What Is Algorand (Algo) And How Does It Work?

Over the past few years, there have been many crypto assets that boast matching many traditional global payment giants. Other crypto assets have tried to provide a space for developers to build smart contracts. In doing so, these crypto-assets try to compete with Ethereum.

However, Algorand is a crypto asset that does both. It aims to be a blockchain development platform as well as a payment processor. To help you understand Algorand and answer, “Is Algorand a good investment?”, let’s do a deep dive into understanding Algorand!

Meet Algorand

As you already know, Algorand is a blockchain development platform. It aims to create a world where users can create and exchange value efficiently and securely. It allows users to develop and host crypto assets and blockchain projects. As such, it is a direct competitor of Ethereum. Moreover, it is also a carbon-negative platform, meaning it has more carbon credits than it needs.

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The Algorand platform is also a digital currency and a crypto asset. It is designed to perform like a major payment processor like Visa. It processes transactions at the rate of 1000 transactions per second. Moreover, it also has a strong focus on near-instant finality. 

Additionally, Algorand is an open-source blockchain. What it means is that anyone can view and contribute to the platform’s code by proposing changes. The platform uses a consensus mechanism called Pure Proof-of-Stake (PPoS). This operating platform inducts network operators from within the set of ALGO token holders.

Algorand was founded and developed by Silvio Micali in 2017. Micali is an Italian computer scientist and a professor at MIT. His research focuses on information security and cryptography. He is also a recipient of the Turing Award for his work around cryptography.

How Does Algorand Work?

Algorand uses a chain governance model which has a consensus-based approach. It is used for making updates to the protocols. Anyone on the network can upload code changes that they want to implement. ALGO token holders use the Pure Proof-of-Stake consensus model to vote on these changes.

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In this model, validators are not rewarded for participating. Validators also do not have the risk of getting their collateral deducted. Therefore, the minority has no incentive to cheat because there are no rewards. The majority has no incentive to cheat either. That’s because, if they do, the value of their holding will decrease.

Furthermore, ALGO tokens are not locked on the network for staking purposes. They are available to users all the time. Blocks on the network are selected at random in two phases. First, a single token is selected randomly and its owner chooses the next block. Second, one thousand random tokens are selected. The owners of these selected tokens then approve the block that is proposed initially.

The ALGO Token: A Snapshot

The ALGO token is the native token of the Algorand platform. The ALGO token is used to secure the Algorand network by incentivising the participants. It is also used to pay transaction fees on the network.

Furthermore, the ALGO token holders can participate in the consensus mechanism. Token holders can also propose or vote on proposals passed by other users. Interestingly, the allocation of ALGO tokens is presented in the Emissions section by the Algorand platform. The total supply of the ALGO tokens is capped at ten billion coins. Currently, there are about seven billion ALGO tokens circulating in the market.

Final Thoughts

Algorand is a blockchain development platform that supports smart contracts. As such, it competes with Ethereum by supporting other blockchain projects. Additionally, it also aims to be a major payments player and compete with the likes of Visa and Mastercard. It can support over a thousand transactions per second.

The ALGO token which is the native token of the platform is used to pay for transactions on the network. Additionally, token holders can propose changes to the platform and vote on them. It is also used for securing the network. Knowing what you know now about the ALGO token, We are sure you are wondering, “How to buy Algorand?”. Now, you can buy the ALGO token with ZebPay crypto exchange platform!

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