PoW) also faces the problem of large mining pools consistently winning block creation races.
Algorand’s PPoS consensus mechanism randomly selects validators and block proposers from those who have a participation key. The likelihood of being chosen depends on the participant’s stake in the total amount staked.
Typically, a person with a small amount of cryptocurrency will have less likelihood of being chosen compared to someone with a large amount. However, Algorand stands out from other blockchain platforms because it doesn’t demand a minimum stake, making it more accessible for the average person. By allowing every staker to potentially validate transactions, Algorand ensures a higher level of decentralization in its network security compared to systems like Delegated Proof of Stake (DPoS).
Algorand’s Pure Proof of Stake protocol produces blocks with immediate finality every 3.7 seconds on average and can handle up to 6,000 transactions per second.
Conclusion
ALGO, similar to other blockchains like Bitcoin and Ethereum, has prioritized scalability, speed, and decentralization. Its Pure Proof of Stake consensus mechanism, along with VRFs, offers a distinct solution, making it appealing to many due to its effective decentralization of power.