What is Algorand?
Algorand is a decentralized cryptocurrency and smart contract platform. Algorand has developed a consensus mechanism known as pure proof of stake (PPOS). Pure-proof-of-stake allows Algorand to confirm blocks in seconds, providing immediate transaction finality to transactions on its platform. The platform offers customizable smart contracts and atomic transfers directly in Layer 1.
Turing award-winning professor Silvio Micali founded the platform. Algorand has the backing of a strong team, reliable technology, and investors putting their money in the platform. The developers of Algorand were able to raise capital from public and private sales.
What is Algorand trying to accomplish in the blockchain space? To understand that, we have to look at the problem plaguing existing blockchain platforms, which is the blockchain trilemma.
The Blockchain Trilemma
Blockchain trilemma refers to the idea that it is impossible to scale a blockchain without compromising security or decentralization. So, a blockchain can have two, but not all three of scalability, security, and decentralization.
An example of this would be XRP, which focuses on scalability and security but compromises on decentralization. Bitcoin, on the other hand, chooses decentralization and security.
The reason behind the blockchain trilemma is the consensus mechanisms that blockchains adopt. The primary consensus mechanisms are proof of work (POW) and proof of stake (POS).
Algorand uses a consensus mechanism called pure proof of stake. Traditional proof of stake systems allows your stake to be your hashing power. This is problematic because the validators who are already in possession of many tokens end up getting more chances to mine blocks.
What does Algorand Bring to the Table?
Algorand, using pure-proof-of-stake, can randomly choose token holders to add blocks to the blockchain. The platform chooses the token holders irrespective of the size of their stake. This ensures the decentralization of the network and also secures it from security threats.
Algorand can offer an alternative to other platforms such as Ethereum and EOS in the DeFi space. Currently, Ethereum is the leader when it comes to DeFi and decentralized apps. Algorand aims to create the necessary functionality for DeFi applications. Since its inception, the platform has built partnerships with organizations like ISDA, Coinbase, The Realio platform.
Algorand has several features that make it stand apart from other platforms in the market. This is why several high-profile projects are creating their protocols on the Algorand blockchain. Tether and IDEX have gone with Algorand’s blockchain due to the underlying technology of the platform.
The platform promises and delivers speed, security, and decentralization. It is the world’s first permissionless, pure proof-of-stake protocol pushing the next generation of financial products. It offers almost instantaneous confirmations of transactions, along with wallet support and micropayment facility.
The Algorand Standard Asset (ASA) enables users to create tokens with the same features as Algorand’s primary token.
Advantages of Algorand Over Other Platforms
The platform has several tools for developers, such as Algorand studio, sandbox, etc. These help developers in developing their tools for the platform.
Smart contracts on the Algorand platform are written in TEAL (Transaction Execution Approval Language). TEAL is a bytecode based language and is used to write stateless and stateful smart contracts. Once the smart contract is attached to the transaction, it cannot be modified. This property makes TEAL one of the most secure languages to write smart contracts in.
Algorand has another advantage over other DeFi platforms: creating and deploying smart contracts and decentralized applications on Algorand is cheaper than other platforms.
The platform has high levels of scalability and security. Transactions are immediately processed, settled, and stored on the blockchain. Transaction fees are negligible, and Algorand’s support for assets ensures that local currencies can be used for carrying out transactions.
Algorand has two types of smart contracts on its network. Layer 1 smart contracts and Layer 2 smart contracts. Layer 1 smart contracts can be used to create a new token or execute an atomic swap. Layer 2 smart contracts are designed for more complex uses. For example, if a contract requires input from multiple sources or has multiple execution stages, it would require a Layer 2 smart contract.
Advantages of Algorand over other blockchains
Algorand’s blockchain has three crucial properties.
- Universal tokenization – This implies that the users of the Algorand blockchain can tokenize assets in diverse fields. The Algorand blockchain will ensure transparency, scalability, and fairness.
- The better medium of exchange – Algorand provides faster block times, thereby ensuring that it is a better medium of exchange than other protocols.
- Forkless – The pure-proof-of-stake consensus ensures that the Algorand blockchain does not need to fork. Every new block formed on the blockchain receives finality by default.
Compared to other blockchains in the DeFi and smart contract space, The Algorand platform has lower costs for creating, deploying, and running smart contracts and decentralized applications. The blockchain also provides users and developers with tools and developer documentation, and financial support to developers. All these facilities make Algorand one of the best platforms for running smart contracts.