What is Algorand (ALGO)? | Algorand Review
What Is Algorand?
Algorand is a permissionless, open-source, Layer 1 blockchain network which has been designed to solve the blockchain trilemma by being scalable, secure and decentralized. It was created by MIT professor, Silvio Micali and launched in 2019. The network offers fast transaction speeds (up to 1,300 transactions per second), near instant transaction finality, and extremely cheap transaction fees (a fraction of a cent).
Algorand uses a Pure Proof-of-Stake (PPoS) consensus mechanism which distributes validator rewards to all owners of the network’s native currency, the $ALGO. This mechanism chooses validators and block proposers using a Verifiable Random Function (VRF) from anyone who has staked and generated a participation key. The chance of being chosen is directly related to the proportion of the participant’s stake of the overall amount staked. Obviously, a small holder will have a lower chance of being selected than a big holder. Unlike PoS blockchains, Algorand doesn’t require a minimum stake, which is a significant barrier to entry for the average user. With every staker who runs a node being a possible validator, the network’s security is more decentralized than one with a chosen set of validators. Algorand also makes a point of being a crypto with a ‘green future’ as its consensus mechanism is more energy efficient than many other blockchains, with the network being carbon negative since 2021.
Users need to hold at least 1 $ALGO in a non-custodial wallet to receive $ALGO rewards. This mechanism makes the ALGO coin one of the simplest cryptocurrencies for users to generate passive income. Rewards are approximately 6 to 8% APY.
In December 2021, Algorand launched its liquidity protocol dApp (Decentralized Application) called Algofi, aimed at providing a decentralized lending market and yield farming opportunities. This launch completes the trifecta of core protocols on Algorand, readying the network’s DeFi ecosystem for take-off. The trifecta includes AlgoFi, Tinyman, the Algorand-based Decentralized Exchange (DEX), and Algomint, a digital assets minter that provides bridges between Algorand and other blockchain protocols.
The $ALGO Token
$ALGO is the native currency that powers the Algorand ecosystem and has the following utility;
- Can be staked for a chance to become a block proposer or validator.
- Can be held in a non-custodial wallet to earn passive rewards.
- Can be used to pay for transaction fees within the network.
Current Market Cap: $4.7 billion
Circulating Supply: 6.63 billion tokens
Maximum Supply: 10 billion tokens
The $ALGO token can be purchased on leading crypto exchanges such as Binance, Coinbase Pro, Kucoin, and Huobi Global.
The Pera Wallet (formerly Algorand Wallet) is the easiest and safest way to store, buy and swap on the Algorand blockchain. This mobile wallet can be used with all dApps in the network and has the full support of Ledger Nano X for extra security.
An Eye on the Future
It can be said that Algorand is still finding its feet, with very little in the way of dApps deployed on the network at the moment. However, there have been some significant announcements in recent months, signaling a bright future for the development of the ecosystem.
- An important near-term factor which will be crucial for the network’s development, lies with future EVM (Ethereum Virtual Machine) compatibility. This would mean that the rich ecosystem of applications found on Ethereum and Ethereum-compatible chains, could also be executed on Algorand. The Algorand Foundation, the not-for-profit Singapore based corporation established to advance the technology, recently announced a $20 million grants program, 50% of which is earmarked for teams to explore and develop EVM compatibility on the network. The remaining 50% will go to projects that can build developer tools, and suites of products that will make building on the network easier.
- Borderless Capital, the Miami based blockchain VC firm, announced that they were launching a $500 million Algorand-focused fund (Fund 2). Specifically, the fund will be investing in DeFi and NFT projects built on Algorand. This latest announcement follows their $200 million investment in 2019 (Fund 1) which continues to support many new projects in the ecosystem.
- Matt Zhang, founder of Hivemind Capital, announced a $1.5 billion venture fund and cited Algorand as its strategic partner, with an initial focus on investments in play-to-earn games and metaverse projects on the network. Hivemind will also be investing in other Layer 1 protocols, however it considers Algorand’s technology as enterprise ready and institutional grade. One can only assume that Algorand will be a major beneficiary of the fund.
- In addition to the well publicized news that El Salvador was formerly adopting Bitcoin as legal tender in September 2021, Algorand has been selected as the official blockchain platform for El Salvador to develop its own blockchain infrastructure. This will be a test of real-world adoption for the network and no doubt other governments and institutions will be watching closely to see how things develop.
Due in part to the expensive gas fees on Ethereum, developers and traders are more willing than ever to try new blockchains which offer significantly lower transaction fees and high throughput. As an open source, smart-contract enabled blockchain, Algorand is well suited to meet these demands and is capable of supporting a broad range of dApps in the future.