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Algorand: What It Is and Why Choose It

Algorand: What It Is and Why Choose It

What is Algorand?

Algorand (ALGO) is a digital currency and a blockchain platform. The Algorand platform is designed to process a large number of transactions quickly, similar to major payment processors like Mastercard or Visa. Additionally, Algorand can host other cryptocurrencies and blockchain-based projects, making it a direct competitor to Ethereum. The native currency of the platform, ALGO, is used to secure the Algorand blockchain and pay processing fees for Algorand-based transactions.

Algorand is an open-source blockchain, which means that anyone can view and contribute to the platform's code. Algorand uses a consensus protocol called pure proof-of-stake (PoS), which recruits network validators from the user pool.

The Algorand platform and its related cryptocurrency were founded in 2017 by Silvio Micali, a professor at the Massachusetts Institute of Technology and a renowned cryptographer. The total supply of ALGO is limited to 10 billion coins, with approximately 7 billion ALGO already in circulation.

Key Concepts

  • Algorand (ALGO) is a blockchain platform and cryptocurrency designed to function as a major payment processor.
  • The Algorand blockchain uses a consensus mechanism called pure proof of stake.
  • ALGO, the native currency of the Algorand platform, is used to secure the platform and reward ecosystem governors.

Understanding Algorand

Algorand presents itself as a highly efficient and scalable platform that can finalize transactions instantly. Algorand achieves this goal in a decentralized manner through:

  • Utilizing relay nodes to enable efficient communication pathways
  • Incorporating participation nodes that vote on and confirm new blocks for the Algorand blockchain
  • Prohibiting any forking of the Algorand blockchain to ensure completed transactions cannot be altered
  • Reducing the data burden placed on Algorand network participants through continuous compression of blockchain information

The Algorand blockchain uses the proof-of-stake consensus mechanism. ALGO holders who stake their coins are rewarded by becoming governors and can vote on blockchain and community-related issues. Algorand governors are rewarded in ALGO, the native cryptocurrency of the blockchain. ALGO is also used as a utility token to pay for transaction processing fees.

The pure-proof-of-stake (PPoS) consensus mechanism utilizes random selection of validators to ensure the process is decentralized.

How Does Algorand Differ from Ethereum?

The blockchain platforms Ethereum and Algorand can be considered competitors. Both platforms provide infrastructures to support the development of other blockchain-based projects, utilize smart contracts, and use proof-of-stake.

Algorand presents itself as the most efficient and environmentally friendly blockchain. As of April 2021, Algorand is carbon negative, meaning the platform purchases carbon credits that more than offset its carbon emissions, which are already much lower compared to blockchains like Ethereum or Bitcoin.

What are Algorand Standard Assets (ASA)?

The Algorand protocol allows for the creation of on-chain assets that enjoy the same security, compatibility, speed, and ease of use as Algo. These assets are called Algorand Standard Assets (ASA).

With Algorand Standard Assets, it is possible to represent various types of assets such as stablecoins, loyalty points, system credits, and in-game points. Additionally, it is possible to represent unique individual assets such as real estate properties, collectible items, unique parts of a supply chain, and more. Optional transfer restrictions can also be placed on an asset, supporting use cases of security, compliance, and certification.