What is Algorand (ALGO)?
Launched in 2019, Algorand is a layer-1 blockchain aimed at solving the famous ‘blockchain trilemma’ – the idea that any blockchain network will need to sacrifice at least one of the following qualities; decentralisation, scalability, or security. It can support smart contracts and serve as a platform to develop decentralised applications.
Algorand was founded by MIT professor Silvio Micali, and consists of a centralised company and a decentralised foundation – the latter managing the ecosystem, distributing funding, and taking care of research and on-chain governance.
Algorand (ALGO) Basics
The Algorand blockchain is proof-of-stake and uses a Byzantine agreement protocol. This means that the protocol can function effectively, finding adequate consensus, even if some of the network is malicious.
To confirm and write new blocks on the Algorand blockchain requires three steps. These are carried out by governors (users) who have staked AGLO tokens. To become an Algorand governor, you need to hold ALGO tokens, connect a wallet, sign-up, and commit your tokens. Anyone staking AGLO will receive ALGO tokens as rewards.
- In the first phase (block propose), a committee of users is randomly selected, with probability of selection influenced by the number of ALGO tokens staked by users. The selected users then build proposed blocks and submit it to the network.
- In the second phase (block finalisation), a new committee is formed and votes on the proposed blocks using a Byzantine Agreement protocol
- In the third phase, if the new blocks are approved, they are disseminated across the network.
The Algorand algorithm changes the memberships of the voting committee every time it is run, making it impossible for potential attackers to know which users will be in a committee.
Alogrand (ALGO) Supply
Like many other cryptocurrencies, the supply of ALGO tokens is capped. The total limit is 10 billion AGLO, which are all scheduled to be released by 2030.
Algorand (ALGO) Adoption & Usability
First and foremost, ALGO is a governance token for the Algorand network. As explained previously, the token holdings of governors are used to weight committee selection. Tokens are also used to reward stakers.
Of course, ALGO can also be traded on secondary crypto markets, and even used for payments in its own right – however, it is not very widely accepted outside of the Algorand ecosystem. At the time of writing in November 2022, ALGO was ranked the 30th biggest crypto by CoinGecko, with a market capitalization of just over $1.75 billion.
Alogrand (ALGO) Fees & Speed
Transactions on the Algorand network do incur fees, but they are so low as to be negligible – typically costing less than 1 cent. Transactions are also very fast, usually finalised in around 5-12 seconds.
Alogrand Security and Safety
Algorand employs several measures at both the consensus protocol and network level to ensure security against attacks. This includes making stakers regularly generate special new secret keys – so their stakes are safe even if the original participation key is compromised.
At the consensus level, the selection of users to certify blocks is done randomly and secretary, and the selection is changed for each round. This means it is virtually impossible for hostile actors to manipulate the process. Additionally, because only one block can be certified and written to the Algorand blockchain in any round, and the chain never forks, all transactions are final, and assets are safe.
Still, as always, the biggest threats to security and safety come when using your ALGO with third-party applications, like exchanges and wallets.
Security and safety tips:
- Don’t leave your ALGO on-exchange for longer than absolutely necessary. If you are not currently trading, transfer them to a local wallet for short-term storage or staking.
- For long-term storage or staking, keep your crypto in a hardware wallet.
- Always keep your wallet keys in multiple safe places – they cannot be recovered.
- Never tell anyone about your crypto holdings. No matter how secure your storage is, if you or your loved ones are physically threatened, you’ll probably hand over your personal keys.
Like many other cryptos, an overly hyped launch saw the price of ALGO initially rocket, going from $1.60 on 21 June 2019 to $3.17 just one day later. However, within days it crashed, and by late September was trading at under $0.20. During the crypto bull run of 2021, prices recovered, at one point climbing above $2.00, but by the time of writing in November 2022 had fallen to just under $0.25 again (CoinGecko data).
Final Word on Algorand (ALGO)
There’s no doubt that Alogrand has a lot of potential, and that the underlying technology is impressive. Transactions are fast and super-low cost, and developers have ensured the blockchain is secure and flexible. There’s also no doubt that, compared to many other blockchains, Algorand is very energy efficient – something its developers are rightly proud of.
But, as a crypto token, ALGO’s fate is utterly dependent on the success of Algorand as a network – and the success of Algorand as a network is going to come down to adoption. Can the project convince enough users to put their faith in it, especially considering there are so many alternatives? This remains to be seen, but at the time of writing, Algorand seems to be stalling on this front.