What is Elrond?
Elrond is a blockchain platform with sharding architecture. It employs the Secure Proof-of-Stake (SPoS) consensus algorithm. How does it work? Do we really need it? Let’s find out together!
The Elrond blockchain can be divided into several parts or shards depending on the workload. Each shard is its own network, with its own set of validators to keep it running.
Each block is divided into three parts for shard interaction. A transaction can also be split into parts and confirmed in parallel across different shards. Synchronization of network segments occurs in stages, after which elements from all chains are incorporated into the so-called metablockchain.
The main Elrond network began operating in July 2020, with a claimed maximum speed of 263,000 transactions per second.
Who created Elrond and when?
The creators of the blockchain project are brothers Beniamin and Lucian Mincu,as well as Lucian Todea.
Development of the blockchain platform began in 2017. Elrond tokenization was conducted on Binance Launchpad in 2019. The core network was launched in July 2020.
Elrond is led by Beniamin Mincu, who previously worked on the team of NEM, another blockchain platform. He oversaw its marketing department and community development from 2014 to 2015.
MetaChain Capital is another investment fund founded by the Mincu brothers. Todea was previously in charge of the Soft32 project.
What problem does Elrond solve?
The project proposes a unique solution to the blockchain trilemma. This necessitates a blockchain architecture that provides significant throughput, decentralization, and security all at the same time. A special blockchain structure allows for high performance under heavy load conditions.
According to the Elrond whitepaper, the project’s network should achieve throughput capacity comparable to centralized payment systems. In this case, the developers intend to ensure a high level of decentralization as well as protection from various attacks.
Elrond’s solutions are designed to reduce computational costs and data volume. The development is compatible with modern smart contract platforms. According to Elrond’s website, this allows for a thousand-fold increase in performance over competitors.
Elrond’s creators claim that their blockchain platform is highly scalable. Following testing, the developers launched a mainnet with a claimed maximum speed of 263,000 transactions per second.
How does Elrond work?
To process transactions, the network is divided into fragments called shards, each of which has its own set of validators. Elrond’s fragmentation is divided into three types: network, transaction groups, and states.
Sharding is the process of forming groups of validators in order to achieve consensus. Transaction groups are fragmented by distributing them among validator committees. The processing and storage of a portion of the transaction results by network fragments is known as state sharding. Transaction completion necessitates synchronization between segments, which is performed at regular intervals.
Adaptive sharding is used in Elrond’s blockchain. The network is divided into fragments, the number of which varies depending on the current load. This adaptability ensures high throughput and security.
Sharding also entails embedding network segments in binary tree nodes with no descendants. At first, all nodes are divided into two groups. The network is partitioned into four, six, or more shards if necessary.
Transactions are executed in parallel across each network segment. Shards generate blocks independently, eliminating external delays. Blockchain fragmentation significantly increases throughput.
How do the Elrond shards join together in a network?
The consensus cycle is divided into rounds and epochs by the network algorithm. A round lasts a few seconds, and when it ends, the composition of the validator group on the shard changes at random.
The number of nodes and fragments remains constant during an epoch. Following its conclusion, the number of shards can be changed to ensure optimal performance. New nodes are also added using the new epoch. After 24 hours, the new validator begins processing transactions.
Each shard has a fixed number of user addresses, but transactions can take place across network fragments. Elrond solves this problem by categorizing transactions into “miniblocks” three types of:
- The first includes transfers between addresses belonging to the same fragment;
- The second contains transactions sent to a user from another shard;
- The third includes transfers from recipients from a different fragment of the network.
The interaction between shards occurs in stages. The algorithm enables fragment synchronization and the formation of a “metablockchain” — a master chain whose blocks finalize transactions received from all shards. Block headers received from segments are included in metablockchain elements, which eliminates the possibility of changing confirmed transfers. The network structure and its main elements are available in the Elrond blockchain browser.
Does Elrond support smart contracts?
The Elrond platform enables the use of smart contracts and the development of decentralized applications. It makes use of an Elrond virtual machine built on WebAssembly that is EVM-compatible (WASM). Smart contracts are written in Solidity, C, C++, and Rust before being compiled into WASM. To process transactions by various shards, the virtual machine employs a special adapter.
How does the Secure Proof-of-Stake consensus mechanism work in Elrond?
The algorithm for creating new blocks is based on Proof-of-Stake. Validator nodes that have contributed funds to the stack take part in transaction processing.
A separate group of validators works on each shard to reach a “local” consensus. The shards’ composition is determined at random, which prevents malicious attacks. The aggregate signature of the last block is used as the argument to the function that defines the members of the group.
One validator is chosen at random from a group of validators to form the block, and the others confirm its validity. The likelihood of a validator being chosen is determined by its steak and rating. A validator’s rating is also determined by the length of time it has been working and the outcomes of its previous activity. If this rating falls below a certain threshold, the node is penalized and may be removed from the list of candidates for locating a new unit. If the validator causes a network disruption, it may be slashed.
An Elrond node can be installed on a computer, smartphone, or server, depending on the role it will play:
- An observer is a node that provides storage for the network and does not have an EGLD stack. An observer node is full if it stores the entire blockchain or light if it stores information about the last two epochs. Nodes can relay messages, but are not rewarded for doing so.
- A validator is a node that adds funds to a stack. It contributes to network consensus, confirms transfers, and is in charge of generating blocks. It is compensated by the network for its efforts.
- Fisherman is a node that checks the correctness of blocks submitted by validators. These nodes reject invalid blocks, for which they receive rewards. Fishermen cannot join consensus groups.
How has the Elrond tokenomics been changing?
Elrond’s native cryptocurrency was originally an ERD token issued by BNB Chain.
It issued 20 billion tokens. Early investors purchased 19% of ERD’s total turnover, and investors purchased another 5 billion tokens as part of a token sale on Binance Launchpad.
In September 2020, ERD was converted into EGLD cryptocurrency, which was already issued on the Elrond network and became the project’s native coin. The developers carried out a “denomination,” exchanging 1,000 ERDs for one EGLD.
The primary function of the EGLD is to settle and pay transaction fees. The coin is also used for staking. At the time of writing, Elrond cryptocurrency issue is more than 22 million coins.
How is the Elrond ecosystem evolving?
According to the creators, the blockchain’s throughput exceeds that of centralized systems. Elrond’s throughput is proportional to the number of fragments. This allows for greater performance by dividing the network into a greater number of shards, but the mainnet requires synchronization between segments, which increases transaction confirmation time.
The Maiar wallet, which allows transfers and sending cryptocurrencies to staking, is the platform’s main application. In December 2021, the Elrond network will launch Maiar DEX, a decentralized exchange. A massive $1.29 billion liquidity incentive program was later announced for it, with the goal of attracting users and funds to the ecosystem. Rewards were given out in Maiar DEX tokens (MEX).
In June 2022, an attacker stole $113 million in cryptocurrency from Maiar DEX by exploiting a bug in the exchange’s code.
Following the event, Maiar DEX was temporarily shut down and the vulnerability was fixed.
The Elrond team intends to launch regulated Stablecoins in the European Union. As a result, in early 2022, it acquired payment service provider Twispay, which has a license to issue virtual assets.
Elrond established the crypto fund Skynet EGLD Capital in April 2022 to further develop its ecosystem, raising more than $40 million for its efforts.
In the summer of 2022, the Romanian research institute ICI announced the creation of an NFT-marketplace and a decentralized domain name system based on Elrond.
What are your thoughts? If you have anything to add to the Elrond topic, please leave your comments below!
Follow Sunflower Corporation on Medium or Twitter for regular updates about trending Crypto news.
Sunflower Corporation — a new cryptocurrency derivative exchange focused on the best trading experience and tech excellence.
We offer BTC/USDT perpetual futures with up to x100 leverage, as well as the most trending instruments. When you trade with us you get a customizable trading terminal, a variety of charts, tools for technical analysis, a wide range of order types, and an option of “stop loss” and “take profit” orders.
