Everything About Algorand Cryptocurrency
Among the new cryptocurrencies and blockchains, Algorand has made quite the buzz. It came out not very long ago but already managed to enter the top 50 cryptocurrencies on the global chart.
In our post today, we’re going to shed light on what Algorand blockchain is, what Algo is, and how it works.
What is Algorand?
Algorand is one of the newest blockchains on the internet that came out in 2019. Silvio Micali, a computer scientist, and MIT professor is credited to be the founder of this smart contract platform.
If you’re jumping to the conclusion that Algorand is a rip-off of Ethereum after you read the term ‘smart contract’, you’d be partially right. It’s very similar to Ethereum. But there are a few key differences between the two which we will explore as we progress through the post.
Also, did we mention that Algorand is completely decentralized? It’s quite obvious because decentralization is the very core of the cryptocurrency/blockchain concept.
Algorand is notably fast and efficient when compared to other crypto networks. At the time of writing, Algorand protocol can successfully complete more than a thousand transactions per second with a cost of a thousandth of a dollar. And it can complete a problem in 5 seconds! Astonishing, right?
How Does Algorand Work?
Being a public smart contract blockchain, Algorand can host decentralized applications (dApps) deployed by the users. Yes, it’s very similar to Ethereum. You can even go ahead and say that the rising gas price in the Ethereum network has given birth to Algorand!
The major difference is the Algorand Standard Asset (ASA) protocol which allows the participants to generate new tokens and transfer them at the fraction of the cost compared to Ethereum. Even stable coins like USDC and USDT are allowed to float around in the Algorand ecosystem!
One of the major differences between other crypto networks and Algorand is the protocol. It’s very different from what we’ve seen with Ethereum or other smart contract oriented crypto networks.
Let’s explore what this protocol is all about!
What is Algorand Protocol Structure?
If you’re familiar with blockchain technology, you’d know that it’s evolving. Bitcoin had a single tier of blockchain where it was a race against time for miners. The miners with the highest resources could bag the reward for solving a block and adding it to the blockchain.
But with Algorand, the first layer is for basic users. If you’re a user, you can create ASAs, which is essentially the token of the Algorand network, also known as Algo.
For security reasons, the smart contracts you create in the Algorand network are executed as ASC1s. It’s the acronym for Algorand Smart Contracts Layer 1.
Layer 2 of the network is where the complex operations take place. dApp deployments, writing new and complex smart contracts, etc. are all done in this layer. Algorand uses a completely new programming language known as the Transaction Execution Approval Language (T.E.A.L). Only users who know this language can access layer 2 of the protocol.
Another key difference between Algorand and other blockchains would be the proof of stake. If you follow the crypto industry, you might know about proof of work and proof of stake.
Proof of work is the primitive way of ensuring that the right person is getting the reward. Older cryptocurrencies like Bitcoin still use the same protocol. It created an unhealthy competition between the miners.
People lined up thousands of GPUs (Graphics Processing Units) and ASICs (Application Specific Integrated Circuit) to mine bitcoin. It ultimately resulted in higher energy costs and low profitability for the miners.
Proof of stake was introduced to eliminate the drawbacks of the previous protocol. In proof of stake, participants had to ‘stake’ their own tokens for a chance to execute smart contracts. It’s definitely better than proof of work protocol, but it still favored those with higher resources.
That’s where the pure proof of stake concept by Algorand comes in. it’s still proof of stake, but not sorted by the number of tokens someone is willing to stake. Rather, anyone with at least 1 Algo in their account can participate.
The participants are chosen at random by a different smart contract running on the 2nd tier of the network. It ensures that no attackers know who is going to participate in the mining process. Also, it promotes a healthy relationship between the miners and the network.
The bottom line is, Algorand has dramatically improved the security and scalability issues faced in Ethereum. It’s faster, it’s cheaper, and it’s safer.
To put it into perspective, it takes about 15 seconds for Ethereum to execute a smart contract. For Algo, it’s 5 seconds.
In terms of cost, Ethereum transaction fees can range between a few cents to a few dollars depending on the gas price at that particular time. With Algorand, the transaction fee is around $0.001.
How Can You Benefit from Algo?
It’s the whole point of the post, isn’t it? How do you benefit from Algorand?
Well, to start with, you can start your trading with very little cost because there is no need to have an astounding amount of tokens in your account. Also, you don’t need a huge amount of power resources to participate in the process.
Then, you have the added scalability and the efficiency of the network. Sending tokens to other accounts is very fast and reliable. Even if there is a hacking attempt, the hackers won’t have the slightest idea about which node to target because the verification process is done at random.
Overall, Algorand might be the next big thing in the crypto industry. Ethereum has successfully popularized the concept of smart contracts and now Algorand is improving on it for the betterment of the industry.
Even if we look back a few years, the crypto talk was not nearly as popular as it is now. More and more tokens are making their way into the market. Developers are working harder than ever to establish the true reign of decentralization.
And in our opinion, Algorand is a true pioneer in the process. If you’re thinking about investing and trading crypto, Algo could be one of your first choices.