Algorand is a relatively new blockchain project. It emerged to put an end to the three main problems that the other blockchain commonly face: security, scalability and decentralization. Algorand works to overcome this trilemma without sacrificing quality or efficiency in any of its aspects.

This project was created by Silvio Micali, professor and cryptographer at MIT. Micali aims to build an economy without borders with this open source software company based in Boston.

How does Algorand work?

Algorand implements the Proof-of-Stake (PoS) algorithm to achieve lower transaction times, lower energy consumption and to provide tools that facilitate the technological evolution of the blockchain.

Specifically, their consensus algorithm that they have called Pure Pos is responsible for linking the security of the network with the honesty of the majority, in a much more effective way than with the Delegated Proof-of-Stake, Liquid Proof-of-Stake or Bonded Proof-of-Stake. In addition, this algorithm does not sanction for bad behavior, there are failures that are inevitable, such as low uptime or security flaws such as trying to validate the same block twice.

Algorand is designed to avoid deception towards minorities and majorities. The protocol will work well as long as 2/3 parties are honest.

Algorand network structure

The network is formed by two types of nodes that work simultaneously to ensure the proper functioning of it.

We find the “relay nodes” and the “participation nodes”. Both use the same software, the difference is in their configuration.

The relay nodes are responsible for maintaining the connections between the nodes. They have high-performance network connections that allow efficient communication paths. These nodes decongest the network by accumulating protocol messages from the participation nodes and other relay nodes connected to them. To achieve this, these nodes deduplicate, verify signatures and other validation steps, to finally propagate just the valid messages. These nodes can be executed by anyone.

As for the participation nodes, they are connected to the relay nodes and act as a user agent in the system. They propose and vote blocks in the name of a user’s participation in the consensus algorithm that has previously authorized them. This type of node can also be executed by anyone.

ALGO Token

ALGO is the platform’s token. He made an ICO in which the project managed to raise about 60 million dollars. It is currently in the 49th position in the market capitalization ranking.

The issuance of the tokens has been done annually through an auction of 600 million ALGO. Although the auction date is not set. These auctions are held on the Algorand bockchain itself with a monthly goal of 50 million ALGOs per month.

The team chose the auction mechanism as a token distribution method because they believe that both the value of their token and that of their platform should be established by the market. Other aspects that they highlight as advantageous for auctions are their efficiency and transparency.

Algorand created a reimbursement program to reduce supply if demand falls. This allows auction buyers to sell tokens to the Foundation.

The company also intends to incorporate other incentive mechanisms to current ones to ensure that community support is maintained in the long term. Participation rewards will come from transaction fees once the 1.75 billion tokens destined for rewards have been used up. It should be noted that the commissions for each transaction are very low, allowing its users to operate with their funds in any way they see fit.

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