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Algorand (ALGO) | Everything you should know about a potential hit this fall Algorand (ALGO) | Everything you should know about a potential hit this fall

Summer belonged to Solana, autumn will belong to Algorand

” – Anthony Scaramucci. Why was there so much hype around ALGO? Can this project really surprise investors with further price increases?

Appetite for Algorand

Sometimes in the cryptocurrency markets you will come across a project where everything plays out as it should. A strong team, strong technology, deep pockets and a pool of investors with even deeper ones. But despite all these juicy ingredients, the market is just getting ready for what the project can offer. There are many such surprising examples. One of the most instructive is Algorand.

What is Algorand?

Algorand is a scalable, secure and decentralized smart contracts platform. They have developed their own consensus mechanism, which is a variant of proof of stake called pure proof of stake (TM). The main benefit is that Algorand’s technology finalizes blocks in seconds and provides instant trade finality while preventing forks. Furthermore, Algorand offers highly configurable smart contracts

as an asset tokenization tool and atomic transfers built directly at layer one.

The company is based in Boston and was founded by award-winning MIT professor Silvio Micali. He has also assembled a pretty strong team from MIT and other academic institutions.

Algorand (ALGO) | Everything you should know about a potential hit this fall

They managed to raise quite a substantial amount of money through 2 private placement rounds and one public round (over $120 million). Some of those who backed Algorand in the private sale included giants like Union Square Ventures and Brainchild.

inwestorzy algo

Here’s a quick overview of the project. However, to best understand what

they wanted to build, you need to know what problem they were trying to solve. This is essentially the well-known blockchain “Trilemma”. Algorand (ALGO) | Everything you should know about a potential hit this fall

However, let’s assume for a moment that you haven’t heard of it yet….

Well, when it comes to blockchain technology, there are three ideal features that we are all looking for;

1 – Decentralization – decentralized control of the network should be properly distributed so that there are no points of centralized control.

2 – Security – blockchains must be resistant to attacks and must also be resistant to censorship.

3 – Scalability – it should be able to grow in size and capacity without affecting basic performance.

All of these goals are good in themselves, but the only problem is that they are tightly coupled. You can’t scale easily while increasing decentralization. You can’t scale in a decentralized way without affecting the broader security of the network one way or another. This is a problem that many other projects have faced. So why do we have a problem with the blockchain trilemma? Well, it comes down to the nature of current consensus mechanisms.

When it comes to blockchain consensus, there are many different options. However, the two primary ones are proof of stake(POS) and proof of work(POW).

pow pos

Proof of work is the consensus mechanism used by networks like Bitcoin and (for now) Ethereum. However, as we have already noted, the trilemma is quite acute when it comes to PoW systems. There is a lot of centralization, where most of the power is controlled by large mining farms. This consensus model is also not the most secure, as there are many blockchains that have experienced problems in terms of so-called “double spending” (double spending). One recent example of double spending is what happened on Ethereum Classic.

PoW chains are also not very scalable. Of course, there is no need to look for an example other than ETH here. Timey transactions are slow and gas fees are sometimes a headache. This is probably one of the main reasons why everyone is so excited about ETH 2.0 and the move to proof of stake.

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So let’s take a look at delegated proof of stake a little closer(DPOS). Under this mechanism, the community allows multiple user-delegates to choose the next block. This is the mechanism used by blockchains such as EOS, for example. The only problem is that it creates centralization concerns. The number of delegates is fixed and they can be seen as having centralized control. In such a blockchain, delegates may hold a small fraction of the total money in the system. However, the entire blockchain is secure if and only if the majority of delegates are honest. Now, even if we assumed that all these nodes are honest, they can be easily identified and attacked. They can launch denial-of-service attacks that stop the consensus and thus have a disruptive effect on the blockchain itself.

Algorand (ALGO) | Everything you should know about a potential hit this fall

Another variant of the proof of stake system is of course Bonded Proof of Stake. This is a more typical model where users vote on blocks via tokens. It is believed that they will never vote against their own interests because they could lose their stake. The only problem is that this allows a well-placed adversary to take over the network. There are many situations where an attacker can gain more benefit from shutting down a network than they can lose from the staking pool. So, it is quite clear that current models do not provide a guarantee to scale and maintain decentralization in blockchain at the same time. This is why Algorand has developed a mechanism for secure PoS.

Pure Proof of Stake

Algorand’s consensus mechanism is called pure proof of stake. It works on this simple principle. Cheating by a minority is impossible, and cheating by a majority is stupid. What does this mean? Algorand has devised a mechanism by which those with small stakes cannot cheat, and furthermore, those with large stakes in the network will not cheat. Cheating would completely devalue their holdings and would make no economic sense. So basically, as long as the 2/3 majority remains honest, the protocol will work fine. It also differs from other mechanisms in that the funds don’t have to be blocked for a specific period of time. They are always in users’ wallets ready to be spent and used in other ways on the network. On the other hand, blocks are constructed in two phases through lotteries known as cryptographic sorting, which is based on a proposal stage and a voting round.

Who does what is completely random and therefore impossible to manipulate. Algorand smart contracts run at over 1000 transactions per second, which is much higher than other blockchains operating on smart contracts. Furthermore, the random nature of this sorting means that it is immediately decentralized, and given that adversaries cannot know who is voting, it also remains secure.

As you can see, Algorand has the tools to approach the challenge that trilemma poses very seriously. Now let’s move on to the next most important component of the technology stack, which is the smart contract functionality. This is especially important given the attention that Algorand has been directing towards DeFi lately.

Algorand 2.0

In 2019, Algorand released Algorand 2.0, which was a much-needed update to the protocol. It resulted in the introduction of three key features that include: standard Algorand assets, Algorand atomic transfers, and smart contracts. If you want to read about the first two, the documentation is worth reading. What is most interesting now is the discussion of smart contracts. Algorand smart contracts are integrated into Algorand Layer 1, which means that they inherit the same speed, scale, finality, and security as the Algorand platform itself. Moreover, they are cost-effective and bug-free.

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Algorand (ALGO) | Everything you should know about a potential hit this fall

There are many benefits associated with Algorand smart contracts. They are energy efficient, fast, have instant transaction finality, easy to develop on Java, JavaScript Python Go support and of course cheap to submit. The application potential for such smart contracts in the DeFi space is huge. Their post on smart contracts in DeFi is worth paying attention to. It walks you through all these use cases including Escrow, Synthetics, stablecoins, loans, exchanges, margin trading, etc. the list goes on.

So clearly there are a lot of use cases for these smart contracts in DeFi and it’s also not entirely theoretical that there are a lot of projects that have started developing based on Algorand.

Team

As mentioned, the founder of Algorand is MIT cryptography professor Silvio Micali. To claim that he has a track record in cryptography is an understatement to say the least. He has won three different international academic awards for his work. it’s hard not to mention that Zero-Knowledge Proofs, which have been talked about all too often lately, were once invented by Silvio and two other professors.

Here are the leading members of the Algorand team:

Algorand (ALGO) | Everything you should know about a potential hit this fall

Silvio is just one part of the team. It’s worth taking a look at their team page to get a feel for with the other names and credentials behind this project. And that’s just their human capital. They also have quite a bit of financial capital behind them. As mentioned, they’ve managed to raise over $120 million in multiple token sales, and they even completed a separate fundraiser for their own Venture Capital arm. It was originally called Algo Capital, but the name was changed to Borderless Capital. They have raised over $200 million to invest in projects that rely on the Algorand blockchain.

Algorand Tokenomics

ALGO is a utility token that serves two main functions. First, it can be used for staking and ecosystem rewards, and second, it can be used as a transaction fee tool.

A total of 10 billion tokens have been minted in the Genesis blockchain. While that may seem like a lot, the circulating supply is currently around 5 billion.

Algorand (ALGO) | Everything you should know about a potential hit this fall

Algorand “here and now”

According to BlockchainCentre, September could be “altcoin month.” This is the belief of many community members. This is claimed not only by crypto proponents, but also by former White House staffers. More specifically, a former White House press secretary.

During an interview with CNBC, SkyBridge Capital principal Anthony Scaramucci asserted that he is bullish on Ethereum, Cardano and Algorand. The reason for this stance would be their “great use cases”.

According to Scaramucci:

“There are a lot of great things happening in this space… As more and more digital applications come out, some of these altcoins like Algorand or Cardano, or things like Ethereum, will continue to grow because there are really great use cases for them.”

At the time of this writing, the ALGO exchange rate against the dollar remains above $2.20. Tby over 100% growth in the last two weeks.

The head of SkyBridge Capital even tweeted:

However, he’s not the only one with similar sentiments:

What’s more, according to Jason Choi of Spartan Group:

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“The price of ALGO has far outpaced the fundamentals so far, with a dramatic increase in IO when the mania set in.”

Algorand a DeFi

The Algorand Foundation has unveiled a new fund designed to allocate money to some DeFi projects they want to build on their native blockchain.

The pool of capital is called the Viridis DeFi Fund and is led by the Algorand Foundation, the group responsible for the Algorand blockchain and the development of its ecosystem. A post published on Friday reads: “This fund will provide 150 million Algo to fuel the significant early growth of the DeFi ecosystem in Algorand.

“The fund will fuel the growth of decentralized exchanges, money markets, options markets, synthetic asset applications and NFT platforms, all of which operate on the best blockchain network for the future of finance, ” the statement continued.

In opening the fund, the Algorand Foundation revealed the first two categories of Algorand DeFi that can receive capital from the fund. They were called “SupaGrants.” Each grant includes $5 million. “We are excited to share the first two SupaGrants, which are designed to support the creation of critical DeFi infrastructure […]. We are introducing the $5 million Oracle SupaGrant suite and the $5 million SupaGrant Bridge.”

Oracles in the crypto space are essentially

ways of directing information data to specific blockchains from sources outside those networks. Bridges help connect siloed blockchains so they can interact with each other, increasing the potential of essentially limited, single networks.

What do you think of ALGO and its investment potential?

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From the Editor

This article neither in whole nor in part constitutes a “recommendation” within the meaning of the Act of 29 July 2005 on trading in financial instruments or the Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014. on market abuse (Market Abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulations (Ue) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive. Thecontent contained on the website does not meet the requirements for recommendations within the meaning of the aforementioned Act, inter alia, it does not contain a specific valuation of any financial instrument, is not based on any valuation method, and does not specify investment risk

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