Hello everyone, welcome to week 4 of this season's lesson series. The lesson taught by Professor @nane15 discussed Algorand and the blockchain trilemma. In this post, I will be responding to the assignment given.
Question 1
What is Algorand blockchain?
At the point of writing this assignment, there was a total of 1,162 TPS, with Algorand standard assets totaling about 4,746,431. It had a total number of addresses equaling 16,591,383 alongside 1,419 decentralization. The Algorand system put together the first pure proof-of-stake in the world foundational blockchain. It was designed to serve as the future of finance.
Far above the foundational requirement of an open, public network, the technology of Algorand allows a set of peak performing Layer-1 blockchains that make provisions for certain features such as security and scalability even full transaction finality. They are built-in privacy and shelled in advanced smart contracts that are important in a Future world.
The system has quite some innovative ideas such as:
It desires to improve on its interoperability
It also makes use of private and public models
The performance and scale is top-notch and so on
This system makes it possible for the technical barriers that have caused problems to mainstream blockchain adoption. Which are?
• Security
• Scale
• Decentralization
The system makes use of Permissionless proof of stake PPoS, which ensures that there is full participation, protection as it should, in a decentralized system. As it is, blocks are finalized in a matter of seconds. It is noteworthy to mention that this system is the first to make provision for the immediate finality of transactions.
Furthermore, in this system users are granted the power to hold stake. Meaning that each user is granted some rewards or incentives for each block that gets integrated into the system. This is done so that other users and the general community will be encouraged to join the platform. Thus, in cases where new developments are suggested to the community, the users all vote to accept or reject the development.
Question 2
What is PPoS?
The PPoS strategy (Algorand) works in a way that it relates the security of the entire economy to the honesty of a very large chunk of the members, rather than a tiny subset. Thus, whenever the majority of the money is in good hands, the system is safe. Contrarily, other approaches rely on a hand-full subset of the economy to decide the economy's security, implying that a few users can constrain other users from trading.
Furthermore, the owners of a hand-full portion of the money can't hurt the entire system in PPoS (Algorand), and it would be unwise for the majority of the money to misbehave because if it does, it would erode the currency's purchasing power and, ultimately, devalue their assets.
So in this network, there is no requirement for users to put aside their various stakes to participate in the protocol neither will participating reduce a user’s ability to spend the stakes. Meanwhile, it is worth mentioning that stakes are not held hostage, meaning that they remain in each user’s wallet. The PPoS network makes it impossible for hackers to gain access to stakes through a 51% attack.
Algorand is based on Byzantine consensus and uses a pure proof-of-stake (PPoS) protocol. The influence each user can exert in the system in the process of selection of a new block is proportional to their stake (tokens) in the system.
Connoting that users in the network are chosen at random and in secret to propose and vote on block suggestions. So every online user has the opportunity to be chosen to propose and vote. The probability of a user being picked to participate in the process as well as the weight of its proposals and votes is proportionate to its stake.
Question 3
Explain the advantages and disadvantages of PPoS?
Advantages
The pure proof of stake has several advantages to itself. The way it works makes it impossible for the heavy weights in the system known as whales to take control of validation this is because it chooses participants at random as I mentioned earlier.
Furthermore, the security system is top-notch as the system is segmented into 2 separate phases with different groups of users, in the same vein making it very difficult for malicious hackers to get access to the network through a 51% of attacks. In addition, during staking, the stakes of users are not blocked; they remain in their custody which is a good thing.
Another advantage worth mentioning is that the system can handle bulks of transactions without collapsing; it also has high scalability and is highly decentralized. Finally, before decisions are taken on the network, they are put to the test of voting implicating that no body of users has autonomy over the network.
Disadvantages
The network is really commendable however, some lapses are that it just came into light recently as such, not many networks have partnered with them at the global level.
The economy of the system is entrusted into the hands of users such that if there is an act of dishonesty, regardless of the incentives provided to stakeholders, there will be a major problem. Although it is almost impossible for this to happen, it is a possibility.
Question 4
Do you think Algorand really solved the blockchain trilemma? Explain your answer.
The algorand is the first pure Proof of Stake PPoS blockchain in the world that can conveniently solve the blockchain Trilemma which is scalability, decentralization, and security. It does all of these in a sustainable way that is at the same time eco-friendly manner. It was developed by the founder of Algorand who is also a cryptographer SILVIO MICALI.
The Pure Proof of Stake is crafted on the Byzantine consensus and it offers a better approach than its immediate predecessor which is PoS. Proof of stake for the sake of clarity is more advanced than proof of work that Bitcoin makes use of when talking about features such as scalability and the speed of its transaction.
Micali desired to create a solution to the blockchain Trilemma and establish a blockchain system that could create serve the demands of society. On algorand which allows users to create Dapps and make NFT transactions knowing fully well that they are dealing with a tech that is reliable.
The PPoS can manage transactions that bulky throughputs without the fear of being congested. The blocks on the network are finalized within seconds. It is actually the first to offer instant finality.
Question 5
Do you think PPoS is better than PoW? Explain your answer.
First of all, the PoW means Proof-of-work, which is a way to approach solving challenging cryptographic puzzles which are termed mining. So in the system, the first user who successfully cracks and solves the puzzles is granted the chance to append the next block and is given some incentive some blockchains like Bitcoin and Ethereum make use of this system.
One of the challenges of this Proof-of-Work system is that it is quite expensive to maintain and could also be very wasteful. To use the mining capabilities, you require a lot of hardware and complex power (electricity). So for you to mine, you will need to be a professional who has the requisite capital expenditure to buy stacks of hyper-specialized equipment that could help you mine so that you can make some profit.
Furthermore, as I mentioned earlier, one user gets the chance to solve the puzzle and get the incentive meaning that if 1000 users attempt to solve a puzzle and only 1 gets it right, other efforts of the users get wasted. Not cool. In addition to this, the PoW system takes about 10 minutes to be integrated into the network meaning that the slowness and absence of scalability are both not sufficient to serve a community at the global level. Crazily, if two or more users solve a puzzle the blockchain would have to fork into two as separate groups will then have different candidate users.
In Pure Proof-of-Stake, the users on this system can influence the choice of the latest blocks through their stake amount present in the system. So the choosing and voting procedure is done secretly such that the participants of the process are chosen covertly. So for you to be chosen or for you to stand the chance to be chosen, you have to stake relatively high. The system was built on Byzantine consensus furthermore, the users on the network.
So yes, the PPoS network is better than the PoW because, to begin with, the PoW network was created first and it had challenges that led to the creation of the PoS and PPoS ultimately. The PoW challenges range from high computational power requirement, the 51% attack possibility and so much more. Now through validating power to users, the PPoS has solved the requirement for computational power.
Question 6
Do you think PPoS is better than PoS? Explain your answer.
We should understand that the PPoS was built as a result of the PoS consensus. The pure proof of stake was built in a way to ensure that the problems created by PoS become sorted out. To begin with, the scalability is very different between these networks, it is commendable that the PoS can perform transactions per second however the PPoS also has this outstanding feature.
Furthermore, the proof of stake proves that before you are chosen as a participant, you need to have a considerably big stake meaning that whales stand a better chance of being chosen. Crazy enough, if malicious hackers can make provision for these high stakes, they could cooperate to launch a 51% attack.
Meanwhile, it is not so for the Pure proof stake consensus. Yes, the pickling can be random and those who have high stakes stand a better chance to be selected, there are cases where it is not operated like that. Power can’t be monopolized in the PPoS system, as explained above, different nodes are selected every time that means the process is random.
Question 7
Explore and explain an ALGO transaction using algoexplorer.io ( Screenshots required)
The first thing to do is to visit the site www.algoexplorer.com
.jpeg)
Present on the dashboard of the site we can see several boxes displaying information such as the amount of circulating supply which was 2,433,050,491.11 at the time of writing this assignment also, the price of ALGO was $1.6255 at the time of writing this assignment.
.jpeg)
In the screenshot above, we see that by clicking on any transaction from past successfully ones seen on the history bar, we can access information about each transaction by clicking on. Certain details such as the transaction ID will be revealed, the timestamp which was Wed, 08 Dec 2021 21:52:16 GMT furthermore, other details such as the sender’s address as well as the receiver, not forgetting the Asset ID.
Question 8
Carry out an analysis of the price of ALGO from the beginning of the year to the present. Via graphics (screenshots required.)
.jpeg)
To answer this question, I visited the coin market www.coinmarketcap.com to observe certain features of this coin. At the time of writing this assignment, the coin was worth $1.68 with a total market cap of $10,580,062,392 and a volume of $273,020,331. The question demands that I make an analysis of this coin since the beginning of this year so I proceeded to the chart section to ascertain certain details about ALGO by this time last year.
.jpeg)
On the 9th December 2021 the price of ALGO was $0.2943 fast forward to a few months after, on the 9th June, 2021 the price was already $0.8919 as shown in the image below;
.jpeg)
It has maintained a bullish trend although there have been periods where it record lows and even choppy markets however, it has been on the uptrend. The coin is ranked #20 in coin market cap with a price of $1.69
.jpeg)
Conclusion
Algorand is a great system that has come to the helm of affairs to rescue blockchains from some of the challenges they face, Trilemma being the chief. The various contributions in term of scalability, decentralization and security have done a lot of good to PoW and PoS which it was carved from. I believe that, after a season of global enlightenment about the good of this project, it will be general introduced and established in all the available blockchain technologies
Thank you professor @nane15 for this educative and insightful lesson.