Crypto Academy Season 5 Week 4 Beginner's Homework Post For Prof @nane15: Algorand And The Blockchain Trilemma
edited by me
Algorand Blockchain
The algorand blockchain uses smart contract and as such is capable of having decentralized applications. Algorand is a smart contract platform pretty similar to ethereum but with some key differences. The algorand blockchain is said to have improved security, decentralization as well as the speed and cost of transaction.
Algorand is a decentralized network that was designed specifically to solve the dilemma facing blockchain technology in a whole, a trillemma as we know it of achieving scalability, security and decentralization. This blockchain platform algorand was put into existence by a team led by Silvia Micali in 2017 who was a computer scientist and actually specializes in cryptography. This blockchain was indeed made to be like the ethereum blockchain but with much more faster transactions and infact the algorand blockchain is able to process a thousand transactions per second.
The algorand blockchain makes use of a consensus mechanism known as the pure proof of stake. In this pure proof of stake one doesn't necessarily need to stake his algo's to earn reward unlike in the normal proof of stake but instead it works in such a way that all algo holders received an apr of 4-6% just for being a holder without necessarily needing to stake their coin.
The algorand blockchain has a special 2 layer blockchain structure
The Layer 1 supports smart contract tokens and nft creation. The majority of this easier processes actually takes place at the base layer of the algorand blockchain which will know as layer 1 and actually goes a long way in ensuring for the security and compatibility of the blockchain. Nevertheless the complex smart contract which takes up more space and needs more computing powers are actually being reserved for the layer 2 which is actually verified off the chain. Subsequently snapshots of layer 2 is often being given back to layer 1 to check in with which thus allows the algorand blockchain to scale and also maintain it's security. This process is being achieved through this; the blockchain randomly selects a committee of nodes already on the network that is validating validators which are being choosen to execute this more complex smart contract which ensures that the blockchain has built in scalability.
The algorand blockchain is also carbon negative which is to say that this blockchain is working to reduce the global carbon issues instead of adding to it which is not surprising considering that it's consensus mechanism is a variation of proof of stake and the it's carbon emission is considerable at a minimum level and algorand inc is even donating money to carbon trade which is a company which takes the lead in offsetting carbon emissions. The native token of the algorand blockchain is algo which is used in carrying out various transactions in the network.
PPoS
The pure proof-of-stake consensus mechanism is a consensus mechanism designed specifically for the Algorand blockchain and this algorand consensus mechanism actually do ensure full participation, blockchain protection as well as good transfer speed in a truly decentralized manner.
This pure proof of stake is a variation of the proof of staked based on the fact that unlike in the proof of stake validators are not merely choosen based squarely on their staking consistency, that is the number of algo the owned but they are selected randomly no matter the amount of coin they owned. This automatic selection process of the pure proof of stake is based on a verifiable random function known simply as the VRF.
How does voting work on this consensus mechanism;
Well the pure proof of stake consensus mechanism actually requires 3 steps to propose and confirm as well as write a block a block to the blockchain and they are as follows
a). Block Proposal This is the process where the validating candidate are really being selected. Each node analyzes the account and using the VRF function determines which user's are online and willing to participate sending the information to nodes on the network that is each nodes receives block Proposal from the rest of the node on the network along with the VRF output which proves the validity of those proposals.
b). Soft vote Here each node will run the VRF analyzing whether an account was choosen to participate in the soft vote committee and if the selection is comfirmed such an account will receive a weighted vote according to the number of algo it holds, proposals are then being filtered based on the lowest VRF timeout with each node identifying a single option and sending it forward to the other nodes together with the VRF proof upon reaching agreement for the soft vote then will move to the next stage
c). Certified Vote This is the stage where new committee members are selected to verify the block proposal that resulted from the soft vote and if no deviation of any form is noticed like overspending then such block is considered to be a valid block and added to the blockchain
Such is the nature of how the pure proof-of-stake actually works and what it entails.
Advantages Of Pure Proof Of Stake
1). Transfer Speed based on this consensus mechanism the blocks are finalized in seconds
2). This consensus mechanism also offers an advanced level of decentralization and offering the anonymity of it participants
3). Low power consumption and minimum hardware requirements
4). Users doesn't necessarily need to stake to earn reward as they could earn an apr of 4-6% for merely holding algo on their wallet
5). It has a little or no carbon emission which is hazardous to environment but actually even works to reduce it by it's various donations to climate trade.
Disadvantages Of PPoS
1). Staking rewards are not very encouraging
2). The blockchain could also allow an arbitrary number of malicious users as long honest user that is those who follow the protocols instructions holds more than two third of the system's total stake
3). On algorand the number of staked tokens of a node that has proposed a problematic block is not reduced to discourage future participation instead the network goes to recovery mood and this process continues while this ensures speed but it's criticize by the community for not punishing malicious users.
4). Due to the various benefits that could come from holding tokens it might make some to simply lose the sense and not hold a token because they believe in it but only simply for commercial benefits which could be bad for the projects in an event they decide it's no longer beneficial.
Did Algorand Really Solved The Blockchain Trilemma, My Thought
Well what is the blockchain trilemma in the first place, as already discussed previously the blockchain trilemma is the fact that no blockchain network is able to feature decentralization, security and scalability all at the same time. Now have algorand blockchain be able to achieve all this 3 things all at the same time.
The algorand consensus is secure in that no one can be able to predict the members of the next consensus committee and if the algorand consensus is secure then the block creation and the blockchain is. The algorand blockchain built it's security mechanism on user replaceability which was enabled by the VRF function which gives the blockchain the most secure and robust platform to build on. Now this fact shows that the algorand blockchain actually offers Security what about when it comes to decentralization.
The algorand blockchain already is a decentralized network which makes use of smart contract platform similar to ethereum which means its capable of having decentralized applications being built on it with considerable lower gas fees. The algorand layer 1 features makes this possible in that it support smart contract and the creation of tokens and nft's alike which shows how decentralized the network really is and also considering the fact that users are choosen randomly from a list of algo holders as one doesn't necessarily need to be staking consistently also illustrate the true nature of algo decentralization now what about when it comes to scalability, how scalable is the algorand blockchain.
When it comes to scalability the algorand network is one of the fastest network there is as blocks are often finalized in seconds and the network is able to process thousands of transaction in a matter of seconds while requiring minimal computational power.
So the algorand blockchain features high level of security, is also a decentralized network and scalable all at the same time, so personally in consideration of all this i truly believe the the algorand blockchain has solved the issue of the blockchain trilemma which postulate that no blockchain could have all three features of scalability, decentralization and security all at the same time. Well the algorand blockchain has shown it is possible and infact does possess all three features in it's network thereby providing a solution to the trillemma facing blockchain network.
Do you think PPoS is better than PoW? Explain your answer
Well for me the pure proof-of-stake consensus mechanism which algorand operates on is much better than than the proof of work consensus mechanism operated by bitcoin for obvious reasons.
In algorand pure proof-of-stake the algorand nodes are selected randomly using a verifiable random function unlike in the proof of work consensus mechanism where miners compete with each other to propose the creation of new blocks. Also the pure proof of stake is highly scalable unlike in proof of work which faces the issue of not being able to process large amount of transaction in matter of seconds the pure proof of stake is able to do this and infact in the pure proof-of-stake thousands of transaction are processed each second and it also offers the same security that the proof of work offers and highly decentralized as users who runs the node are selected randomly.
The proof of work consensus mechanism makes use of much computational power in order to solve the puzzle which will eventually lead to the creation of new blocks and as such this much computational power is expensive and for a miner to still be in the game it requires money which is different from the pure proof-of-stake which is cheap when compares to proof of work as it doesn't really require the vast amount of computational power the proof of work do in block creation.
The pure proof-of-stake consensus mechanism which is operated by algorand has provided a solution to the blockchain trilemma which the proof of work was unable to in that the consensus mechanism ensures that algorand is highly scalable, decentralized and offers high security without requiring mad expenses to run while the proof of work which bitcoin runs on is only able to offer security and decentralization and for this alone it requires huge amount of computational power which is rather too expensive. Therefore for this reasons i believe that the pure proof of stake is much better than the proof of work consensus mechanism.
Do you think PPoS is better than PoS? Explain your answer
The proof of pure stake is more like the proof is stake with a slight variation which i believe makes the proof of pure proof-of-stake much better than the proof of stake.
In both cases token owners participate in the network consensus mechanism by simply holding or staking coins. In the case of the proof of stake the chooses blockchain validators based on the amount of tokens being staked by users, that is to say for one to be choosen as a validator then he must be consistently staking tokens and depends also on the amount of tokens being staked before he is being considered or choosen to be part of the blockchain validators, this is not necessarily the case in pure proof of stake where users doesn't necessarily need to be consistently staking to be considered or choosen as block validators but instead are choosen in random.
In the pure proof-of-stake any token holder in respective of the amount of token he is holding could be selected randomly to participate in proposing and adding new blocks to the chain as the may be which adds to the decentralized nature of the pure proof of stake. It is true that the issues of scalability and security was solved by the proof of stake but the fact that powers lies more with those who are staking much amount of tokens as they are able to propose and dictate what happens. Most time block creators for the proof of stake consensus mechanism is choosen from high stakers which leaves out those with minimal amount of token and means they can't be able to become block validators as they can't compete with the high stakers which affects the decentralisation of this consensus mechanism as block powers lies more on the much token holders taking away the decentralized nature of a blockchain network.
The pure proof-of-stake VRF function solves this issue by ensuring that any token holder gets to be choosen to become block validator users doesn't necessarily need to be staking to be choosen just by holding the token in your wallet you could be choosen to participate in the block proposal and creation adding to the decentralisation of pure proof of stake. The pure proof of stake solves the monopoly that a large amount of staked tokens could create which is one major issues of the proof of stake consensus mechanism.
Due to the fact that the pure of stake is highly decentralized and offers equal opportunity to all it's holders i strongly believe that it is more preferably and a variation of the proof of stake consensus mechanism.
Exploration of algorand blockchain and explaining an ALGO transaction using algoexplorer.io ( Screenshots required)
First of i visited algoexplorer.io and upon visitation i came upon this👇
The first dashboard shows me a pic of the overview info i need about algo. It's latest block, the circulating supply, it's total supply and online stake as well as the current price of algo, this was the various data presented to me, now as i was looking for algorand transactions i scrolled down lower using my mobile device and i came upon the list of transactions on the algorand blockchain.👇
The image provides or shows all the possible transactions on the blockchain both past and present and some were being added in seconds as time passes. I click on one to get information about that particular transaction and then👇
Then i saw the time this transaction was happening down to the last second as well as the type of the transaction and it's block i also saw the transaction ID.
I also saw the sender's address as well as the receiver's address and the amount involved in the transaction and the group ID of said transaction.
Then i also saw the sender's balance and the receiver's balance as well as transaction fees. This was data from my exploration of algoexplorer.io
Analysis Of The Price Of ALGO Carried Out By Me From The Beginning Of The Year Till The Present. Via graphics (screenshots required.)
source
Around January of this year 2021 as the data above shows the price of algo started at around $0.34 it was ranging between $0.34 to almost $0.70 at January 2021.
source
Around February of 2021 algo had a surge in price it started at $0.75 to hit a high of $1.74 at 13th february 2021 it then consolidated afterward following this run up in price and around April of 2021 it hit the high of $1.74 previously reached around february.
Following the crypto crash in the middle of may the price of algo dipped from the high of $1.74 and crashed to a low of $0.74 and was trading at the low range throughout june
This pic above proves this👆
Around august the price begin showing signs of strength and by september algo begins surging higher and reach a high higher than the previous february and april high of $1.74 to hit a high of almost $2.50👇
From that height the price had a correction and at present till date as of when am making this post and during which time i explored the price of algo on coin gecko based on the data the price of algo is currently at $1.52 or there about.
Conclusion
Indeed the algorand blockchain is an exciting blockchain with it's innovative pure proof of stake consensus mechanism that has solved the blockchain trilemma and offers opportunities for dapps to be built on it with a lesser gas fees in comparison with the ethereum blockchain while offering robust security and equally scalable as is able to process thousands of transaction in seconds which is indeed what we have been lacking in blockchain technology over the years. I truly believe that this blockchain is proof that crypto has what it takes finally to be able to completely take over the traditional financial system ofcourse time will tell.
Hello prof @nane15 my homework post is yet to be curated 🤲
Cc:
@nane15
@sapwood