Algorand and its unique consensus mechanism.

A new and exciting blockchain, Algorand, and its native token, Algo.

It's been around for a little more than a year, but this time Algorand has managed to create quite the hype around it and its native toke , Algo, has climbed to within the top 50 on Coinmarket Cap, with a total value of a little over $160 million at the time of making this article. Price-wise, it started strong at token launch with a validation of $3 per coin.

In early August 2019, less than 2 months after the mainnet's launch on June 19, rumors of its listing on Coinbase Pro gave it a good pump in price. The fact that it was the fastest a token has ever been listed on the popular exchange definitely played a part.

But as it usually happens in these cases of "buy the rumor, sell the news", the price continued its decline after the actual listing happened and has sinced settled at around $0.23.

What is Algorand?

Algorand is a smart-contract oriented platform, pretty similar to Ethereum, but with some key differences that the Algorand development team claims improve security, decentralization, and the speed and cost of transactions.

The first thing you'll notice about Algorand is their trademark "Pure Proof-of-Stake" consensus protocol.

Coins like Bitcoin use a Proof-of-work consensus mechanism, where miners compete with each other, like a cage match, in solving complex mathematical problems.

The first miner to solve the problem gets to add a new block to the coin's blockchain and receive the mining reward.

However, this protocol has some disadvantages. It costs a lot to mine new blocks, both in equipment and electricity.

The high cost makes profitable mining unattainable for most, leading to the centralization of mining power.

Staking Algo

In a Proof-of-Stake protocol, token owners participate in the network's consensus mechanism by simply holding or staking tokens.

NEO, XTZ and VeChain are only some examples of coins that use Proof-of-Stake.

And although you can get rewards with these assets by holding and staking your tokens, that doesn't necessarily mean that you can also participate in the consensus mechanism. And here's where Algorand makes the difference.

Every token holder with at least 1 Algo in their account can choose to participate, in which case they can be randomly choosen to propose and add new blocks to the chain. If more tokens someone holds, the more likely that user will be chosen.

How to participate in the consensus process?

Now, to participate in the consensus process, you'll need to keep your Algos in their official wallet and declare your availability through a special transactions. Algo calls this "going online".

At this time, rewards are distributed universally to all token holders according to the number of tokens they hold.

Advantages of Algorand

The Algorand foundation boasts that this Pure Proof-of-Stake approach has significant advantages over the current implementations of Proof-of-Stake.

• First, it enhances security : Since the miner's are chosen at random from all token holders, an attacker can't know which ones they are beforehand, in order to attack them.

• Secondly, it promotes decentralization : No complex calculations are needed, so anyone can participate in the consensus process without needing specialized equipment or high energy usage.

• Finally, Algorand transactions are fast, taking about 5 seconds to confirm z and with an average fee of less than $0.001, they're very cheap too.

Compared to Ethereum's average transaction confirmation time of 15 seconds and a transaction cost raging from a few cents to a few dollars, Algorand is both faster and cheaper.

Two layers of Algorand's smart contracts

Algorand achieves both the high block speed and the low transactions cost because of the lightweight consensus mechanism it employs, the fact that transactions are immediately final and by splitting the smart contracts in two layers:

• Layer 1 is used for simple smart contracts, atomic transfers and swaps, and token transactions, things that don't require much time to be executed and won't delay block production.

  Some examples of Algorand smart contracts at Layer-1 is called ASC1 include : Post-and-Sale transactions, Securitized loans, Crowdfunding, Accredited-only transactions and Multi multi-sig wallets.

  Furthermore, Algorand has implemented a universal architecture for a Layer 1, written in a new language called Transaction Execution Approval Language or TEAL, this universal architecture simplifies the creation of smart contracts, or new tokens called Algorand Standard Assets (ASA), which work exactly like the native token, Algo.

  The universal architecture also removes security or other malfunction risks and guarantees that the execution of these smart contracts doesn't impede the blockchain's performance.

• Layer 2 : For more complex smart contracts that require longer execution times or access to off-chain data, Layer 2 is used - These smart contracts are executed "off-chain", in parallel with the block creation. Once they have finished executing, only the results, and a certificate validating them, is added to the chain, and the block production speed is unaffected.

These features are pretty cool, but Algorand has another ace up its sleeves : "co-chains".

Co-chains are private blockchains built on the Algorand protocol. They can be utilized organizations that want a blockchain, and perhaps also a token or security built on it, accessible only by their members.

This idea already exists I'm other blockchains, but the implementation usually leads to isolation of the users of the private blockchain. But Algorand solves this problem by having built-in the ability to communicate with other co-chains or the main chain and the world at large. I'm this way, what needs to remain private does, but at the same time, the co-chain users can also transfer information to other chains around the world.

Images use are from : medium.com

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Article of : @Vained