What Is Algorand?
Algorand (ALGO) is both a digital currency and blockchain platform. The Algorand platform is designed to process many transactions quickly, similar to major payment processors like Mastercard or Visa. In addition, Algorand can host other cryptocurrencies and blockchain-based projects, making it a direct competitor to Ethereum. ALGO, the platform's native currency, is used to secure the Algorand blockchain and pay processing fees for Algorand-based transactions.
Algorand is an open-source blockchain, meaning anyone can view and contribute to the platform's code. Algorand uses an operating protocol it calls pure proof-of-stake (PoS), which recruits network validators from the pool of users.
The Algorand platform and accompanying cryptocurrency were founded in 2017 by Silvio Micali, a professor at the Massachusetts Institute of Technology and noted cryptographer. The total supply of ALGO is capped at 10 billion coins, with about 7 billion ALGO already circulating.
- Algorand (ALGO) is a blockchain platform and cryptocurrency designed to function like a major payment processor.
- The Algorand blockchain uses a consensus mechanism it calls pure proof of stake.
- ALGO, the native coin of the Algorand platform, is used to secure the platform and reward the ecosystem's governors.
Algorand markets itself as a highly efficient, scalable platform that can immediately finalize transactions. Algorand accomplishes this in a decentralized way by:
- Using relay nodes to enable efficient communication paths
- Incorporating participation nodes that vote on and confirm new blocks for the Algorand blockchain
- Prohibiting any splitting (forking) of the Algorand blockchain to guarantee that completed transactions cannot be changed
- Reducing the data burden placed on Algorand network participants by continually compressing blockchain information
The Algorand blockchain uses the proof-of-stake consensus mechanism. ALGO holders who stake coins are rewarded by becoming governors and are able to cast votes on blockchain and community issues. Algorand governors are rewarded in ALGO, the blockchain's native cryptocurrency. ALGO is also used as a utility token to pay transaction processing fees.
The pure-proof-of-stake (PPoS) consensus mechanism uses random validator selection to ensure the process is decentralized.
How Does Algorand Differ From Ethereum?
The Ethereum and Algorand blockchain platforms can be viewed as competitors. Both platforms provide infrastructure to support the development of other blockchain-based projects, use smart contracts, and use proof-of-stake. However, the two have different staking and reward methods.
Ethereum requires a stake of 32 ETH to become an activated validator but allows anyone to join a validation pool by staking any amount of ETH. All ALGO holders are eligible to participate in consensus by having ALGO in their wallet. It is not a resource-intensive process, so the users chosen by the network will not even know it is occurring.
Ethereum is slower, and transactions are more expensive than Algorand. For example, Ethereum can process a new block of transactions approximately every 12-14 seconds. Transactions processed via the Algorand network are finalized in 5-12 seconds. Algorand also boasts significantly lower transaction fees than Ethereum.
Ethereum rewards those who participate in validation according to the amount of ETH contained in the blocks being verified. Staking ETH pays out an average of 4.0% APR.
When Algorand first launched in 2019, it had a reward system in place for participating in consensus. The Algorand Foundation was responsible for funding the rewards pool, which paid out rewards over four six-month periods (two years). The participation rewards program ended in April 2022.
As of Oct. 2022, Algorand rewards are earned by participating in governance. Algorand relies on its community of users to make decisions regarding blockchain implementations or other important issues. Rewards are given to those who stake ALGO and participate in all votes for the duration of the governance period.
How Do You Stake Algorand?
As mentioned earlier, rewards for staking Algorand ended. However, you can still stake your ALGO and participate in governance to receive rewards. To stake your ALGO and become a governor, you need to visit the signup page and follow the steps by clicking on the "Sign Up" button:
- Connect a wallet
- Sign up
- Commit ALGOs
Frequently Asked Questions
What Is the Purpose of Algorand?
Algorand aims to achieve global trust among trustless parties through blockchain-based decentralization. The platform prioritizes simple designs for developing technology that can eliminate barriers to prosperity.
What Makes Algorand a Green Blockchain?
Algorand bills itself as the most efficient and greenest blockchain. Since April of 2021, Algorand has been carbon-negative—meaning that the platform purchases carbon credits that more than offset its carbon emissions, which is already much less than blockchains like Bitcoin.
What Projects Are in the Algorand Ecosystem?
The Algorand blockchain supports various projects, many of which focus on decentralized finance like decentralized lending and trading. In addition, the Algorand blockchain supports other cryptocurrencies such as stablecoins and even a digital national currency.
Can You Mine ALGO?
ALGO is validated rather than mined. Its pure proof-of-stake consensus mechanism uses validation rather than mining to operate a blockchain platform. Crypto mining is generally associated only with the proof-of-work consensus mechanism.
How Can I Buy ALGO Cryptocurrency?
You can buy ALGO using a major cryptocurrency exchange like Kraken or Coinbase. After establishing an account with an exchange and funding it with your local currency, you can initiate a buy order for ALGO. Once the purchase is complete, you can store your ALGO in a wallet that is self-hosted or hosted by the cryptocurrency exchange.