Algorand and the blockchain trilemma - Crypto Academy / S5W4 - Homework post for @nane15
THE ALGORAND BLOCKCHAIN
Algorand is a blockchain-based cryptocurrency network that is decentralized, safe, and scalable. Smart contracts are supported by the Algorand platform, which uses proof-of-stake principles and the Byzantine Agreement protocol for consensus.
Algorand was created with the goal of combining aspects of major, well-established cryptocurrencies–such as decentralization, transactions without a central authority, and easy-to-divide tokens–with increased speed and less computational power.
The Algorand is actually a decentralized network that is focused on bringing solution to the issue of speed, security, and decentralization in the blockchain space.
The native currency of Algorand is ALGO, which is a decentralized blockchain technology network.
To be eligible for future blocks, as long as it is accessible online. Process foundation of a secure, rapid, and redistributive system is a fully redistributed and healthy competition for the royalties of future blocks in which anybody can participate.
Of course, security is important in Algorand, and it is achieved through healthy competition, in which everyone in the network uses their tokens according to their needs, removing one of the issues with PoS. "Blocking coins" are a system that challenges decentralization because the reward is based on the percentage of coins you can collect, allowing large investors to dominate them.
To summarize, Algoran is completely decentralized because no third parties are involved. In addition, every account on this site participates in the consensus process. There is complete security because it is based on pure proof of stake. And this platform can handle a large number of transactions in a short amount of time.
THE PPOS
Algorand is based on Byzantine consensus and uses a pure proof-of-stake (PPoS) protocol. The influence of each user on the selection of a new block is proportional to their stake (tokens) in the system. Users are chosen at random and in secret to propose and vote on block suggestions. Every online user has the opportunity to be chosen to propose and vote. The probability of a user being picked, as well as the weight of its proposals and votes, is proportionate to its stake.
The PPoS strategy of Algorand relates the overall economy's security to the honesty of the majority of the economy, rather than a small portion. When most of the money is in good hands, the system is secure. With other systems (described below), the security of the entire economy is determined by a small subset of the economy, which means a few users can restrict other users from transacting. It is not possible for those who own a little portion of the asset to create much problem for the whole system in Algorand, and it is not wisdom for those who own a large part of the asset to misbehave because it would erode the currency's purchasing power and, as a result, devalue their own assets.
THE ADVANTAGES OF PPOS
1.The most obvious benefit is the ability to directly employ the three blockchain components of decentralization, scalability, and security.
2.Because PPoS comprises two phases, each with its own committees that are chosen at random, it offers a high level of security.
3.To validate a block like Application-Specific Integrated Circuit, there is no need for expensive equipment (ASIC).
4.Because each phase includes a different committee, those who intend to attack unilaterally are unable to do so because they have no idea who will be elected in the following phase.
5.It is quite simple to join in the algorithm blockchain; all users need is the ALGO token.
THE DISADVANTAGES OF PPOS
1.As long as honest users (those who follow the protocol's rules) possess more than two-thirds of the total stake in the system, the blockchain can support an indefinite number of malicious users.
2.Apart from the risk of monopoly that a large number of staked tokens can create, which PPoS mitigates, this Consensus Mechanism has the same problems as standard PoS.
3.Staking incentives are not particularly tempting, except as a source of passive income and in relation to large amounts of staked tokens.
4.Rather, the network immediately enters recovery mode, and the process continues. While this improves speed, it is criticized by the community for failing to punish bad users.
5.To discourage future involvement, the staked tokens of a node that has submitted a faulty block are not reduced on Algorand.
WAS ALGORAND ABLE TO SOLVE THE TRILEMMA OF BLOCKCHAIN?
The solution to the blockchain trilemma was one of Algorand's goals. The Algorand blockchain, in my opinion, has solved the blockchain trilemma's concerns, which means it has implemented three blockchain components directly without surrendering any of them.
The use of three blockchain components in the algorithm is explained below
•Decentralization: Decentralization, as we all know, allows us to carry out any operations on a decentralized system without the use of third-party mediators or algorithms. The method is divided into two parts, each of which selects a new user. Decentralized components are utilized in the blockchain algorithm when the selection of users in each phase is done at random and silently without the involvement of third parties.
•Security: As previously stated in the section on decentralization, the algorithm is divided into two phases, each with its own committee that is picked at random. This algorithm has exceptionally good security due to the PPoS system, which has two phases of processing on the algorithm. What caused this to happen? This occurs because each phase has its own committee, which is picked at random and in secret, making it easier for thieves to track down and strengthening the algorithm's security component.
•Scalability: The algorithm does not reduce scalability by using two of the three main components of a blockchain, namely decentralization and security. The proof is that the algorithm has a rapid block creation and block verification procedure, and that even if there is a crime, the system will continue to function normally. This implies that the algorithm makes advantage of the scalability component.
Putting the above points into consideration, my answer to the above question is yes, Algorand was able to provide solution to the trilemma of the blockchain
PPOS VS POW; WHICH IS BETTER?
From my personal opinion, the PPOS is much more better than the POW and below is my reason.
Proof-of-work (PoW), often known as mining, is a method in which users compete to solve extremely difficult cryptographic puzzles. The person who solves the puzzle first gets to add the next block to the chain and is paid for it.
This is how Bitcoin, Ethereum, and many other blockchains work. PPoS has a number of benefits over PoW.
•To begin with, PoW is incredibly costly and wasteful. To remain competitive, mining frequently necessitates specialized technology and uses a significant amount of electricity. Only professional miners who have invested the money to purchase racks of hyper-specialized mining equipment can hope to earn. As a result, they are the only ones who participate in (and benefit from) block generation. Because only one person solves the riddle and creates the new block, all other miners' efforts are worthless.
While those that participate in the Algorand consensus mechanism do not worry themselves about solving cryptographic puzzles to propose or validate blocks. The consensus protocol is open to every user who is online and has a stake in the network. Furthermore, block formation does not necessitate any costly processing. The computational and financial cost of participation is very minimal, therefore it is not a deterrent to participation.
•Blocks in PoW systems take 10 minutes to spread throughout the network. This is true regardless of how many people attempt to solve the crypto puzzle. Slowness and scalability like this are insufficient for serving a global economy or any financial application.
While blocks are transmitted in seconds thanks to Algorand's low computation and communication overhead. As a result, the protocol may scale to millions of users while maintaining a high transaction rate.
PPOS VS POS; WHICH IS BETTER?
Just as above, my answer to this question too is that the PPOS is better than the POS and this is due to the reasons I explained below;
In the same way that PoS works by selecting block validators based on the number of coins owned, PoS works by selecting block validators based on the number of coins owned. As a result, depending on the number of coins in their possession, a person can mine or validate block transactions.
Despite the fact that PoS is a modification of PoW and does not necessitate a large amount of processing, it provides the wealthy additional mining power. This is because the more tokens staked, the more likely it is that the next block will be chosen to be validated. The wealthy, without a question, have a stronger chance of succeeding.
With PPoS, however, everyone who owns a token, regardless of number, has a chance to be chosen to validate.PPoS is unquestionably a solution to or a development of PoS. This simply means that PPoS is preferable to PoS because a problem has been discovered and a remedy proposed.
EXPLORING AN ALGO TRANSACTION VIA HTTPS://ALGOEXPLORER.IO/
Go to https://algoexplorer.io/ as the first step. As you can see on the top left of the page, it's the Algorand blockchain explorer.
On the explorer’s homepage, we can see informations like the latest block, the circulation supply, the total supply, the online stake, the ALGO price, block speed and so many others.
You can view all transactions by clicking "View all transactions," which will show you all transactions distributed with multiple tokens, as well as an ALGO token carrying the quantity of ALGO tokens transferred and thus the receiver's balance.
It contains relevant information such as dealing ID, timestamp, block range, sender, and sender data.
When actively working and transacting in the blockchain, it's always a good idea to have this information in mind. We will have rapid access to information about them, including timing, commissions, and other facts, allowing the North American nation to operate at a higher level on both sides.
ANALYSIS OF THE PRICE ALGO FROM JANUARY TO DECEMBER 2021
Let's have a look at the highlighted 12months of the chart from https://www.coingecko.com, with January 2021 as the starting point.
After a series of ups and downs in 2020, the price of ALGO was $0.29 at the start of January 2021. (according to the chart)t began on a bullish path, reaching a high of $1.75 in the first quarter of 2021, February specifically, before settling at $1.41 as the first four months came to a close.
Before the beginning of May 2021, the price had fallen a little below the $1.41 barrier set in April. In May, it surpassed $1.58 and came dangerously close to $1.60. The price dropped due to the gloomy market in May.
ALGO struggled between $1.58 and $0.70 throughout May, June, July, and August. It ended up at $0.96 in the end.
ALGO, like all other cryptocurrencies, experienced a bullish run at the beginning of September. The bull pushed the price up to $2.38 from its August low. It remained constant until it plummeted at the end of the year. The prices ALGO traded in the last few months ranged from $2.38 to $1.58. The cost is currently $1.64.
CONCLUSION
Because the algorithm blockchain already uses the three essential characteristics of the blockchain, namely decentralization, scalability, and security, Algorand is a platform that has addressed challenges in the blockchain trilemma and has proffered a solution to those challenges. In today's investment market, Algorand is causing a revolution, and I strongly hope it will continue to strengthen our settlement system.