What is Algorand (ALGO)?

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Algorand is an enterprise-grade, programmable, layer-1 blockchain. The network, which provides instant finality and a block time of under three seconds, can process up to 10,000 transactions per second. Algorand achieves a high level of decentralization with no central authority, and a network of validators authenticates transactions. The protocol has gained widespread popularity in enterprise applications, particularly in real-world asset tokenization, digital money, and payment infrastructure. 

Who is behind Algorand?

Silvio Micali, an MIT professor and Turing Award-winning cryptographer, founded Algorand in 2017, and the Algorand mainnet went live in 2019. Two entities are involved in the evolution of Algorand: Algorand Technologies, which manages protocol development, and Algorand Foundation, a non-profit organization established to drive the global adoption of Algorand blockchain technology. The Algorand Foundation fosters developer talent, creates educational content and courses, and works with leading organizations to achieve its mission.  

How does Algorand work?

Let's briefly discuss how Algorand works and what makes it different from similar blockchains.

Pure proof-of-stake

Algorand uses a pure proof-of-stake mechanism to reach consensus—in other words, to verify transactions and add another block to the blockchain. Soon, Algorand will introduce consensus incentivization, where validators will be rewarded for proposing blocks to the network.  

This consensus protocol works in rounds, where a block proposer and a set of voting committees are randomly chosen from the pool of all token holders (accounts with Algo). The chance of being selected is proportional to an account's stake (the amount of Algo held relative to the total). Algorand utilizes sophisticated cryptographic algorithms like verifiable random functions and cryptographic sortition to ensure fairness, prevent collusion, and maintain high security.

Want to learn more? Read "Why Algorand?"

Verifiable random functions (VRFs)

Verifiable random functions (VRFs) are a core part of Algorand's consensus algorithm. They act like a lottery, randomly selecting a leader among participating Algo holders, with user selection being influenced by the amount of Algo staked. The advantage of VRFs is that the identity of the chosen leader is only known to them. This confidentiality enables the leader to validate and approve blocks without external influence. Leader identities are revealed only after the round ends, and the committee disbands. This ensures a new, independent committee is chosen for each round, keeping the blockchain process secure.

VRFs, combined with the concept of user replaceability, are fundamental to Algorand's security. There's no single, vulnerable point of control – no central authority to target. Since communication between a central authority and leaders doesn't exist, there's no information to intercept. This eliminates a major attack vector and strengthens overall blockchain security.

Smart contracts and smart signatures 

Algorand supports two kinds of programs on the blockchain for decentralized applications (dApps): smart signatures and smart contracts. Smart contracts (also referred to as stateful smart contracts) are the recommended choice for most dApps. They are deployed to the blockchain and can be called remotely by any node. Once deployed, they can store data (global or local) and manage Algorand accounts' transactions, including asset transfers and escrow services. This makes them suitable for implementing core functionalities of dApps. Smart signatures, on the other hand, are stateless programs that provide cryptographic verification without permanent storage on the blockchain.

Algorand Standard Assets (ASAs) 

ASAs are like building blocks for creating your own tokens on the Algorand blockchain. Like ERC-20 tokens on Ethereum, ASAs offer a standardized way to issue and manage digital assets. ASAs can represent anything fungible or non-fungible, including stablecoins, real-world assets, loyalty points, system credits, and in-game points. 


FAQs: The Algorand blockchain

What is Algorand?

Algorand is a programmable, layer-1 blockchain designed to provide a decentralized, scalable, and secure infrastructure for building various applications at scale. Algorand's features make it a popular choice for building enterprise blockchain applications. These applications focus on areas like tokenizing real-world assets, creating digital money, and building efficient payment infrastructure.

How does Algorand achieve scalability?

Algorand achieves scalability through its innovative pure proof-of-stake consensus mechanism. PPoS efficiently selects validators to confirm transactions in a decentralized way. This enables high transaction volume (throughput) without sacrificing security or decentralization, leading to fast and secure transactions.

What makes Algorand different from other blockchain platforms?

Algorand distinguishes itself through its consensus mechanism, Pure Proof-of-Stake, which eliminates the need for energy-intensive mining and enhances scalability. However, a key differentiator is Algorand's strong resistance to forking. This makes it ideal for high-value real-world asset (RWA) tokenization. In such scenarios, a stable and reliable blockchain like Algorand is crucial to ensure the integrity and security of tokenized assets.

How does Algorand ensure security?

Algorand leverages cryptographic techniques and its powerful pure proof-of-stake consensus algorithm to maintain a secure and tamper-resistant network. This design goes beyond just securing transactions; it aims to prevent attacks altogether, ensuring the integrity of the blockchain and safeguarding user assets.

Can I participate in the Algorand network?

You can participate in the Algorand network by running a node. This contributes to the consensus mechanism by proposing and voting on blocks. Algorand will soon introduce consensus incentivization, which will reward block proposers for their contributions to the network. Learn more in the Algorand 2024 roadmap.

What are the use cases for Algorand?

Algorand supports a variety of use cases, including financial applications, decentralized exchanges, supply chain management, real-world asset tokenization, and more. Its scalable infrastructure and support for smart contracts make it suitable for a broad range of applications.

How can I get started with Algorand?

To get started with Algorand, you can acquire Algo tokens through exchanges that support cryptocurrency. Once you have Algo, you can participate in the network by exploring decentralized applications (or building your own!) on the Algorand blockchain.

Is Algorand environmentally friendly?

Algorand was designed with the environment in mind. Its pure proof-of-stake consensus mechanism is energy-efficient compared to traditional proof-of-work systems. Furthermore, the Algorand Foundation actively offsets its carbon footprint, making Algorand a truly eco-friendly blockchain solution.

What is the role of Algo in the Algorand ecosystem?

Algo is the native cryptocurrency of the Algorand blockchain. It is used for transaction fees, participating in consensus, and as a means of value exchange within the ecosystem.

How does Algorand contribute to financial inclusion?

Algorand's low fees, fast transactions, and accessibility make it a powerful tool for financial inclusion. The Algorand Foundation actively supports projects building inclusive financial tools such as microfinance solutions and mobile banking for underserved communities worldwide.