In this report we will unpack the Elrond startup. You may not have heard of Elrond, as this project has spent several years focusing purely on building their technology. The team did not open any fundraising efforts until they had a working prototype — something we don’t see often.
Elrond are building a new public blockchain to address scalability, throughput and cost whilst maintaining sufficient security and decentralization. As is the case with many projects building new blockchains along with novel consensus techniques, it is easy to get lost in the detail of Elrond’s whitepaper.
With that in mind, this post will try to keep everything high-level and easy to understand.
As mentioned, Elrond are a blockchain project. We have heard many times about the drawbacks and intrinsic limitations that Bitcoin, Ethereum and others have, in lacklustre transactions-per-second (TPS) numbers and high latency. Elrond are another blockchain project designed to address these core issues with currently popular blockchains.
The two key innovations of this project are the ‘Adaptive State Sharding’ approach and ‘Secure Proof of Stake’ (SPoS) consensus mechanism.
You can read more about Elrond at their website: elrond.com
Let’s begin with the key components of the Elrond offering:
- A Highly scalable blockchain
- A highly efficient network
- Secure by design
- Cross-chain interoperability
Beginning with scalability, we must expand on the Adaptive State Sharding concept introduced earlier.
What is sharding?
Sharding is an approach to enabling highly scalable blockchains. This is necessary for any meaningful adoption of blockchain implementations for massively scalable dApps in the future. Zilliqa could be regarded as the most notable sharding implementation to date, with Ethereum also looking at a potential implementation of the technology in the future.
Because Elrond are using an adaptation of a PoS consensus, sharding is an attractive option to pursue when designing a highly scalable network.
Elrond’s implementation of sharding is called, ‘Adaptive State Sharding’. This sharding solution is designed to improve communication of the shards themselves, the network’s performance (through parallel processing) and reduce storage needs. Additionally, as more nodes join the Elrond network, the sharding design boasts the capacity with which near linear scalability is possible.
For a more technical insight into the Adaptive State Sharding, refer to pages 4–7 of the whitepaper.
A highly efficient network
Elrond have deliberately designed their protocol to create an efficient network, meaning energy consumption is minimized in balance with high network security.
We have seen many implementations and adaptations of the original Proof-of-Stake consensus, an alternative to the inefficient Proof-of-Work model.
Elrond eliminate the PoW mechanism, for their new SPoS model.
What is different about Elrond’s PoS?
Elrond have created something that they call, ‘Secure Proof of Stake’. This mechanism is similar, yet distinct from regular PoS models. Typically, PoS models use a combination of a user’s stake, stake age and randomness to determine the next block.
Elrond’s approach to consensus with SPoS is made up of stake, ‘rating’ and randomness.
The rating value is a means to discourage bad-actors in the network, as the rating value itself is included as part of the selection function for block propagation. A bounty program for invalid block detection will be implemented to act as a disincentive for this behavior. If a block proposer does act in a malicious way, the network will apply negative feedback, reducing the proposer’s rating and with it their chances of being selected again. If rating drops below a certain threshold, slashing of the locked stake occurs and the bad-actor will not be able to participate in the consensus any more. The default rating for a user is zero.
The consensus protocol remains safe in the face of DDoS attacks by having a high number of possible validators from the list (hundreds of nodes) and no way to predict the order of the validators before they are selected.
Secure by design
Elrond is being built with a vision to see large scale adoption of their blockchain and to enable large scale dApps and other applications built on top of their protocol. With this goal, security must be front of mind, and Elrond have addressed security as part of their design.
The team have identified common attack vectors and designed the protocol to mitigate common risks to popular high-volume blockchains such as:
- Sybil attacks
- Nothing-at-stake (specific to PoS)
- Long range attacks
- DDoS attacks
Sybil attacks are mitigated through ‘stake locking’ when joining the network, and nothing-at-stake risks are removed through the need for multiple signatures. For more detail on the technicalities of the design, see the whitepaper or short-form descriptions available online from Elrond.
Other methods of attack like single shard takeover, transaction censorship, double spend and bribery attacks have been noted.
Without getting into profuse detail, it is safe to say that security has been a key consideration in the design of this blockchain.
The final design component we want to highlight is cross-chain interoperability.
Interoperability has deservedly become quite an important consideration for the broader community as we put aside the idea that one blockchain will rule all, and welcome the concept of interoperability between chains.
Elrond understand that already established protocols like Ethereum account for a significant portion of active development and dApp deployment, and as such will offer an EVM compliant engine.
We hope to see more work being done to enable further interoperability between other popular protocols in the future.
It is easy to understand that each new public blockchain protocol proposing a faster, better and safer ledger is going to face steep hurdles to adoption and ultimately success; the same can be said for Elrond.
Regardless of the technology, awareness and adoption is another challenge.
Elrond have prepared a comparison of their most notable competition, shown below.
As shown, Elrond has addressed the key drawbacks of other blockchains. The buzz of 2018 was TPS throughput, and they are claiming to exceed their competition with ease. With relative low latency, a scalable design and interoperable capabilities — this project ticks the boxes.
The challenge however remains in execution and adoption, by both developers and users.
Beniamin Mincu — Founder & CEO
With over four years experience in blockchain startups, Beniamin was part of the core NEM team facilitating business development, marketing and community management. He is an entrepreneur, having helped bootstrap NEM from simply an idea to a globally recognized crypto-project cemented as one of the most well-known startups in the space.
Beniamin is educated with a background in economics, working in several different blockchain-related roles prior to Elrond.
Lucian Todea — Founder & COO
As a successful entrepreneur, Lucian brings a wealth of experience from his time with several tech-related startups in Europe. Founded in 2002, Lucian’s Soft32.com generated revenue in excess of $10M per year.
Lucian has a breadth of experience to draw on in ensuring Elrond is successful as a startup in the emerging crypto-space.
Lucian Mincu — Founder & CIO
An experienced infrastructure engineer, with a background in developing end-to-end startup solutions and network architecture for large entities in Germany.
Prior to Elrond, Lucian founded ICO Market Data and was a partner of crypto-fund Metachain Capital.
The team at Elrond began their research in Q4 2017, with the first iteration of their whitepaper released in May 2018.
We want to again make mention of the fact that this team did not open any funding rounds until they had a working prototype.
There is a wealth of technical information available on their website to deeply explain the technology and the methodology behind it.
This is a team focused on building a robust and highly-capable solution, taking into consideration what is lacking and what is needed for public blockchains to succeed and achieve large scale adoption.
Their blockchain will be fast, secure and efficient by design.
Overall, we like the technology that Elrond are bringing to the table. We have seen promising blockchain projects be successful in the past, and as such this is an intensely competitive area with many startups seeking the lion’s share of this space.
With the technology in motion, the next challenge is usage and adoption.