By Christian Arita — October 30, 2019
Introduction:
Algorand is a permissionless blockchain network, which allows for any participant that holds Algos to participate in validation. Algorand’s distinction in validation is in users’ ability to participate seamlessly with minimal effort. This is called Pure Proof-of-Stake and it can scale, support open participation, and create transaction finality for billions of users. The protocol is also built so that it exhibits immediate finality with a throughput of over 1,000 tps and latency of less than 5 seconds.
Factsheet — Metrics:
Price: $0.22
Market Cap: $92mn
Liquidity: $83mn
Circulating Supply: 424mn
2050 Supply: 10bn
Yield: 16.6%
Staking Ratio: 11.4%
Beta to BTC: 1.25
Correlation to BTC: 73.6%
Algorand Initial Investor Allocation:
- 25% Algorand Foundation & Algorand
- 30% Public Sale over first 5 yrs
- 25% Relay Node Runners
- 17.5% Rewards
- 2.5% End User Grants
Select Investors: Union Square Ventures, Pillar Venture Capital
Indexed Price Performance:
History:
Silvio Micali, a Turing Award winner and MIT professor, started researching blockchain technology in 2015 after he came across Bitcoin. He found that Bitcoin had areas he believed could be improved upon and thus he proposed his own idea of a permissionless blockchain network. Silvio eventually tested his idea and after seeing satisfactory results, he founded Algorand in 2017. In early 2018, Algorand secured a seed round from USV and Pillar and then raised an additional round in October from various other investors. The business then hired seasoned executives in October 2018 to help scale the business. Algorand was under closed testnet participation since July 2018 and opened up to the public in May 2019. Its mainnet’s launch then saw success, which led to the first round of a dutch auction for Algorand tokens in July 2019.
Team:
Silvio Micali:
Silvio is the Founder of Algorand. He previously spent time as faculty at MIT in the Electrical Engineering and Computer Science department. Silvio co-invented probabilistic encryption, Zero-Knowledge Proofs, and Verifiable Random Functions as well as other protocols.
Steve Kokinos:
Steve is the CEO of Algorand. He executes the overall vision and strategy for the team. He is a serial entrepreneur and most recently co-founded and led strategy at Fuze. Steve also co-founded two other companies prior to Fuze, both of which saw a successful exit.
W. Sean Ford:
Sean is the COO of Algorand and is responsible for broad go-to-market execution and operations. Prior to Algorand, Sean was the Chief Marketing Officer at LogMeIn and also held several executive leadership roles at various companies.
Technology:
Consensus Algorithm:
Algorand’s consensus mechanism is optimized for fast finality, high throughput, and no forking risks and it, therefore, removes barriers around decentralization, scale, and security seen in other networks. Algorand’s consensus mechanism is known as Pure Proof-of-Stake. Algorand uses the term “Pure” to signal that users are free to participate without a lockup or bonding period. Within the network, consensus occurs through three steps: block proposal, soft vote, and certify vote. In the initial phase, accounts are selected to propose new blocks. This phase begins with every node in the network looping through each account that it manages and running Algorand’s Verifiable Random Function (VRF). The account checks whether they were selected by evaluating the VRF with their secret key and the selection seed to prove it is a valid proposer. Once an account is selected and confirmed, the following phase is a soft vote. The selected account will have a weighted vote based on the number of algos it holds. The purpose of this stage is so that only one proposal/block is certified. Lastly, a different committee checks and validates that the block proposed in the soft vote phase was not subject to over-spending, double-spending or any other issue.
Innovations:
Immediate transaction finality occurs in the network because only one block can have the required number of signatures to be certified in a given round. Once a block is public, participants can be sure of the transaction’s finality.
Self-selection in the network is the act of a validator checking whether they were selected to participate in validation by comparing their secret key and the selection seed through a VRF. This ensures selection is random, secret, and broad.
User replaceability relates to self-selection in that participants change in every block and malicious participants do not know validators prior to their participation and knowledge of participation is not known until a participant has already propagated its message to the network.
Lastly, Algorand’s network architecture employs relay nodes and participation nodes. Relay nodes allow for communication paths while participation nodes propose and vote on blocks. Algorand‘s relay nodes are currently run by a wide range of global interests.
Validators & Staking:
In the Algorand network, delegation does not exist. Token holders can join the validator set with as little as 1 Algo so long as the user has their tokens in a non-custodial wallet. It also does not matter whether the user is marked online or offline. Unlike other networks, Algorand does not have any sort of bonding period so token holders automatically generate rewards. The network currently does not implement slashing penalties either. Users are also protected because Algorand separates spending keys and participation keys so that if a participation key is corrupted, a user’s stake remains safe. The current reward is set to encourage broad participation from the community and will see a distribution of 1.75bn tokens over the next 5 years. Otherwise, the Algorand Foundation has set up an agreement to disburse Algos to early participants that run relay nodes. These tokens will vest over 2–5 yrs.
Rewards: Algorand’s reward has held steady at 13.4% since launch.
Select Projects:
Syncsort and Algorand are partnering together to use blockchain solutions to work on data movement, data quality, and other challenges within data.
TOP Network has a strategic partnership with Algorand to research and develop scalable blockchain services and infrastructure.
OTOY is working with Algorand to democratize computing rendering power for leading studios and creative individuals.
AssetBlock is partnering with Algorand to work on using blockchain technology in the real estate investing industry.
Community Statistics:
Algorand:
- 268 commits
- 25 contributors
- 6 branches
Twitter: 12.7k Followers
Telegram: 10.5k Members
Reddit: 657Members
Conclusion:
Algorand’s focus is an improved PoS consensus mechanism, driving value through speed, scale, and security. Algorand benefits from Silvio, its high-profile technical founder, responsible for the co-creation of several cryptographic protocols. Algorand most recently held a very successful dutch auction for $60mn in algos, but it will see further public sales and the success around the sales will partly drive the narrative around its success as a network.
Appendix:
Beta: a measure of volatility for an asset in relation to a benchmark. One can think of beta as direction and magnitude of an asset’s move in relation to its benchmark’s move.
Blockchain:a system in which a record of transactions are maintained across a distributed network
Byzantine Fault Tolerant: a protocol capable of reaching consensus in the presence of malicious parties within a distributed system
Correlation: a measure of the linear relationship of an asset in relation to a benchmark. One can think of correlation as the direction of an asset’s move in relation to its benchmark’s move.
Consensus algorithm/mechanism: the method in which various parties agree on the state of a network
Forking: an event where a blockchain network can permanently or temporarily split into two or more branches
Multi Factor Rank: Each asset is percentile ranked within a factor. Each score within a factor is then equally weighted for a composite score.
Proof-of-Stake: a consensus mechanism requiring a stake to engage in validation
Proof-of-Work: a consensus mechanism requiring users to solve complex mathematical problems to propose new blocks
Smart contract: a contract where terms of agreement are programmatically written
Volatility: a measure of the variability around an average, specifically a calculation of standard deviation.
About:
StakerDAO: StakerDAO is a platform for governing financial assets in a decentralized, secure, and compliant manner.
Christian Arita: Christian is the Staker Ops Team Lead. His team is responsible for research, proposal development, and product implementation across all Staker products. Prior to working within crypto full-time, Christian worked at Deutsche Bank in research covering thematic topics with a focus on the US and major regions. Christian graduated from UC Santa Barbara with a degree in Economics & Accounting.
