Everything about Algorand Blockchain and How does it Work?

What is Algorand Blockchain?

The decentralised network Algorand was created to address the Blockchain Trilemma of simultaneously achieving speed, security, and decentralisation. Algorand is a permissionless, open-source blockchain network that anybody may build on. It was introduced in June 2019 by computer scientist and MIT professor Silvio Micali. Algorand is intended to be a payments-focused network with quick transactions and a heavy focus on attaining near-instant finality, which entails handling over 1,000 transactions per second (TPS) and achieving transaction finality in under five seconds.

The Proof-of-Stake (PoS) consensus technique is used by Algorand, and all ALGO holders get validator rewards. Algorand can handle the high-throughput demands of varied use cases and large worldwide usage thanks to its great throughput capacity and fair community incentivization.

Working Mechanism of Algorand - How does Algorand Work?

Algorand is currently capable of hosting decentralised application (dApp) development and offering scalability as a public smart contract blockchain that relies on staking. Decentralised application (dApp) developers and traders have been searching for alternate blockchain alternatives as a result of rising gas costs on Ethereum. Algorand has gained popularity among some as an Ethereum substitute for dApp and DeFi applications.

Additionally, Algorand enables developers to move existing tokens to the Algorand ecosystem or generate new tokens using the Algorand Standard Asset (ASA) protocol. Stablecoins like USDT and USDC, for instance, are also available on the Algorand blockchain as ASAs and benefit from substantially faster throughput and lower transaction costs than what is often seen on Ethereum. Algorand has also emerged as a credible choice and has been selected to host the Marshall Islands CBDC as central banks continue to look for networks to host their central bank digital currencies (CBDCs).

ALGO: Algorand’s Native Cryptocurrency

ALGO is the native Algorand coin, and is a cornerstone of its network structure. The benefits provided to validators for creating blocks are split and dispersed among all ALGO coin holders as part of Algorand's distinctive protocol design, as opposed to only block producers. As of February 2021, all ALGO coin holders will be able to earn an annual percentage yield (APY) of roughly 7.5%. The goal of reward distribution, which occurs every 10 minutes on average, is to entice people to join the Algorand staking platform and hasten the process of decentralisation.

Users do not need to stake the coin themselves as part of the block creation and validation process, which makes the procedure even simpler. To access earned incentives, they only need to hold ALGO in a non-custodial wallet or on an exchange. As stakeholder can passively retain ALGO while still supporting the network, Algorand has gotten close to automation in this respect.

Is Algorand the ‘Ethereum Killer’?

Algorand, a lesser-known cryptocurrency when compared to well-known ones like Bitcoin and Ethereum, has increased to 20.76% and caught the attention of investors. Algorand increased by 35.44 percent over the previous quarter and 357.57 percent over the previous year, according to data from coinmarketcap.com on December 26.

The majority of cryptocurrencies assert a purpose and address an issue. To address the blockchain trilemma of scalability, decentralisation, and security is Algorand's objective as well. Algorand is quick, inexpensive, decentralised, carbon-neutral, and equipped with cutting-edge smart contract capabilities. Algorand is capable of handling thousands of transactions per second, with instantaneous resolution and transaction costs as small as a cent. Other blockchains can cost a lot more.

Conclusion

Algorand, like other Bitcoin and Ethereum rival blockchains, has placed a strong emphasis on scalability and decentralisation. Many people find this blockchain technology appealing because of its success in successfully decentralising power. Its Pure Proof of Stake consensus process offers a novel solution with VRFs.