Algorand is "a permissionless, pure proof of stake blockchain that ensures full participation, protection, and speed within a truly decentralized network." Back in September, the Algorand community started working on an Economic Improvement Proposal or EIP, labeled EIP-09092019PC (“the Proposal”). The proposal suggested imposing a 30-day suspension of daily rewards for relay node runners. The proposal was passed and extended by a further 30 days. Finally, Algorand announced a few days back that their relay node runners have approved a new long-term vesting plan for their rewards.

Why were the relay node rewards frozen in the first place?

Relay nodes play a crucial role in Algorand’s ecosystem. Relay nodes are responsible for connecting different nodes with each other and building a coherent system. To ensure that they are adequately rewarded for their services, Algorand used to release a large amount of Algo tokens per day into the ecosystem. Going by the numbers, the relay node runners were supposed to get back 100% of their initial allocation within just 2 years, or 50% per year, or 0.1365% per day.

Many in the community were rightfully worried about this system, because:

• Releasing a large number of tokens into the ecosystem causes the supply/demand equation to go haywire, creating economic disbalance.
• A potential whale can also lap up these extra tokens and sell them en masse in an exchange, creating massive sell pressure on the market.

After listening to the community’s concern, Algorand realized that the system needed to change. They received an EIP from Polybius Capital, which looked to propose a 30-day suspension of relay node rewards. As mentioned above, not only was this proposal successfully passed it was extended by a further 30-days, as well.

##The Solution

Finally, in conjunction with Algorand’s community, their relay node runners completed a vote to ratify a change to their node awards vesting schedule.

The new vesting schedule, based on a Conditional Accelerated Vesting model, has moved from a 2-year timeframe to a greater than 5-year timeframe but with the opportunity for that timeframe to be reduced under certain conditions.

Before we get into the new schedule, keep the following points in mind:

• The Node Runners have already received 14% of their restricted Algos before the current vesting freeze.
• As per the community voting, the freeze will be extended through the end of December 2019 to allow the orderly implementation of the new schedule.

Summary of the Proposal

The Node Runners will receive an additional 25% of their original allocation to make for the freeze. The unvested Algo tokens (125% minus 14% which was already vested in 2019) are vested according to the following guaranteed base vesting schedule:

• In Year 1 (2020), 3% (for a total of 17%)
• In Year 2 (2021), 8% (for a total of 25%)
• In Year 3 (2022), 25% (for a total of 50%)
• In Year 4 (2023), 35% (for a total of 85%)
• In Year 5 (2024), 40% (for a total of 125%)

If the price of the Algo tokens increases, then the Node Runners will capture “awards” (additional Algos) potentially much faster than the base rate. This will ensure that the vesting period will be significantly accelerated. In other words, the vesting schedule will be reached must quicker than five years.

If you want to know more about the new vesting schedule, then read here

The key points to remember about the new vesting schedule are:

• In Year 1, only 3% of the tokens are being released instead of the previously proposed 50%.
• Instead of getting 100% of their initial allocation back, the relay node runners will be getting 125%.
• The Node Runners are further incentivized to do an excellent job since if the price of Algo increases, then the vesting schedule will be accelerated as well.

What this entire saga has shown us is that the Algorand Foundation is heavily dedicated to building a highly-involved and robust community. They have identified democratic EIP voting as one of the ways with which they could achieve that.
Releasing Algorand 2.0
Algorand managed to release Algorand 2.0 within six months of their MainNet launch, which is a huge deal. This shows us that the platform is committed to continually developing and integrating new advances. In fact, this is the biggest reason why the value of Algo tokens have held up relatively well even though the market is going through a bearish cycle.

The three main changes coming along with the new release are as follows:

• Algorand Standard Asset in Layer-1 (ASA).
• Atomic Transfers.
• Algorand Smart Contracts in Layer-1 (ASCs).

ASA

The Standard Assets feature will allow anyone to create a Layer-1 token or asset on the Algorand network. The property of these assets are as follows:

• The newly created tokens inherit all the same features, security, transaction finality, and performance of the primary token (Algo)
• The standard assets are configurable and can be allowed to represent virtually anything.

ASAs will also have a unique functionality called “Role-Based Asset Control (RBAC).” RBAC will allow issuers and managers to tweak the asset as they see fit to satisfy specific business, compliance, and regulatory requirements. This elegant little feature can allow projects building on top of Algorand the freedom to create a variety of assets like - fungible (loyalty points), non-fungible (collectibles), restricted fungible (securities), and restricted non-fungible assets (real estate).

If you want to know more about ASAs then read this.

Atomic Transfers/Swaps

Atomic swaps will enable people to directly trade with one another wallet-to-wallet. This will help mitigate the issues with trading via centralized exchanges. The features of Algorand’s layer-1 atomic transfers are:

It allows many transactions to be grouped into one operation. If any of the transactions fail for any reason, none of the transactions are processed.
Atomic Transfers can also be used in conjunction with any asset on the blockchain (ASA or Algo).
They all have the security benefits of being layer-1 features.

ASCs

One of the biggest developments in Algorand 2.0 is the deployment of Algorand Smart Contracts or ASCs. ASCs utilize a new language called “Transaction Execution Approval Language” or TEAL), which allows Algorand to execute smart contracts at layer-1. This ensures that they have the same security, efficiency, and atomicity as single-payment transactions.

If you want to know more about ASCs then read this.

Algorand and Partnerships

Even before the launch of Algorand 2.0, its pure Proof-of-Stake platform and solid cryptographic principles were alluring enough to attract a huge range of partners into the ecosystem. Algorand has IDEX for DEX, Tether for Stablecoins, AssetBlock for real estate, Securitize for STOs and security tokens, Bleumi for enterprises and fintech, PureStake for API and Devs, DUST for supply chain, World Chess for chess, Reach for developers, and Parsiq for compliance and regulation.

To go through their extensive list of partners, click here.

Conclusion

Headed by cryptography pioneer Silvio Micali, it is easy to see why Algorand has grown so rapidly in such a brief amount of time. With the quality of partners and technological innovations, there is seriously no telling how high they can go. However, amidst all the glitz and glamour, it heartening to see that they have not forgotten to prioritize their community.