What is Elrond?
Elrond is a layer 1 network centrally designed to resolve the issue of scalability. In laymen’s it is the foundation, the basic infrastructure that allows for applications to be built on top of it, designed to run faster than other networks. Elrond utilises the Secure Proof of Stake (SPoS) consensus mechanism, an improvement upon the popular Proof of Stake (PoS) consensus mechanism- which is how blocks are added to the blockchain. The native token for Elrond used to pay all transaction fees in Egld.
Why Do I believe In It?
Layer 1’s cannot be ignored. Previously I have written on the topic of scalability and why it matters. Briefly, scalability is the most treacherous obstacle that blockchain technology must overcome to become valid for widespread global adoption. Scalability is to be defined as the ability to utilise the system efficiently regardless of total users at any point in time. Throughput or Transactions Per Second (TPS) is the speed at which transactions are verified by the network and is the best measure of scalability. Visa offers an average TPS of 1700 whilst Bitcoin offers an average TPS of 5. Blockchain cannot be taken seriously as a global transactional network with such speed. The issue of scalability grows worse as more and more users enter the crypto ecosystem putting increased demand on already congested networks.
Elrond was designed solely to address this issue. The team was formed in October 2017 and the mainnet went live in July 2020. Formed by the Mincu brothers (Beniamin and Lucian), early crypto adopters who previously ran Metachain capital, which invested early in projects such as Tezos and Binance, and Lucian Todea, a tech entrepreneur who is the founder and CEO of Soft32 and an angel investor in Typing DNA and Smart Bill. The team has expanded since then and is replete with competent developers. But just the core team is fearsome with lots of experience and a good vision for seeing the growth areas within crypto.
The central aim of the Elrond network was overcome the severe limitations of scalability hindering mainstream adoption. The aim was to enable the network to achieve performance at least equal to its centralised counterpart. The Elrond network has a current TPS of 15,000 and a transaction cost of $0.001, one tenth of a cent.
An ambitious vision that has been realised.
Investors Quick Hitter For EGLD
Max total supply: 31,415,926
Circulating supply: 21,727,123
All time high: $545.64
All time low: $6.51
Current price: $192.50
Staked Supply: 12,524,598
Floating Supply: 9,586,387
As the network relies on the Secure Proof of Stake (SPoS) consensus mechanism, that means the native token Egld can be staked to help run the network. Validators are rewarded in transaction fees from the network and the current APR for nodes is 13.95% and for delegators is 12.56%.
To set up a node there is a minimum stake requirement of 2500 Egld, and the minimum stake requirement to become a delegator is 1 Egld.
An incredible APR for what is a relatively safe investment. This risk assessment is relative to the crypto sphere. But to borrow terminology from traditional finance to facilitate a better understanding Bitcoin and Ethereum can be considered blue chips/ stalwarts, and I would class Elrond as a fast grower that will one day become a blue chip/stalwart.
More Egld is currently staked than held. This is a bullish signal that people who own Egld believe it is going to continue to appreciate in price and thus are staking it for rewards instead of having it on hand for a quick flip. When people ‘park’ their assets it is a sign of faith for future prospects.
Total users has just eclipsed 1.5 million when in early February 2021 it stood at 200,000. Elrond is attracting more and more new users, and thus attracting more and more capital investment.
What Makes Elrond Special?
Within the crypto sphere Bitcoin is the gold standard for value store- driven by its scarcity-, over the years its value has continued to appreciate, and will continue to do so.
Ethereum is the programmable blockchain, and the core of all Decentralised Finance (DeFI). On the Ethereum chain programmers can create smart contracts which execute functions, and that has birthed an entire ecosystem.
The Elrond network aims at both. It is an entire defi ecosystem and developers can use the blockchain to develop decentralised apps (Dapps) and Egld the native token was created to rival bitcoin as a store of value.
The two central features that distinguish Elrond from other layers 1’s is its adaptive state sharding and Secure Proof of Stake (SPoS) consensus mechanism.
Adaptive State Sharding
Sharding is a form of database partitioning. A technique used to divide the workload of a blockchain network, each node keeps only information related to its specific shard, and is responsible for a fraction of the overall transaction. This greatly increases overall processing ability of the network.
Elrond introduced dynamically adaptive sharding, which allows for reorganisation dependent on necessity.
Elrond’s network consists of shards and each shard is allocated a set of validators to produce each block. The network utilises different time periods to organise its network. And from a technical standpoint the idea is brilliant but heavy and overly complicated for most users to understand. The thrust is that the Elrond network reduces latency by improving the communication between nodes- the delay normally met when distributing new work to shards was decreased. And the network prunes itself when an epoch expires, allowing the shards to reorganise and be more efficient, dependent on network usage.
Secure Proof of Stake (SPoS)
Elrond again focuses on dealing with latency with its consensus mechanism. It introduces an improvement which allows each node in the shard to determine the members of the consensus group (validators) at the beginning of the round. This has reduced the time it takes to pick nodes for a shard to less than 100 milliseconds. This greatly increases the speed or the TPS of the network.
Another change was the introduction of rating to validators. Elrond refines its consensus mechanism by actively rating its validators. With nodes that stake more coins and have been honest in that past more likely to be selected as the validators. This encourages honest validators which is a boon for the network’s security.
Elrond’s Ecosystem
Elrond is an enormous network and continues to grow. The greatest project found on the network currently is Maiar. Maiar is a digital wallet and global payments application. It facilitates the purchase and transfer of crypto from a mobile phone or google chrome extension. It is one of the simplest wallets to interact with and it is obvious it was built with global adoption in mind. With just a phone number Maiar offers the ability to send money to friends and family.
Maiar exchange is the economic engine of the Elrond network. It is Elrond’s Decentralised Exchange (DEX) which allows uses to complete swaps, access liquidity pools, and engage in yield farming.
The Elrond network is an entire ecosystem within itself constantly expanding. Currently there is an airdrop underway, Metabonding, where stakers of Egld or LKMEX (Locked Mex) will be eligible to claim four tokens soon to be released on the Maiar Exchange.
What is LKMEX?
Locked Mex (LKMEX) is a token reward found on the Maiar exchange. The APR rewards of farms are doubled if the user chooses to accept LKMEX in place of MEX. Each month a new LKMEX token is created, and all rewards for that month are locked for one year, with 17% available followed by a vesting period with 17% unlocked every subsequent month. Another hugely bullish signal for Elrond, one year in crypto terms is a lifetime. The fact people are choosing rewards in tokens that will only start unlocking a year later shows incredible long-term faith in the project.
The Native Token Egld
It is used to pay for transactions, storage, validator rewards, and smart contract execution. A portion of the fees from every transaction are burnt, some go to validators, and some go to the Elrond community fund. With a max supply of 31,415,926. Likely lower in the future due to burning.
One of the best features of the reward programme is that Elrond puts developers first. This reward system was seen on the Fantom network where developers are rewarded and encourages organic ecosystem growth. If a developer creates a smart contract and lots of people use kit, 30% of the fees from that smart contract go to the developer. This encourages competent developers to build on the Elrond network and develop great decentralised applications (dApps) that will bring more and more users to the network.
The Future
Elrond has consistently met its roadmap targets and plans to introduce on-chain governance and Staking phase 4 in quarter 2 of 2022. On-chain governance will enable holders of Egld to vote on network proposals and take a lead in determining the future destiny of the network. In line with the democratised values of decentralised finance.
The Elrond network offers the solution to scalability, has a swelling user base, and continues to encourage the growth of its already vast ecosystem. It has been cultivated to become a holistic project from the outset and has planted deep roots.
A key tenet of my belief in Elrond is the simplicity it offers, and this value cannot be understated as more and more participants join the crypto sphere. The projects that benefit from the influx of new capital will the ones most accessible to the ordinary person, and Elrond delivers fiercely on this front. Elrond offers a blend of traditional finance and decentralised finance to its users and is thus accessible by all.
I look forward to seeing what 2022 brings this project.
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