WHAT IS ALGORAND?
This article provides every information you need to know about Algorand. We will see how Algorand solves the problem of blockchain trilemma.
Introduction
From the invention of bitcoin, blockchain technology has evolved a lot. Blockchain platforms like ethereum, hyperledger have become quite famous and made their own identity in this field. Even though these platforms present a huge number of use cases still somehow they haven’t been able to solve the problem of “blockchain trilemma” (discussed later). Unlike these platforms, Algorand has been working on designing a platform that can effectively solve blockchain trilemma as a problem that inhibits adoption at a scale. Algorand publicly opened its Testnet on April 16, 2019, and introduced this foundational blockchain platform from Turing Award winner, MIT professor, and zero-knowledge proof creator, Silvio Micali. Algorand is an open-source software company working towards building a borderless economy. Let’s try to understand Algorand in detail.
What is Algorand?
Algorand is a technology company which aims to solve the three main problems faced by blockchains today, Security, Scalability, and Decentralization. They developed the world’s first open, permissionless, pure proof-of-stake blockchain protocol that, without forking, provides the necessary security, scalability, and decentralization needed for today’s economy.
There has been a problem of implementing security, scalability, and decentralization together in Blockchain, which is known as blockchain trilemma. Ethereum is not able to provide scalability as it uses Proof of Work Consensus algorithm (PoW) which requires a large amount of energy to add a block to the blockchain and normally it takes around 10 minutes to add a block in ethereum blockchain. Bitcoin too has the same problem. Also, there is a problem of forking with them (forking is something like a division of blockchain into two parts mostly due to the different ideologies).
In the case of hyperledger, it doesn’t provide public blockchain, i.e., having an issue of decentralization.
To solve such an issue professor Micali with his team (which includes researchers, managers, and scientists, also supported by big companies equally), built a platform that is public, easily scalable, and provides security.
As we know, in a public network anyone can participate. What if an adversary could try to partition the network or convince different groups of users to accept different blocks at the same height in the blockchain? If so, then it will result in contradicting transactions and will be accepted by different users, causing a fork in the chain. This allows the adversary to double-spend their money. Even if you made a payment, you cannot consider your transaction to be successful. This is because a branch may overcome the current chain and your block may end up in a dead branch and disappear. As it is recommended to wait for 6 blocks after yours to be confident that your block will remain on the chain. In contrast, the Algorand blockchain never forks. Only one block can have the required threshold of committee votes (discussed later) and added to the chain. Thus, Algorand is fast and there is no issue of double spending, i.e., the user’s balances remain secure.
Consensus Protocol
The Algorand blockchain uses a decentralized Byzantine agreement protocol that uses pure proof of stake (PPOS). That is, it won’t allow malicious actors to alter the blockchain configuration. It uses a decentralized Byzantine agreement which says that if the majority of stakes are in non-malicious actors then the network is secure. This protocol is very fast and requires minimal computational power per node, and performs the transactions efficiently. With PPOS you can commit up to 1000 transactions per second.
PPOS uses two concepts that are verifiable random function and participation keys. Let’s understand both of them one by one.
Verifiable Random Function
VRF produces a pseudo-random output using a private key and a value, and anyone can verify the result. VRF function is like a lottery system and it randomly selects the leader to propose the block and the committee (subset of all network nodes) members vote on this block. The more Algos (Algorand crypto-currency) an account has, the better are its chances of becoming the leader for that block. This method ensures that a user does not gain any advantage by creating multiple accounts.
Participation Keys
A user must be online to participate in the consensus protocol. However, for security reasons users do not need to use their spending keys (i.e., the keys used to sign the transactions) for consensus. Rather, a user needs to generate a specialized participation key before going online. Using this key, the user can participate in consensus protocol (i.e., both proposing phase and confirming phase). The participation key expires after a certain number of rounds, after which it is removed and a new participation key will generate. It ensures that a user’s money is secure even if their participating node is compromised.
Now we see how consensus protocol works -
Algorand uses the VRF to select accounts to propose blocks for a given round. After the block is proposed, the committee voters vote on the block proposal. If the two-third majority of the votes are from honest participants, the block can be certified.
Note that a new committee is selected for every step in the process and each step has a different committee size, which is quantified in votes, not accounts.
Basically the consensus protocol is divided into three steps -
- Block Proposal
- Soft Vote
- Certify Vote
Let’s understand each of them.
Block Proposal
This is the first step in which accounts are selected to propose the new block in the network. Every node loops through each of the accounts it manages, requiring that account should be participating in the consensus protocol. Further, each node gets block proposals from other nodes and then validates the VRF output for these proposals.
Soft Vote
Each node will run VRF for every participating account it manages to see if they have been chosen to participate in the soft vote committee. If an account is chosen, it will have a weighted vote based on the number of algos (discussed later) it has. Chosen accounts filter the proposals down to one proposal by voting. Note that since every node can have only one vote (based on the number of algos), this makes the voting independent of multiple accounts.
These votes for the lowest VRF block proposal calculated at the timeout and will be verified by the other nodes. Each node will validate the committee membership before adding to the vote tally. Once the required number of votes is reached, the process moves to the next step.
Certify Vote
A new committee is selected to check the block proposal that was voted on in the soft vote phase to check the problems such as overspending, double-spending, etc. If valid then the committee again votes to commit the block. This voting process is the same as the soft voting process. The votes are collected and validated by each node until a quorum is reached. Finally, the block is written to the ledger.
As we have seen that the selection of users to participate in consensus is done randomly and secretly, without any communication with peer nodes. This procedure requires a user’s private key, hence any malicious actor does not know who is going to participate in generating the next block until a selected user participates in the consensus protocol. After this point, it is too late for them to benefit from an attack. Furthermore, for each step of the protocol, a unique subset of participants is chosen randomly.
Algo Tokens
The key role of the algorand company is to distribute algo tokens. “Algorand held a Dutch Auction ICO in June 2019, and raised over $60 million, selling 25 million tokens at $2.40 each. The ICO date coincided with the launch of the Algorand mainnet. That’s just the beginning though, as Algorand has said they will auction off 600 million tokens per year, using the same Dutch Auction system each time. The total token supply will be 10 billion ALGO.” (as per the source https://www.coinbureau.com/review/algorand-algo/)
Conclusion
Algorand was created by the cryptography professional, Silvio Micali from MIT, and is supported with a world-class team of research scientists, business and marketing professionals. There are very high expectations from this project. So far the team has delivered excellent results. Algorand is the first ever blockchain platform that can solve the problem of blockchain trilemma.
Because the Algorand protocol uses PPOS to randomly select a small set of block proposers and verifiers, users only need to receive a fixed number of messages in order to reach consensus on the next block.
Algorand’s consensus protocol is able to scale to millions of users and sustain a high transaction rate, without suffering significant cost to participating users. Consensus on a block is reached in parallel while the block is being propagated to the network, which typically happens in a few seconds.
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References
https://www.algorand.com/what-we-do/technology/protocol-overview
https://www.algorand.com/what-we-do/technology/scalability
https://www.algorand.com/what-we-do/technology/immediate-transaction-finality
