Hey guys,
I welcome you'll to the 4th week of the SteemitCryptoAcademy course by Professor @nane15. In this course, I will run a comprehensive review on Algorand and the blockchain trilemma.
All images used in this post unless otherwise stated are not mine and were extracted from Coinmarketcap for the purpose of this assignment.
Question One
What is Algorand blockchain?
The Algorand is a recent blockchain project launched in June 2019, founded by Silvio Micali; a computer scientist and MIT professor; a famous and world-renowned character for wining the Turing award; which represents the highest distinction in computer science and is sometimes called the Novel Prize of Computing. Algorand is a project on a bid to solve the blockchain trilemma by creating a decentralized, scalable and secure network simultaneously. Algorand is also said to be a blockchain network upon which anyone can build, as it is open source and without permission. Here is an illustration of what Algorand entails.
Algorand was designed with an aim for rapid and instant transaction finalization processing over 1,000 transactions per second (TPS) and finalizing transactions in less than five seconds, without fears of congestion, enabling it to compete with global payments and financial networks in terms of speed. Furthermore, the system is one that seeks to solve the Trilemma challenge thus, handling scalability, security, and decentralization. It is vital to note that this blockchain can’t be forked. There are three steps involved in creating a block on the system which include the proposal phase which is the phase where the PoS principles are put into play thus; a random user in the community is selected through a cryptographic process. Furthermore, the next phase is the finalization block step. Here, there is a voting process on selecting the required block.
Algorand is also useful for a variety of things such as enabling other developers to create new kinds of applications fuelled by cryptocurrency. The Algorand blockchain was built with the aim to be a payment-focused network with rapid transactions as fast as processing over 1,000 transactions in less than five seconds. It uses a Proof of Stake (PoS) consensus mechanism, it is also appraised for being the world's first Pure Proof of Stake that solves the blockchain Trilemma. Algorand’s block rewards are distributed to all ALGO coin holders, offering all ALGO holders an opportunity to earn rewards instead of just block producers. In addition, the system has a smart contract pattern of operation such that it controls and monitors the logic of the program.
Question two
What is PPoS?
PPoS is a short abbreviation used for Algorands unique stake variation mechanism which is called the Pure Proof of stake, or we can simply define it as a new consensus procedure put into use by Algorand, built of Byzantine consensus.It is also worth mentioning to say that Algorand is the world's first Pure Proof of Stake blockchain. This stake mechanism is done such that users who can influence the choice of a new block are depending on their number of sakes or tokens in the system. these users are usually randomly and secretly selected to propose blocks and vote.
Its safety measure is by keeping most of the money in honest hands which means majority of the economy determines the security of the whole economy. Also, in algorand it is not possible for owners with small fractions to harm the whole economy as it is also foolish for owners with majors of the money to misbehave because it would eventually diminish their assets and purchasing power.
The PPoS network is the first blockchain to offer immediate final transactions. This has therefore positioned it as the go-to chain for seamless finance. Which allows it to be able to compete with global financial networks in terms of transaction speed?
The PPoS protocol has two phases:
- Phase one:
This is where the user is randomly selected among all coin holders then his public key is revealed to all users. This makes it possible for the user to propose a block. VRF known as verifiable random function is the procedure used to select random users in this phase although the amount of stake a user owns isn’t the biggest factor in choosing who will form new blocks. For instance, if a own a total of 100 ALGO tokens, I stand a better chance to be selected in contrast to someone who has only 10 ALGO tokens.
- Phase two
This is where a committee of 1000 users is randomly picked then the committee validates the block. Finally, this newly fashioned block gets attached to the main chain. The same process that is used in the first phase is also used in this second phase in selecting the committee. The committee helps in analyzing the formed blocks i.e they are the ones responsible in choosing the blocks that are worthy of selection or not. To cap up everything about this system, after each phase is completed, there is a replacement meaning that malicious attacks can not be efficiently carried out as the hacker wouldn’t have an idea who the new selected users will be.
Question Three
Explain the advantages and disadvantages of PPoS?
Advantages and Disadvantages of PPoS
As good as the pure proof of stake is, there is a downside to everything including the PPoS. I will be highlighting the advantages and disadvantages:
Advantages
• The PPoS system has a special blockchain structure which is segmented into two. The first layer deals with smart contracts, it also deals with asset creation. The synergy between these two layers helps the system operate perfectly.
• Unlike the Proof of Stake protocol, the management and control of the system is given to the majority of the community instead of a minute subset of people. This means the system’s decentralization is heightened.
• The running of the system is less expensive i.e participating in the system and the operation of the system as a whole, even computational and financial is less expensive.
• If you own a relatively higher number of stakes, you stand a chance to be selected as against a user who has a fewer stake.
• Another pro is that block producer and validators get randomly picked meaning that the security of the network becomes tightened.
Disadvantages
As it is, the system has not gained so much popularity globally so we cannot really point out some of the lapses. However, the operation of the system depends on the sincerity of users regardless the incentives given. The implication is that some users can choose to misbehave even though it is almost impossible for a large chunk of the community to be simultaneously bad.
Question Four
Do you think Algorand really solved the blockchain Trilemma? Explain your answer
Yes! I commend the Algorand network for being the first Pure Proof of Stake that solves the blockchain trilemma of security, scalability, and decentralization without any compromise.
Regarding security, the Algorand block uses Pure Proof of Stake, of which one of its safety measures is by keeping most of the assets in faithful hands. That is, a large chunk of the economy is saddled with the security of the entire economy.
This implies that it is quite difficult for that large determining chunk to mess up however, if they do, it will have a great effect on their asset. Furthermore, hackers will find it very difficult to launch a 51% attack as a large chunk of the community are in charge of the operational running of the system. About its Scalability, this is also limitless with PPOs as a result of its seamless transactions processing over 1,000 transactions within seconds without congestion’s, making it capable of competing with global payment and financial networks. This network has good scalability as it has the ability and capacity to hold and successfully complete transactions within a few seconds. Further note in terms of speed, Algo can be sent to anyone’s wallet, in under 4.5 seconds. No delays at all or wondering if your payment went through or not because you get almost instant confirmation of your payment. In addition to scalability: the Algorand is built for billions of users, this, therefore, means that no matter how many users there are, payment still occurs in 4.5 minutes. In terms of security and trustworthiness, the blockchain is built such that it is guaranteed not to fork; which is a problem that can occur when a blockchain splits into more than 1 chain. Furthermore, about its Decentralization, one of the defining features of blockchains is that the operational running of the system should not be handed over to only a minority of the community but, to the majority. Algorand’s PPoS solved this by ensuring that the selection of users is done randomly even though the number of stakes a user has determined the choosing process. I.e it is no longer users who have the greatest stakes that stand the only chance to be chosen.
Question Five
Do you think PPoS is better than PoS? Explain your answer
Yes! Because with PPoS your stake does not define whether you can participate neither is your chance of taking part, in relation to a huge stake and a fixed number of validators but this is the case with Proof of Stake (PoS). With PPoS protocol, there is no fixed number of validators and your participation is not dependent on your number of stakes, everyone can participate with no penalty and lock period. Each network is created to solve and create bridges in the lapses of the former system. So the PPoS was formed to solve the problems that were observed in the PoS just like the PoS was made to solve the problems in the PoW. For instance, there is a time constrain that validators face while validating blocks however, in the pure proof of stake, it is the opposite. One other distinguishing factor of the pure proof of stake and proof of stake is that because of the highly decentralized nature of the PPoS, malicious hackers will find it impossible for them to successfully launch a 51% attack not just that, authority cannot be monopolized in the pure proof of stake as it can be, in the proof of stake. In fact, one of the security challenges of the proof of stake is that hackers can cooperate and own high stakes as to get chosen to build blocks or even launch a 51% attack.
Question Six
Do you think PPoS is better than PoW? Explain your answer
Taking research through POW, the first thing we notice is that Proof of Work(PoW) is an expensive and wasteful protocol; it consumes high power, complex to set up and transactions are slow to process. It is also important to note that it is the oldest mining protocol, which makes the first user who can solve the cryptographic puzzle receive the reward for participation and this requires high computational power. We understand that the proof of work has its own good as we can see a rise in the number of active miners especially in countries such as China, which try to produce bulky hash rates annually such that it produces potent results. It is my personal opinion that operating the proof of work system is not environmentally friendly as the amount of technical equipment required to run it, will increase with time not forgetting their expenses too. Contrarily, users who own the ALGO token participate in the system easily and efficiently without having to spend excess money on technical equipment which will not only tell on the ecosystem but, on their pockets too.
On the contrary, PPoS doesn’t require high-cost hardware to mine and doesn’t require high computational power which as a result requires high cost of electricity. and everybody gets an equal chance to propose a block.
Question Seven
Explore and explain an ALGO transaction using algorithm?
- The first step is to visit the site www.algoexplorer.com
- After the page opens, a variety of information will be displayed on the screen such as the price of ALGO which was $1.4976 at the time of writing this assignment and was actually on a little dip of -4.81%. Furthermore, other info contained on the page includes details of the latest block and latest transactions. We can also ascertain the speed with which each block is formed which is 4.5 seconds. At the time of writing this assignment ALGO has a total of about 16,731,309 accounts and a circulation figure of 6,312,743,982.28.
To proceed in analyzing the latest transaction on the network
- I clicked on the latest transaction link and it opened, displaying info about the transaction as shown below
After the latest transaction opened, it reveal information such as
ZW3ISEHZUHPO7OZGMKLKIIMKVICOUDRCERI454I3DB2BH52HGLSO67W754 which is the sender’s address and the recipient’s address was also displayed. From the screenshot above, we can observe that the block of the transaction was 17958350 with a timestamp of Sat 11th Dec 2021.
It also gave out information such as the balance of the sender, as shown below, the sender has 5,195.484155 ALGO tokens and the receiver had 0.997 ALGO tokens respectively. The good part is that the fee was just 0.001 ALGO
Question Eight
Carry out an analysis of the price of ALGO from the beginning of the year to the present. Via graphics?
Visiting www.coinmarketcap.com at the point of writing ALGO price was $1.50 on 11th of December 2021 with a crypto market cap of $9,456,027,629 and a volume of $267,061,481over the past 24 hours.
Furthermore, on the 24th of December 2020 ALGO had a price of $0.3 and a volume of $70.99M as shown in the screenshot below-
Fast forward to 6 months later which was June 2021, we can see that price of AlGO moved to about $1.0862 and a total volume of $149.48M on the 13th June 2021.
Six months later which is December 2021 we can see that the price of ALGO has skyrocketed.
We can finally see that the trend has been a mix, majorly of a bullish trend and a little of a choppy-ranging trend.
Conclusion
In Conclusion, the Algorand is one of the fastest, most secure, and trustworthy crypto-currencies existing and in use today. As the vision of a Borderless Economy becomes a reality, the Algo will be one of the most critical crypto-currencies in use. It has proven in the way it can that solving the Trilemma is a possibility, what is needed is global improvement and acceptance of this new solution.
Special thanks to Professor @nane15