Blockchain technology has emerged rapidly in over a decade and a constant problem-solving revolution is being experienced by the world. Nowadays, the blockchain not only allows transactions but also shows the emergence of numerous possibilities and opportunities. Many new blockchains are released in the market to address different problems related to the technology.
Similarly, Algorand blockchain was developed with a mission to address the existing problem of scalability, decentralization, and lower fees for transactions. And of course, one cannot forget the environmental problem related to the blockchain as it consumes a heavy amount of electricity for problem-solving capabilities.
What is Algorand Blockchain?
Algorand Blockchain is one of the fastest networks built to solve the ongoing blockchain trilemma problem. It aims to achieve speed, security, and decentralization at the same time. Algorand is developed by the computer scientist Professor of MIT Silvio Micali and was launched in 2019. The Algorand blockchain is an open-source technology on which anyone can develop their applications. Micali builds the payment-focused blockchain from scratch to achieve express transactions and instant finality. It processes over 1,000 transactions per second (TPS) and achieves finality in less than five seconds.
Silvio Micali is an award-winning computer scientist from the Massachusetts Institute of Technology (MIT). He established the Algorand Foundation where the core blockchain research team dwells and the cryptography research team conducts several explorations. Both the teams work under the supervision of Cryptographer Tal Rabin who holds a senior position in the foundation.
According to Micali, Algorand focuses on the traditional issues of the blockchain like finality, scalability, decentralization, and consensus. But it primarily focuses on the concerns related to scalability and consensus. The blockchain operates on Pure Proof-of-Stake (PPoS) through which the consensus protocol chose a validator randomly depending upon the staked ALGO coins.
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How does Algorand blockchain works on the PoS mechanism?
Popular cryptocurrencies like Bitcoin and Ethereum function on the Proof-of-Work (PoW) mechanism and consumes a huge amount of electricity through their computing power. Due to the PoW hardships, PoS consensus (Proof-of-Stake) was built which consumes much less power and reaches more scalability.
Algorand employs a unique solution of the PoS model called Pure Proof of Stake (PPoS). The network is superiorly democratized by several validators and nodes. Also, the blockchain requires as minimum as 1 ALGO coin for staking to participate and secure the network. Besides, another blockchain such as Ethereum requires a minimum of 32 ETH tokens to stake and participate in the validation protocol.
The Block Proposal Process
On Algorand’s PPoS network, the consensus mechanism functions on a two-phased block production process including proposing and voting. The member of the Algorand network can stake ALGO coins and participate in the voting procedure and generate a participation key for itself to become a ‘Participation Node’. Such nodes are then coordinated by another type of network node known as Relay Nodes enable the communication between the participating nodes. Relay nodes do not directly participate in proposing and voting procedures.
As the proposal phase begins, a selected block leader proposes the current block. Besides, these block leaders are selected through Algorand’s verifiable random function (VRF). VRF is a proven random mechanism that selects nodes on a random basis based on their respective stakings. The block leader is assigned with the participation key by which he can propose the block secretly. The secretly block generating process gives an extra shield of security in the network where any malicious activists can not know about the nominated block leader. Consequently, the methodology is very much verifiable as it reduces the chances of compromising the network. Also, since the block leader is unknown the defaulters do not get any attempt to target the block leader.
After the block is proposed, a voting stage arrives where committee members are randomly selected out of all the participation nodes. The committee ensures that no overspending, double-spend, or any other problem occurs during the current block. Afterward, if all is well, the majority decides to add the block to the blockchain. Anywhere in between the process, if any kind of discrepancy or malicious activity is seen, the block is discarded and a new block leader is chosen.
Layer-1 Capabilities of Algorand
Algorand blockchain is dedicated to billions of people who want to build simple yet impactful applications. The blockchain’s elegant technology eliminates all the barriers and focuses on global decentralization. The Layer-1 solution holds immense capabilities for future developers. Few capabilities have been listed below:
1. Algorand Virtual Machine (AVM)
- Smart contracts are built in such a manner that any node can access them remotely on the Algorand blockchain. The AVM distinguishes the contracts by equipping an ‘application call’ transaction and then evaluating the contracts through resolving the transactions.
- AVM runs to cater to smart signatures containing logic that is used to sign transactions. Scalable, fast, and secure execution is possible on the Algorand platform. Through ASC1s smart contract, Algorand promises one thousand operational transactions in one second and a five-second finality reach on the blockchain.
- Through the block proposal process, there is a reduced risk of settlement and trustless executions.
- AVM also offers low-cost transactions that have the same fees as any other transaction on the Algorand blockchain at 0.001 ALGOs.
2. Algorand Standard Assets (ASA)
The Algorand Standard Assets (ASA) is one of a Layer-1 mechanism and represents a different type of assets on the Algorand blockchain. These assets include fungible assets, non-fungible assets, restricted fungible, and restricted non-fungible assets.
Today, many issues still pertain to digital assets which include:
- global access,
- 24×7 transferability,
- Instant settlement,
- easy enforcement of asset controls, and
- efficient administration.
The ASA mechanism fights from all the above-mentioned issues as compared to other popular blockchain networks. Algorand Standard Assets (ASA) provide an optional and flexible asset control system to the issuers and managers of the business. Some of the regulatory and compliance requirements include:
- Forcefully transferring of assets where legal and other regulations are to be required
- Extremely efficient custom made flexible asset reserve models for business
- Asset documentation for transactions occurring outside the blockchain (Off-chain) on-chain asset definition.
- Whitelist mechanism for prerogative asset transactions that enables only specific addresses to approve the transaction.
- Asset spam protection is also provided that avoids unknown asset tax or any reputational risks.
3. Atomic Transfer
Atomic transfers in Layer-1 Solution extend a secure passage to transfer any number of assets simultaneously to several parties. If we speak briefly, the transactions are pooled together and then executed. In this case, either all the transactions are approved or none of them are executed further.
Some of the most exciting applications of Atomic transfer are:
- Instant multilateral trading
- Streamlined and accelerated debt settlement
- Much efficient platform for decentralized exchanges by using Algorands Standard Assets (ASA) and Algorands Smart Contract (ASC1)
- Rapid settlement of multi asset transactions
Moreover, atomic transfers in the Algorand blockchain support all types of Algorand assets and allow multi transactions. These atomic transfers charge a negligible amount of fees as compared to heavy fee structured blockchain to complete the transaction.
4. Algorand Rekeying
Algorand has introduced a unique solution under its Layer-1 solution to protect the accounts. Surprisingly, Algorand provides a ‘Private Spending Key’ for security purposes used in combination with the public address of the account holder to send transactions. In such procedures, the Private Spending Keys are used to authenticate and encrypt the public address and protect it from being compromised. Moreover, it resolves the operational inefficiencies in the network where often assets move from an old public address to a new one.
Additionally, rekeying fix the public address and only Private Spending Keys is changes in case of asset movement. The process of rekeying provides flexibility, continuity, and fewer overhead charges for any change in the Private Spending Key.
Rekeying transfers the authority to the separate address authorized by the account holder. Moreover, it is also applicable in the case of a multi-synch account having a single holder through authorization via program logic.
Currently, on the Algorand blockchain, each block takes 4.38 to add to the blockchain and the TPS rate is 18 transactions per second. Whereas, the total number of addresses linked to the blockchain is 23,649,465 at press time.