Crypto Academy / Season 5 / Week 4 / [Beginner Course] - Algorand and the blockchain trilemma
Algorand and the blockchain trilemma
1. What is Algorand blockchain?
Algorand Blockchain:
The Algorand blockchain was developed by Silvio Micali an MIT professor in the year 2017, however, the mainnet was released in the year 2019 meanwhile the distribution and decentralization of the platform are funded by the Algorand foundation.
The Algorand blockchain meets all the fundamental requirements for a perfect Blockchain by being secure, scalable, and entirely decentralized with the help of its unique and new consensus algorithm that goes with the name of pure proof of stake. The consensus algorithm of this Blockchain is permissionless and users holding native coins of this Blockchain can participate. This Blockchain like other blockchains operates using smart contracts.
The native token of this Blockchain is Algo that we will be studying in other questions of this homework post. However, anyone holding these Algo coins can participate to validate the next block formed on Blockchain. Since every user has the opportunity to participate so the blockchain is completely decentralized and the process to verify block compromises of two stages.
The first stage includes a selection of random coins and it’s the coin holder who proposes a new block on the blockchain hence called the proposal phase meanwhile the second stage that a protocol is optimized to select a committee of native coin holders to vote the block proposed the first stage i.e. a byzantine agreement protocol and called the second phase.
The developer behind this network aimed to solve the Blockchain trilemma that I think has been achieved with this Blockchain however we'll be having an in-depth talk on it another question of this task. There are many use cases of this blockchain that can be found on its official website such as building a Defi on it and much more.
2. What is PPoS?
For understanding PPoS let’s remind our mind of consensus mechanisms we are already familiar with such as PROOF OF WORK, PROOD OF STAKE that are used to verify transactions on blockchain whether through mining or staking so keeping the purpose of this consensus mechanism let’s study what PPOS is.
The PPoS is one of the many types of consensus algorithms based on Byzantine consensus that operates or verifies the transactions of Algorand blockchain and differs from the popular most pow and pos consensus algorithm as it doesn’t ask for mining or stakes from verifiers but instead let everyone on the system owning ALGO coin can verify the transaction and block formation.
The block verifiers are selected randomly among users that participate in staking and the mechanism used to select these committees is called “Cryptographic classification” at times the preference can also be based on the number of staked tokens. Once a block is generated a random committee is again selected to verify the next block that will be different from the earlier one.
3. Explain the advantages and disadvantages of PPoS.
Advantages of PPoS:
- The pure proof of stake consensus mechanism made it easier for users to participate in staking unlike other consensus mechanisms and the selection of validators committee is not based on coins they hold and the users with fewer coins are allowed to participate.
- One of the important most features of this consensus mechanism is that it is said to solve blockchain trilemma i.e. manages to provide a scalable, decentralized and secure platform ensuring users the perfect atmosphere.
- Another thing that adds to the pros of Ppos is the availability of users to use their staked assets on the blockchain using this consensus mechanism.
- As discussed above the validators are selected again after every block generation hence with the help of ppos the blockchain is less prone to unwanted invaders i.e. hackers attack.
- There’s no need for a computer with heavy powers or a large number of asset staking in PPoS mechanism.
Disadvantages of PPoS:
- I wouldn’t say it is a flaw but PPOS being new development has progressed to makes the features such as decentralized scalable and secure platform can disappoint users as with heavy crowd on the platform the transaction can cause the time to process and this algorithm is still new so it is too early to identify its disadvantages.
4. Do you really think Algorand solved the blockchain trilemma? Explain your answer.
Before coming to what I think of this platform solving blockchain trilemma let me combine what trilemma is and how does this blockchain behaves with that.
So we know the trilemma is when you can only choose 2 among 3 and concerning blockchain when you can only choose 2 essential properties of blockchain among three that are scalability, decentralization, and security. Till now the consensus systems we have found we have seen platforms the scalability and decentralization have been in inversely proportional ratio i.e. blockchains having scalability were not decentralized entirely and if decentralized there were scalability issues.
Now the Algorand blockchain has all three of these features in it because of its unique consensus algorithm PPoS that allows every user to participate in block verification in blockchain and after every block generation another verifier is selected to random cryptographic classification now with everyone being able to participate in block verification makes the platform well decentralized coming to its scalability the Algorand blockchain has great scalability with the high level of security.
Hence I think YES! The Algorand blockchain has so far solved the blockchain trilemma.
5. Do you think PPoS is better than POW? Explain your answer.
From what it looks like till now I’d say Yes, The Pure Proof of Stake algorithm is better than the father consensus mechanism i.e. Proof of work. We are well aware of the problem we go through because of proof of work mechanism as it takes time to validate a block meanwhile PPOs mechanism carry’s out a transaction in no time. Apart from this, we are also aware of the heavy computational power required in the PoW mechanism whereas the PPOS mechanism doesn’t require heavy computational power.
Another thing that makes PPoS better is an opportunity given to every user to participate to verify newly formed blocks. In Proof of Work the more the miners are there the more computational power is required meanwhile excessive validators in the PPOS mechanism add more to the security of blockchain maintaining its scalability and decentralization.
6. Do you think PPoS is better than PoS? Explain your answer.
The apparent features of Pure proof of stake make it better than the Proof of stake algorithm now why’s that? Continue reading to know.
As we know Proof of Stake was initially built to solve problems face is proof of the working mechanism such as scalability issues. Though the Proof of stake solved the scalability issues if we remember the concept of blockchain trilemma so the proof of stake somehow compromised on blockchain being less decentralized. Also, we know that to stake on platforms being operated by Proof of stake mechanism required a massive number of tokens to stake to validate transaction now because of that any fraud individual can acquire validation power on the system two meanwhile the pure proof of stake keeps the system entirely decentralized by allowing everyone on the system to participate in verifying transactions or block generations.
Apart from this the pure proof of stake also maintains scalability along with decentralization and security of the platform.
7. Explore and explain an ALGO transaction using algoexplorer.io ( Screenshots required)
Like every other blockchain, Algo has its blockchain explorer so for exploring and explaining its transaction I’d first go to algoexplorer.io homepage here how it looks like.
As you can see in the screenshot above the in the right corner there are transactions given here we can click on the view all transaction button to dig more so let’s do that.
Upon clicking the view all transaction button here’s the page down below we will be navigated to as you can see the different transactions carried out w with different tokens including the native coin ALGO.
Now upon clicking on any of the hash here are details of transaction we can find such as sender’s and receivers id and block number, timestamps, etc. here there’s an option of more information given down below which upon clicking gives further info on the balance of senders and receivers, round number, etc.
8. Carry out an analysis of the price of ALGO from the beginning of the year to the present. Via graphics (screenshots required.)
I’ll be carrying out this analysis using coinmarketcap so the chart below shows the yearly movement of the price of Algo token that shows the initial price at the beginning of the year of this token was 0.42 meanwhile at the time of writing the price of algo token shown on coin market is $1.55
Now looking in-depth we can the different fluctuations in price at the different periods of the year throughout the year. From the first month to the first half of the second month the price rise high then market met the rejection and until the end of Feb price finally started moving upward however with minor fluctuation the market kept moving upward until April then we can see a pause in its upward movement until June since then the market kept moving upward until September however since September with minor fluctuation market is still facing price movement of Algo coin in alternative up and downtrend.
9. Conclusion
The Algorand blockchain has so far solved the blockchain trilemma however with being newly developed there might be flaws in it but nothing that can’t be improved. The unique consensus algorithm of this blockchain is what makes it stands out from other consensus mechanism and has been proved to be better than popular most consensus mechanisms such as POW and PoS. The opportunity is given to every user to participate in the blockchain is ending the rich getting more rich culture of blockchains.
Much appreciation to the professor for his efforts in the lecture I hope to meet your expectations for the assignment.
Thank you.