Algorand and the blockchain trilemma - Crypto Academy / S5W4 - Homework post for nane15
What is Algorand blockchain?
Algorand blockchain is a blockchain protocol that was developed and launched by Silvio Micali in June 2019. Algorand blockchain was created under the Algorand foundation. The blockchain protocol has three central objectives of scalability, security and decentralization to achieve. It aims to solve blockchain trilemma issue which no blockchain has been able to solve. Algorand blockchain does not undergo forking. It uses smart contract to function and the **pure proof of stake and byzantine agreement protocol are the two consensus mechanisms upon which it is based. This is to say that Algorand blockchain is a blockchain just like the Ethereum and Tron blockchains that has a platform, housing different decentralized applications and cryptocurrency projects. Algorand is different from the aforementioned because it has been able to address the blockchain trilemma problem faced by them.
The Algorand blockchain was developed to be a digital economy that can be accessed by all its owners or users providing an economy without border, getting everyone involved in governance.
ALGO is the digital cryptocurrency used to operate the Algorand platform or blockchain. All the financial transactions that can be done with the local currencies can be done with ALGO using the Algorand platform. Sending and receiving of ALGO is supper fast and does not cost anything between users of the platform.
There are many features of the Algorand blockchain that are of great importance to cryptocurrency project owners, owners of and users of decentralized applications. These are:
SPEED OF TRANSACTIONS
It takes just 4.5 seconds for transactions to be verified and confirmed between sender and receiver in the Algorand blockchain.SCALABILITY
The blockchain is built for many users. Algorand has the ability to take in billions of users and carry out billions of transactions without delay on any one of them. The population of users in the system doesn't affect the 4.5 seconds that is used to process transactions.SECURITY
The security of Algorand platform is topnotch even as it present itself to be transparent. An advanced cryptographic technique is used to protect and secure transactions and personal information peculiar information to users.TRANSPARENCY.
Algorand blockchain is an open source protocol that let's everyone sees what goes on in the system.TRUSTWORTHINESS.
Algorand provides a non-forkable blockchain that can be trusted by every user. This gives guarantee to users that their ALGO coin will remain in their quantity as long as they use the blockchain and hold its cryptocurrency.
What is PPoS?
PURE PROOF OF STAKE
Pure Proof of Stake is a consensus algorithm that was created by Algorand to be used for its blockchain. It is a consensus algorithm that is built on the byzantine algorithm where every user who holds a token have an influence on the platform depending on the quantity of the token staked in the platform. Anyone who stakes token can be picked as a validator of blocks as the selection process is done in a random manner.
This gives every user a chance to be picked by the system which boosts the decentralized nature of the Algorand blockchain and enhancement of the security of the blockchain.
Algorand blockchain protocol operates using the PPoS consensus algorithm. The reliable technology of Algorand offers users the opportunity to build DApps and the issuance of non-fungibe tokens. With the PPoS, the network can deal with high numbers of transactions without any issues with getting the network congested. The validation of blocks are done in about 4.5 seconds without any form of delay.
Explain the advantages and disadvantages of PPoS.
ADVANTAGE
Pure Proof of Stake gives every participant a chance to be the next validator of the block because the choosing of the validator is done is a random manner. With this even participants who do not really have much to stake can be considered.
With PPoS, blockchains transactions are very fast and do not cost anything. It takes only few seconds to complete a transaction adoption PPoS in the validation process of transactions in blockchain. This is to say that the speed of carrying out a transaction is topnotch.
Also it doesn't cost much to use the PPoS as it doesn't use much electricity in its operation.It is highly decentralized and participants are kept anonymously: Everyone sees what goes on in the system and anyone can carry out a transaction but users who avail themselves to be validators are kept from each other.
DISADVANTAGES
Users who do not stake their tokens cannot have a chance of being selected for validation of a block.
It is open to manipulation because participants do not get to know each other.
The reward given to validators is small compared to what what is given in other blockchains and consensus mechanisms
Do you think Algorand really solved the blockchain trilemma? Explain your answer.
To a very large extent, Algorand solved the blockchain trilemma. It addresses all the three components of blockchain trilemma which no blockchain had done. Since 2019 in has operated effectively and efficiently at its best.
It is fully decentralized, highly scalable and offers great security for transactions and users personal information.
In terms of decentralization, it allows everyone who have staked ALGO to be a part of the validation exercise and it is transparent as possible.
In terms of scalability, it accommodates many users numbering up to billions and allows them to do transactions with the high speed. This is what every user wants, that their transactions do not hang at any point as a result of a congested system.
The security level of the blockchain protocol is one thing that also makes it outstanding. The system randomly chooses the next validator and keeps the node anonymous. This it does to protect the validator and the system from any manipulator from the outside.
Algorand covers the three important features that makes a blockchain run smoothly. Therefore it has solved the blockchain trilemma issue.
Do you think PPoS is better than PoW? Explain your answer.
Pure Proof of Stake is better than Proof of Work in quite a number of ways.
I have been able to discuss PPoS in the preceeding part of this write up and we see that it is a very standard consensus mechanism offering blockchain the best way to choose the validator node.
Compared to PoW, PPoS is fast as it can validates blocks in 4.5 seconds compared to Bitcoin's PoW that takes minimum of 10 minutes. PPoS is cost effective because it doesn't use much of electricity and sophisticated computers gadgets for the validation of a block.
Also, there is no need to solve any mathematical puzzle in order to be considered for validation. This process used in PoW is stressful for validators.
In PPoS, the only thing users who are interested in validation are to do is to stake their ALGO coin and the system does the selection in a random way.
With all these, PPoS is a better consensus mechanism than PoW.
Do you think PPoS is better than PoS? Explain your answer.
Though Pure Proof of Stake is very similar to Proof of Stake, it hedges it in three ways.
The speed of transactions. It takes 4.5 seconds for transactions to be completed in PPoS but transactions are complete between 5 to 10 seconds in PPoS.
PPoS picks validators randomly but PoS selects validators based on the staked amount each individual has in the system, making the one who has more stakes be the next validator.
Explore and explain an ALGO transaction using algoexplorer.io ( Screenshots required)
On the above block explorer of Algorand, we can see the following details of transactions done one the blockchain.
As seen, we have information on the latest block, circulating supply, total supply, online stake, ALGO price, block speed, etc
To get the information of a block, one can simply click on one of the blocks to see all the transactions contained the the block. As we can see from the above screenshot, not all the blocks contain the same number of transactions. Only transactions that are successful are listed on each block.
The block 17953545 is explored below.
A total number of 28 transactions were done in the block and the block reward was 43.7 ALGO.
The block hash and hash of previous transactions are all contained in the information provided.
To explore a transaction, one can simply click on any of the transaction to see the details of it.
The detail of the transaction, transaction ID, transaction type, time of transaction, block number, sender ID and receiver ID, etc are all contained the the transaction
Carry out an analysis of the price of ALGO from the beginning of the year to the present. Via graphics (screenshots required.)
Looking at the chart above, we see that ALGO started this year at a price of $0.3 and went in an uptrend from January until February and marked its first high of $1.66 before it had a draw back. Between February and May, it's struggled between $1.66 and $1.00 until the early part of May when it went close to the first high marking about $1.64 before the general crypto bear that happened at the middle of May and lasted until September. This brought the price to about $0.6. By middle of September when the general bill started, it was no different for ALGO has it went on an uptrend until it marked a all time high for the year at $2.38. It has been trading for about two months between $2.27 and $1.40 and now it's price is at $1.49 as at the time of putting up this write up.
Conclusion
Algorand is a great blockchain. To have addressed all three problems of blockchain is a great feat. Today we see the price of ALGO at about $1.5 but this is a coin that will surge so much in price because so many decentralized applications will be built on this blockchain and this will further take the price higher to new highs.
With this, I have come to the end of this task. I am happy to have learnt about this great blockchain. With this knowledge, I shall make an investment on the ALGO coin to benefit from its future high price.
Cc:
@nane15