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Algorand

Algorand

Algorand builds technology that aims to accelerate the convergence between decentralized and traditional finance by enabling the creation of financial products, protocols, and exchange of value including NFTs, stablecoins, payments, and more.

Algorand is a company implementing an open-source public ledger, utilizing the Byzantine Agreement message-passing protocol to reach consensus among network participants. The Algorand protocol is designed to be a blockchain-based payments platform.

Funding

The developers of Algorand, including MIT professor and Turing Award winner Silvio Micali, have raised $64 million in funding from venture capital firms, including Pillar and Union Square Ventures. Stock investment in Algorand comes with an option for conversion into tokens.

Consensus mechanism

The consensus mechanism enabling the blockchain operates in one of two environments: permissioned or permissionless—similar to a proof-of-stake protocol. This allows minimal computation to be an honest block producer. The blockchain assumes that 2/3 of the block producers are honest and not adversarial or Byzantine.

Secret self-selection

Algorand is developing an approach to decentralized consensus that relies on secret self-selection to determine new block generators and validators.

Users run a verifiable random function based on a seed generated in the previous block to select a leader, who is in charge of proposing the next block, and members of a committee who are responsible for voting on the validity of that block. This cryptographic lottery results in a rotating, random selection of committee members who are self-selecting. Committee members run the computation to see if they won the lottery trivially and in secret, so they do not reveal their identities until they pass their message or vote to the network with a credential in the form of a digital proof or signature. This secrecy is intended to improve network resilience against committee member corruption from a malicious adversary by obfuscating the identity of the committee until after they have propagated their information to the network.

Player replaceability

The Byzantine Agreement process takes multiple steps, introducing a vulnerability where adversaries may corrupt committee members after they have revealed themselves in the first step. Algorand seeks to solve this issue by having each step in the Byzantine Agreement process performed by a player-replaceable protocol in which the committee members are swapped out at each step in the protocol — making the adversary unable to predict the committee member in any step until after they have performed their task.

Forking probability

The probability of a fork in the protocol is estimated at 1/1,000,000,000, and therefore blocks can be considered final upon validation.

Network Assumptions

Security assumes an honest majority of 2/3 of online nodes. The protocol also makes a message propagation assumption whereby all messages reach honest users in a timely fashion.

Incentive program

Algorand did not originally incentivize or financially reward honest block generators for honest creation of blocks. However, in December 2020, The Algorand Foundation partnered with Algofi (a DeFi platform) and launched an incentive program to boost the usage of decentralized finance (DeFi) protocols on its blockchain. The announcement resulted in ALGO rallying by more than 15% over the first twenty-four hours.

Initial criticisms

Initial critics of the original non-incentive Algorand model asserted that 2/3 of honest nodes may not be fulfilled if honest nodes simply go offline without a monetary incentive to stay online; this is known as the lazy validator problem. Other decentralized systems have maintained network integrity without financial incentives, like BitTorrent and some non-mining aspects of Bitcoin. Given the potential monetary incentive for adversarial nodes, the robustness of non-incentive-based blockchains remains an open question.

Yongge Wang, in his recent paper "Another look at ALGORAND" (May 11, 2019), says it is possible to fork Algorand even with 1/3 malicious users and the possibility to bribe validators easily is not unrealistic.

Timeline

May 2, 2022
FIFA has announced Algorand will become the official blockchain of FIFA, empowering the global football community with cutting-edge, sustainable technology.
April 26, 2022
Ferrum Network rolls out its staking-as-a-service solutions on the Algorand Blockchain.
April 18, 2022
Algorand rents Times Square billboard to tout green cred ahead of Earth Day.
March 10, 2022
Algorand's total accounts increase by 35.5% in 2022.
February 2, 2022
Algorand partners with eMERGE Americas.
January 10, 2022
Algorand partners with Alchemy Pay for Fiat payments.
December 30, 2021
Algorand rallies by 15% following the launch of DeFi incentives.
December 30, 2021
Algorand to distribute 2M ALGO to drive DeFi adoption; tokens soar.
June 10, 2021
Arrington Capital launches $100 million Algorand Ecosystem Fund.
June 2019
Algorand raises a $60,000,000 initial Coin Offering.

Funding Rounds

Patents

Further Resources

Title
Author
Link
Type
Date

A TradFi veteran explains why ALGO reminds her of bitcoin's early days

Vicky Ge Huang

Web

February 16, 2022

Algorand

Jing Chen, Silvio Micali

Academic paper

Algorand Pushes for Ethereum Compatibility With $20M Incentive Program

Tracy Wang

Web

February 18, 2022

Algorand: Scaling Byzantine Agreementsfor Cryptocurrencies

Yossi Gilad, Rotem Hemo, Silvio Micali, Georgios Vlachos, Nickolai Zeldovich

Academic paper

Algorand’s Instant Consensus Protocol – Algorand – Medium

Georgios Vlachos

Blog post

News

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Title
Author
Date
Publisher
Description
October 12, 2021
The Economic Times
Bitcoin climbed above $57,000 for the first time since May as speculators bet that the largest cryptocurrency will retest the record highs reached earlier this year.
Omar Faridi
July 15, 2021
Crowdfund Insider
Ledgermatic, a treasury, finance, custody solution, is now live, and it is compatible with Algorand ecosystem.
Algorand
June 10, 2021
www.prnewswire.com:443
/PRNewswire/ -- Arrington Capital, a digital asset management firm in blockchain-based capital markets, today announced it has launched a new $100 million USD...
Algorand
June 9, 2021
www.prnewswire.com:443
/PRNewswire/ -- Xfinite and Eros Now, a leading over-the-top (OTT) South Asian entertainment platform owned by global entertainment company Eros STX Global...
MAPay, LLC
June 3, 2021
www.prnewswire.com:443
/PRNewswire/ -- MAPay, a global healthcare technology firm with a focus on decentralized payment networks, today announced it will introduce its own stablecoin...
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References

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