Algorand and the blockchain trilemma - Crypto Academy / S5W4 - Homework post for @nane15

cover photo made by @sargoon

Hello, Steemit Crypto Academy community! Here I am with my new homework post for Steemit Crypto Academy Beginner courses. In this homework post, I will give you information about Algorand and the Blockchain Trilemma. I would like to start my homework by explaining "What is Algorand blockchain?".

What is Algorand blockchain?

Algorand is an open-source blockchain and anyone can contribute to the Algorand blockchain. The Algorand blockchain is a highly scalable, decentralized, and highly secure blockchain created in 2019.
The Algorand blockchain is very similar in structure to Ethereum, but ahead of Ethereum in most aspects.

The Algorand blockchain was created to solve the scalability - decentralization - security issues that Vitalik Buterin described a few years ago about the "bitcoin trilemma" problem. The founder and creator of the Algorand blockchain is Silvio Micali, a professor of computer science and cryptography at MIT.

There are several reputable universities like MIT university behind the Algorand blockchain. Academics at MIT and other universities have been supporting the Algorand blockchain since the project was created.

When we compare Algorand and Bitcoin, the number of transactions per second is only 7-8. Other cryptocurrencies can only process 50-60transactions per second. Thanks to the PPoS mechanism in the Algorand blockchain, transactions are finalized within 4-5 seconds and approximately 1000 transactions per second occur.

The Algorand blockchain is many times better than Bitcoin in terms of scalability. Visa is the world leader in scalability as it processes 2000 transactions per second. Algorand is currently the leader among cryptocurrencies in terms of scalability as it can process 1000 transactions per second.

What is PPoS?

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PPoS stands for pure proof of work. The PPoS mechanism is much more environmentally friendly and safe than the Proof of Work and Proof of Stake mechanisms. The PPoS mechanism consumes much less electricity and energy than other consensus mechanisms such as Proof of Work and Proof of Stake.

In the PPoS mechanism, a committee is first elected and this committee keeps the records (blockexplorer) of the blocks in the Algorand blockchain, but this committee is not elected by the people in the Algorand blockchain network. The person who will be on the committee chooses himself, but this choice is not certain and depends on chance. A total of 1000 people are elected to the committee and it is stated that they are selected by sending a quick and simple message to the selected people with the VRF mechanism, but the elected people are not permanent and a different committee of 1000 people is elected after each block. Everyone on the committee must stake at least 1 ALGO coin.

The committee of 1000 people who will complete the registry (blockexplorer) is constantly changing with each new block. The reason for doing this is to keep it private and secure who will complete the transactions in the main block in blockexplorer. In the Proof of Stake and Proof of Work mechanisms used in Bitcoin and other cryptocurrencies, who made the transactions in the blocks and who suggested the blocks can be seen on the blockexplorer, and the wallets of those who operate in the blocks can be seen, which greatly reduces the security. Using the Algorand PPoS mechanism, it secretly elects the 1000-member committee, and new committee members are elected in each new block. As the PPoS mechanism is used, the security in the Algorand blockchain increases significantly because it is not clear who will propose each block in the blockexplorer of the Algorand blockchain, thus preventing corruption and bribery. Algorand blockchain has been successful in the field of security found in the blockchain trilemma thanks to the PPoS mechanism.

Explain the advantages and disadvantages of PPoS.

Advantages of PPoS

The Algorand blockchain is the fastest and most scalable blockchain compared to other cryptocurrencies. Algorand has become the most reliable blockchain in the world because 1000 people selected to the committee finalize each new block in 7-8 seconds, and 1000 people are elected to the committee again. As new people are added to the committee for each new block, it is not clear who completed the blocks and corruption became impossible.
Since the transaction speed on the Algorand blockchain is very high, it gives all members using the PPoS mechanism a chance to join the committee.

Thanks to the Algorand blockchain PPoS mechanism, Algorand has become the most reliable blockchain in the world because 1000 people elected to the committee are re-elected for each new block every 7-8 seconds, so it is not clear who completed the blocks and corruption has become impossible.

The 1000 committee members to be elected to the committee for the PPoS mechanism are always fixed, and everyone who has staked 1 ALGO coin is selected on equal terms.

Thanks to the Algorand PPoS mechanism, it consumes much less electricity compared to the Proof of Work and Proof of Stake mechanisms and does not harm nature.

Disadvantages of PPoS

Algorand has very few dapps compared to other cryptocurrencies and hasn't had much success with dApps. Although Algorand is an open-source blockchain, it has not been successful in dApp and DeFi as its main goal is to focus on solving the blockchain trilemma. Algorand coin is not particularly preferred by new investors, as investors show interest in cryptocurrencies developing dApp and DeFi projects.

Do you think Algorand really solved the blockchain trilemma? Explain your answer.

In the homework given last week, I explained that the Algorand blockchain solved the trilemma of the blockchain by providing 33.3% decentralization, 33.3% scalability, and 33.3% blockchain security, so I think that the Algorand blockchain solved the blockchain trilemma problem.

It has completely solved the blockchain security problem, which is the most important topic in the blockchain trilemma, with the Algorand PPoS consensus mechanism. Thanks to the PPoS mechanism, 1000 people elect themselves to the committee, and the results of these elections are sent to the randomly selected people with a quick message via the VRF mechanism. Thanks to the VRF mechanism, 1000 people selected to the committee process the transactions to the blockexplorer without any communication with each other, and as soon as the block is completed, 1000 different people are secretly elected to the PPoS committee for the new block. The reason for choosing different people for each block is to prevent corruption and bribery because once this is done thieves will not be able to access the wallets and contacts. Algorand blockchain has solved the blockchain security problem in the blockchain trilemma with the PPoS mechanism.

Algorand is built on a completely decentralized blockchain. Each of the users using the PPoS mechanism in the Algorand blockchain elects themselves to join the committee, that is, they are not selected by the committee leaders or the Algorand officials. There is democracy on the Algorand blockchain and anyone who stakes at least 1 ALGO has an equal chance of being elected as all other candidates and there is no need for anyone's permission to do so. Anyone elected to the PPoS committee on the Algorand blockchain can contribute to the blockexplorer regardless of the number of ALGO coins they stake. Algorand blockchain is decentralized and all committee members are individual and confidential, bribery and corruption are also impossible as no one knows anyone.

The Algorand blockchain is one of the most scalable blockchains. Even Bitcoin cannot exceed the capacity of 7-8 transactions per second, while the Algorand blockchain processes 1000 transactions per second, and these transactions are finalized within seconds. Since Algorand has high scalability, it is the blockchain with the highest transaction processing speed compared to other blockchains. Using the Algorand PPoS mechanism, a random committee of 1000 people is secretly selected per new block, and the selected people complete the transaction(s) on the current block within 1 second and finalize all these transactions within just 6-7 seconds.

Do you think PPoS is better than PoW? Explain your answer.

PoW stands for Proof of Work and many other cryptocurrency blockchains like bitcoin use PoW. In my opinion, the PoW is an antiquated mechanism and very cumbersome. Compared to PPoS, PoW is a much slower, more costly, energy-consuming, and unfair mechanism.

People spend thousands of dollars setting up bitcoin mining units and putting effort into it, but those with more powerful mining units are more likely to solve puzzles on the blockchain, and those who invest more earn more, those who invest less earn less, and the mining rewards on the blockchain are ever greater. It goes to those who invest a lot.

This is an unfair mechanism in my opinion, because those who invest more will earn more and increase their investment, earning more rewards in the blockchain, and by wasting a lot of electricity, they will do more harm to the environment. In fact, those who make a lot of money will have their wallets in danger as their reward will be revealed on the blockexplorer, so the PPoS mechanism is much more secure and user-friendly.

When we look at the PPoS mechanism, users do not need to invest a lot of money, anyone who stakes 1 ALGO can be nominated to enter the 1000-person committee that will be randomly selected using the PPoS mechanism, and they can create blocks on equal terms without discrimination. Since the transactions are very fast in the PPoS mechanism, using the PPoS mechanism is much easier and much faster than using the PoW mechanism. While you have to make a lot of investments in the PoW mechanism and solve puzzles depending on luck, in the PPoS mechanism you can stake 1 ALGO and become a secret node by choosing yourself to the committee and create a block with almost no electricity and without harming the nature.

Do you think PPoS is better than PoS? Explain your answer.

PoS stands for Proof of Stake. Users buy coins/tokens from cryptocurrency exchanges to use the pos mechanism in blockchains and stake the cryptocurrencies they buy. When users prove the coins they stake, the PoS mechanism will choose the user who has staked the most coins to determine who will create the next block, so there is no democracy in the PoS mechanism. Unlike PoW, PoS doesn't want users to calculate random puzzles on the blockchain but instead calculates the coins users stake. In this case, in a blockchain where the PoS mechanism is used, the user who stakes the most coins is the most influential user in the blockchain, because the users who stake the most coins create the blocks.

Compared to PPoS, we can say that it is somewhat similar to the PoS mechanism, but unlike PoS, there is democracy in the PPoS mechanism and the users are secretly chosen at random. Every user who has staked at least 1 ALGO has the same probability of being elected to the committee. Users selected to the committee finalize the transaction within 5-6 seconds and new committee members are selected immediately after. So getting on the committee (i.e. becoming a node) is very fast, easy, and inexpensive compared to PoS.

Explore and explain an ALGO transaction using algoexplorer.io (Screenshots required)

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I reached the blockexplorer of Algorand blockchain through the address https://algoexplorer.io. On the home page of Algorand block explorer, we can easily see the latest transactions and blocks created on the blockchain, the price of the ALGO coin, the circulating supply, and total supply, the current number of online stakes, and the block speed.

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I clicked on a random transaction from the "Latest Transactions" section to examine a transaction in the Algorand block explorer.

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In this section, we can easily see the summary of the completed transaction in the Algorand blockchain by looking at the Transaction ID, Block number, Timestamp, and transaction type under the Transaction Overview title at the top. If you want to see the details of the transaction, you can examine the Sender, Amount (token amount), Receiver, Asset ID (token's ID), Sender, and Receiver's ASA Balance information under the "Transaction Details" title.

Carry out an analysis of the price of ALGO from the beginning of the year to the present. Via graphics (screenshots required.)

ALGO/USDT pair from tradingview

Algorand coin started the new year with a price of $0.32 on January 1, 2021, and after the first days of the new year, its price increased for 42 days until February 13, 2021, reaching a price of $1.84, and the price of ALGO coin increased by about 500% in just 1.5 months.

ALGO/USDT pair from tradingview

As a result of the flag formation on November 18, 2021, the price suddenly increased from $1.61 to $5.53 (up to $5.53 on Huobi exchange, $2.99 on Binance) and reached an all-time high in 2021. Although the rise was not healthy, as it took place after the flag formation, investors who made technical analysis gained profit. When we look at the values on the RSI indicator, we see that the voluminous buying pressure on November 18, 2021, did not affect the RSI indicator much because the price suddenly increased and the candlestick became an inverted hammer and corrected by falling back to its old price. For this reason, the RSI indicator continued at the 50 levels and the price returned to the healthy area.

Conclusion

The Algorand blockchain is a blockchain that will make its name known in many areas in the coming years, thanks to the PPoS mechanism. I think that many blockchains will use the PPoS mechanism created by Algorand in the future because it is very advantageous and very cheap compared to PoS and PoW. Algorand blockchain is the only blockchain that provides a definitive solution to the blockchain trilemma, as it provides both high scalability, full decentralization, and high security thanks to the PPoS mechanism. If Algorand blockchain cares about dApps and DeFi projects, I think it will be one of the most valuable coins of 2022. I believe that PPoS will be used much more widely than other blockchain consensus mechanisms due to its fair node selection policy and eco-friendly open-source blockchain mechanism.

Best regards to Professor @nane15 for sharing this homework.

Thank you so much for reading my Steemit Crypto Academy post! :)