Algorand and the Blockchain Trilemma - Crypto Academy / S5W4 - Homework post for nane15
Algorand blockchain has made a lot of waves in the blockchain world. The network has become very popular among blockchain enthusiast. The native token has also been very well adopted and used. Many people are quick to mention Algorand when the issue of blockchain trilemma comes up. This is because it is one of the blockchaina networks that is said to be able to deal with with this problem.
Recently, we discussed the trilemma issue and in this lesson Prof. @nane15 has expanded the link between Algorand and this issue. I will now go straight to replying the assignment questions.
What is Algorand Blockchain?
The Algorand is a very appealing network created so far. The different components it has makes it stand out amongst others. Although it was officially launched in the year 2019, it has gained enough ground to create a space for itself in the Blockchain world.
The Algorand project developed through the Algorand Inc company, was founded by Silvio Micali who is the renowned award winning Italian. It was built in 2017. Test run was done in April 2019 main network was launched in June 2019.
Algorand project has a coordinating body called the Algorand Foundation, whose main function is the management of the Ecosystem. Their other functions which come together to form a perfect whole to ensure he main function is achievable includes, facility growth, funding awards, cryptographic research primitives, on-chain governance and decentralization.
The network employs minimal computing power for validation of transactions by using Byzantine Agreement protocol which is a pure proof of stake (Pure POS) mecahnism to achieve consensus.
The steps used to reach consensus using the pure proof of stake Byzantine Agreement protocol include; Proposal, Soft vote, Certify vote.
Here, 1,000 token holders are opportuned to be selected randomly for the purpose of validating transactions through a lottery system in a particular block. Each round requires a change of validators as they are selected randomly and there is no repetition.
When refering to a blockchain that cannot produce two similar blocks at the same time, Algorand comes to mind as it is the first blockchain that gives transaction finality without delay, that is immediate transaction.
An exhibitionconducted on transactions using the Algorand network, discovered that the network could handle half a million transactions in one day. That is, at least two thousand transactions can be processed every second. There is a block production rate of one block after about 5 seconds.
Algorand has been able to gain to create scalability, security and decentralization through the pure proof of stake consensus mechanism. Which has eluded most blockchains.
It is difficult to attack the network due to the dynamism of authenticating transactions. Because the validating nodes are choosen randomly and the process changes each time over the three steps process, there is a myriad of unpredictability and anonymosity associated with the participating nodes.
Through he dynamic committee method of authenticating transactions where validating nodes are choosen randomly and which keeps changing over the three steps process, it is difficult for the network to be tailed and attacked as there is much unpredictability and animosity about the participating nodes.
The advantage of Algorand blockchain, is that it can be accessed and verified by anyone, that is it is an open source blockchain. Algorand blockchain, deploys dApps and launches projects using the smart contracts that can be used for stateful or stateless contracts.
Algorand also supports decentralized Finance (DeFi), NFTS, gaming and stablecoins to be created on the blockchain.
Algorand allows for data storage especially in the environmental system. This is seen in projects like the proposed system for organizing the application of restoration funds to landscapes spearheaded by International Union for the Conservation of Nature. Another is a programme launched by the PlanetWatch on February 2020 where air quality data is stored on Algorand network.
Algorand also has a native token called ALGO.The total fixed supply of this coin is put at 10,000,000,000 ALGO. Its performance has produced astounding results in the past months.
What is PPoS?
The full meaning is, the pure proof of stake consensus mechanism. It is an evolved consensus adopted by Algorand. It allows each user the chance and opportunity to participate in new blocks for voting and validation.
This is different from proof of work (PoW) consensus mechanism of the likes of Bitcoin and Ethereum and the proof of stake (PoS) used by many other blockchains.
Every user who holds the ALGO coins can become an active member in the blockchain.
- Block Proposal Stage
These mechanism is divided into steps and phases. In the first phase, the participating nodes are selected randomly. The Verifiable Random Function (VRF) is a tool used for random selection. Using the unique selection seed key a user can check on his own if he has been selected to propose a block.
The randomization system is called cryptographic sortition which is a kind of weighted lottery session. Each ALGO owned by a user is like a ticket which stands a chance of being selected and this is done continuously in a cycle with no fixed deposit or designated nodes.
The cycle repeats for every new block proposed. Once the randomization has been completed, the selected users go ahead to propose blocks for building.
- Soft Vote Stage
The process moves to the next phase which is the Soft Vote Phase. In this phase, the proposed blocks are voted by the committee to filter them down to one. The selected users are verified by the participating nodes to confirm their selection. The user's also have voting power which is used to vote proposed blocks and then an agreement is reached based on the proposals that has been duly voted. The voting power of the user is similar to their AGLO holdings.
- Certifying of Vote Stage
This is the final stage in which the voted block is certified as a proof of being valid. Here, another committee is also selected to vet the voting process of the soft vote phase. Their duty is to check for potential double spending, over-spending or any other irregularities and problems that may exist.
After a confirmation that there are no irregularities, the committee validates the block through another voting session. When an agreement that the block is valid is reached through the voting, a certificate is created for the block and it is recorded in the ledger.
This brings an end to the round and another is started with fresh randomization and selection.
The pure proof of stake consensus mechanism allows for self selection as user can check for their selection status on their own using the Verifiable Random Function (VRF). Also, there are no fixed nodes. User replaceability exist here also as the round of selection and validationis conducted after every cycle.
Explain the advantages and disadvantages of PPoS.
Notwithstanding its unique strengths, the PPoS has its weaknesses. Below are the advantages and disadvantages of the this mechanism.
ADVANTAGES
Due to random selection the participating nodes makes the system unpredictable and less vulnerable to attacks.
The network uses the increased computational nodes as a result of the inclusivity of holders of the native coin to boost its security level.
The fact that each user has to be replaced at every round of validation goes ahead to tighten the security of the network.
The complex nature of block certification gives a unique feature to the blockchain as different phases of the process has to be bypassed to obtain a new block thereby making it credible.
Because the platform is decentralized, it is possible for all users to have a say in the network. By being a holder of the ALGO token, one has full access to participate in the running of the network.
The cryptographic sortition mechanism and the Verifiable Random Function makes it possible for participating usera to independently facilitate block validation process, that is,there is no third party system involved to carry out a function.
There are no central administration units or bodies that assigns stakes or allot blocks to users. Opportunities are granted to every user through the process of randomization.
As earlier established, over two thousand transactions is carried out per second processing rate with traditional financial systems rates. This level of scalability is first of its kind and very rare in most blockchains. This means that with PPoS, Algorand allow many users and transactions to be done at the same time. The speed by which these transactions are done makes it unique on its own.
PPoS uses minimal computational power as a result it attracts low cost and fee charges.
As earlier stated, because the PPoS makes use of minimal computational power, there are lesser carbon emissions in the environment. Because of this, less energy released into the atmosphere provides a clean, friendly and safe environment.
There is absence of forks in the blockchain because no two similar blocks can be entered into the ledger at the same time. Block certification is done with the knowledge of all participants.
DISADVANTAGES
Limited number of chances for users due to stakes proportion. Here, users with a large number of stakes have more tickets and as a result have an increased chanced to getting selected as the tickets provide them slots for random lottery selection.
Open access to the network grants access to user's whose main aim is to impede the structure of the system. Since validation requires all users participation, it is vulnerable to attack by hackers.
Although the PPoS offers rewards to users, there are really low and thus discourages participants involvement and resources in the process.
Do you think Algorand really solved the blockchain trilemma? Explain your answer.
Yes, it has. Unlike other blockchain who only solved the problem of high security and decentralization, the Algorand blockchain has handled the problem of trilemma successfully. That is, high security, open decentralization and scalability. This is seen in the advantages of the pure proof of stake consensus mechanism which Algorand blockchain uses.
These three important features are well incorporated into the network. With this essential attributes established as pertaining to any blokchain network, it can be surmised that Algorand has solved the problem of blockchain trilemma.
Do you think PPoS is better than PoW? Explain your answer.
In my opinion, PPoS is better than PoW by miles. Comparing and contrasting these two protocols, anyone familiar with blockchain concepts and operations will be able to quickly find stack differences and clear advantages of PPoS over PoW.
PPoS has been able to avoid the weaknesses that is in PoW. A block in a PoW consensus mechanism like in Bitcoin takes a whooping 10 minutes to be created. This is a highlight of the very low scalability of the protocol. Whereas by using PPoS like in Algorand, blocks are produced in less than 5 seconds.
Over two thousand transactions can be executed concurrently without any strain on the network. This fosters excellent scalability.
Interacting in a PoW enhanced network will demand much spending in procuring necessary hardware and computing sets to meet the computational power requirement. This goes further to make the system expensive ans hazardous as these equipment produce dangerous carbon emissions into the environment.
These hardware also consume a lot of energy. Trying to solve complex cryptographic problem is very difficult and time consuming. This makes the fees charged in such networks for transactions to be very high.
Furthermore, the rush and competition to validate transactions in PoW protocol sometimes lead to creation of two identical blocks which results in forking of the system and in most cases a a complete waste of resources.
With pure proof of stake these issues are absent as they have been properly addressed. There is low charges for transactions, low energy is required, lesser computing hardware and power is required, the environment is better protected and conserved, there is no chance of forking as certification of blocks is done with the knowledge and agreement of all users. Looking at all these benefits of pure proof of stake consensus mechanism over proof of work, it is logical to conclude that PPoS is a better than PoW.
Do you think PPoS is better than PoS? Explain your answer.
I am of the opinion that the pure proof stake is better than the ordinary proof of stake consensus mechanism. First, the pure proof deals with issues like decentralization and most importantly, it has solved the trilemma problem.
Proof of stake gives few individuals access to access large stakes by holding large units of assets which causes limitations to voting and rights to conduct mining. With any unit of assets, participation in the network is guaranteed. And it does not limit the number of investors into the system, this gives everyone the opportunity to be relevant, there is no discrimination.
The fact that the pure proof system solves the limitations that comes with poor security, scalability and decentralization is a proof that it is much better than the Pos.
Explore and explain an ALGO transaction using algoexplorer.io ( Screenshots required)
To explore an ALGO transaction, I went to block explorer tool at algoexplorer.io. On launching the page, I saw some information.
The first group of data shown were those like the Algorand price in Bitcoin equivalent. The block speed, the number of transactions per seconds which was shown to be 11.08. The total number is active accounts was also shown. This was 16,732,272. The market capitalization was also shown as well as the price history chart.
There were two tables listed. One was for the latest blocks and the other way for the latest transactions.
From the table of lastest transactions, I tapped the second transaction hash that was shown on the page. It opened up with some details of the transaction.
The transaction was a transfer of ASA involving 15.4368 Planets.
The transaction took place on block number 17960402.
The transaction ID is RWQAM65QWMYIJ2F773PCBILTNTHX22KCPXCFIF46VTHJHW27AB2A
The time stamp is Sat, 11 Dec 2021 14:29:49 GMT.
The Senders adress was X2W76H7A57BNGV6UQNMYQHCFOK4BI4DE6AG7V7BIGIYSNGCPBO44JXRMHA
The destination address was WKJZ2AK7IBP67LR2T5UIBINPSHUQKNQF5NWPFYWSQBCZVJMS63IMBP2YK4
Sender ASA Balance was 174,990.677118 Planets.
Receiver ASA Balance was 4,317.984799 Planets.
More details about transaction are recorded towards the bottom of the page
Carry out an analysis of the price of ALGO from the beginning of the year to the present. Via graphics (screenshots required.)
Over the past months in this year, it is understandable that the price of the Algorand coin has not been static. It has changed from time to time with it going up at some points and coming down at other points.
In an overview, the price seem to have started quite poorly but has embarked on some significant bullish rally to see great increase. For one, the point at which the price began the year was very low but have since moved up from that.
Algorand started the year at $0.3981 but on this date of writing this assignment, it is at $1.5034.
The rise in value of Algorand has more than quadrupled in the past months.
After the low start, the price shot up in February to hit a high of $1.7124. Thereafter, a retracement followed between this time a April.
In April, the price went up again. This time it climaxed at $1.6979.
As usual, retracement set in for some period which was quite brief as the went up again in May to hit $1.5819.
After this, the longest dip period for the coin was experienced. Price was down for almost give months between May and September.
Somewhere in between, the price dropped to 0.6972.
But after this, in September which witnessed tremendous surge in value of almost all cryptocurrencies, Algorand also enjoyed this bullish campaign and hit the year high of $2.3795. This is even close to its all time high of $3.28.
After the September rally, like most other blockchain assets, the price has been going down gradually.
Since then, price has not really gone up again though I has not also gone down too much. In recent days, the price has really been going bearish.
This is the price point at present.
The chart seem to be down trending and is looking likely to proceed in that direction.
Pictures reference: CoinMarketCap
As it is, it looks quite interesting that the developers were not just making empty propositions about tackling the issues of blockchain trilemma. They had created a consensus protocol and a system that has assisted in making this a reality.
Algorand blockchain is tightly associated with the pure proof of stake consensus mechanism which is very distinct from the earlier versions of consensus protocols like the proof of work which happens to be the very first one and the later evolved proof of stake. These two have been largely adopted by many blockchains and they seem to share the recurrent problem of the blockcain trilemma.
Now, Algorand has moved on to the next technology and it appears to be quite positive. It already has outstanding features that eclipse those of the previous ones. Its advantages over proof of work and proof of stake are much more pronounced than its disadvantages.
As it is, Algorand seem to be doing quite alright and is outperforming the other consensus protocols in terms of achieving optimal decentralization, security and scalability. Prof. @nane15 has done clear explanation of these in the lesson. I for one, am very cartain that Algorand has created the path for a new wave of blockchain technology.
