Algorand and the blockchain trilemma - Crypto Academy / S5W4 - Homework post for nane15.
Hello everyone!
This is the 4th week in the 5th season at cryptoacademy and in the previous lesson, I got to understand that the Blockchain Trilemma is one of the biggest puzzles that have plagued the world of cryptocurrencies and Blockchain developers.
However, in this week's lecture, professor @nane15 showed the breakthroughs of blockchain which have tried to solve the Blockchain Trilemma. One of these blockchains is the Algorand blockchain and in this homework post, I will be completing tasks that show the brilliance behind the Algorand blockchain.
Task 1
What is Algorand blockchain?
source : icodrops.com
Algorand blockchain is a blockchain network that was officially launched in June 2019. This blockchain network was founded by Algorand, Inc. a technology company owned by MIT professor and cryptography pioneer, Silvio Micali
Algorand is also one of the very few blockchains that have broken through the barrier of the Blockchain Trilemma and actualized the goal of being secure, scalable, and decentralized.
The Algorand blockchain was designed to be unique by using a permissionless blockchain protocol that can complete over 1800 transactions within a second.
Algorand was able to achieve this feat through its smart contract functionality and its consensus algorithm known as the Byzantine consensus which uses the pure proof-of-stake (PPOS) protocol
The Algorand blockchain is also open source, therefore, it supports the creation of dApps within its network. Algorand's native cryptocurrency is called ALGO and it serves as the governing cryptocurrency for all dApps launched on the Algorand blockchain.
Task 2
What is PPoS?
Pure Proof of stake (PPoS) is a validation protocol that the Byzantine consensus algorithm uses to validate blocks within the Algorand blockchain.
Unlike other validation protocols like proof of stake (PoS) and Proof of work(PoW) where a lot of computational power or a huge amount of staked coins is a necessity before a user (node) is qualified to validate a block, the PPoS randomly and secretly selects users who propose blocks and vote on the block proposals for validation.
The criteria for the selection of these users are not dependent solely on how much coin (ALGO ) the user has, although having more coins increases your chances of being selected.
The proposal of each block for validation is done by one lucky holder of the ALGO coin, while the voting and certification of each of these proposed blocks are done by 1000 randomly selected holders of the ALGO coin. This validation process repeats again and again with different candidates are chosen each time for both proposing and voting.
Task 3
Explain the advantages and disadvantages of PPoS.
Advantages of PPoS
- PPoS is energy and cost-efficient: Block validation using PPoS is done by random selection and voting and not the consumption of computational power which leads to heavy cost and energy consumption as seen when using the POW.
- PPoS is decentralized: The power to validate blocks and effect changes using the PPoS is shared among all nodes in the blockchain network. There is no set or group of people who have any sort of control irrespective of the number of coins the user holds.
- High speed of conducting transactions: Using the PPoS, over 1800 transactions can be executed within a second, hence, creating a scalable network.
- PPoS is well protected from malicious attacks: Due to the Decentralized nature of PPoS, it is very difficult for individuals or organizations to attack the Blockchain network, irrespective of the number of coins the user has staked.
- PPoS creates an opportunity for cryptocurrency application in various fields of commerce: Cryptocurrencies like Algorand which can handle a large number of transactions in a second and can therefore compete favorably with Card financial services like VISA.
Disadvantages of PPoS
In my own opinion, I can only see only one disadvantages of using PPoS
- *** Loss of incentive of to stake coins***: Using PPoS will dissuade large stake holders from holding their cryptoassets within the blockchain network , rather they will be more pursuaded to hold the cryptoassets of a blockchain network where getting rewards from validating blocks is very uncertain. This is due to the randomization of the validation process.
Task 4
Do you think Algorand solved the blockchain trilemma? Explain your answer.
source : pixabay
In my opinion, Yes! I believe the Algorand Blockchain has been able to solve the blockchain Trilemma. My reasons are based on the knowledge that for the blockchain Trilemma to be solved, the need for scalability, security, and decentralization within a blockchain must be satisfied to a degree of perfection.
Algorand Blockchain has been able to satisfy these needs to that degree of perfection through the implementation of the PPoS protocol which decentralized the process of block validation and in the process reduced the time taken to validate a block thereby, increasing the rate of transactions done per second which is directly proportional to the salability of the network.
The PPoS, finally went further to secure the blockchain from malicious attacks by high stakeholders in the blockchain network by ensuring that every user can propose and vote on blocks directly irrespective of the users' stake of coins. It also secures the blockchain from foreign attackers by leaving no special group of users for attackers to target as the user to propose the block is selected randomly.
Task 5
Do you think PPoS is better than PoW? Explain your answer.
source : pixabay
In my opinion, Yes! I do believe that the PPoS is better than the POW. The POW faces several drawbacks like the requirement of huge computational power, the slow, inefficient, and expensive nature of the protocol, and the possibility of a 51% attacking the blockchain network. These drawbacks have been solved in PPoS as users are randomly selected to validate blocks, therefore, eradicating the need for massive computational power, increasing the speed of block validation, and securing the blockchain through total decentralization.
Task 6
Do you think PPoS is better than PoS? Explain your answer.
source : pixabay
In my opinion, Yes! I do believe that the PPoS is better than the POS protocol. The POS protocol despite solving problems faced by POW created its unique problem known as centralization within the blockchain. Centralization is not the nature of the blockchain. The level of control high stakeholders who validate blocks possess within the blockchain makes the blockchain susceptible to malicious attacks.
The PPoS resolved this issue by creating a system that allows every single stakeholder within the blockchain to participate in the block validation process, therefore, totally decentralizing the blockchain and improving security.
Task 7
Explore and explain an ALGO transaction using algoexplorer.io (Screenshots required)
Source :screenshot
The homepage of algoexplorer.io is filled with information about the Algorand blockchain. Some of this information includes;
1 The latest block
2 Circulating supply
3 Total supply
4 Online Stake
5 Algo price
6 Block Speed
7 Transactions per second (TPS)
8 Transaction cost (TX cost)
9 Number of Accounts
10 Market Cap
Source :screenshot
However, to view a transaction using the algoexplorer.io, scroll down and select the transaction ID you want to view from the box labeled " Latest Transactions".
Source :screenshot
You will then be redirected to a page where the details of the transaction will be recorded. Some of these details include;
1 Transaction ID
2 Timestamp
3 Type of Transaction
4 Block where the transaction is recorded
5 Sender's ID
6 Amount sent
7 Receivers ID
8 Asset ID
9 Sender's Balance
10 Receiver’s Balance
With the information above we can confirm that for a transaction to be complete, there have to be two parties that are well identified.
Task 8
Carry out an analysis of the price of ALGO from the beginning of the year to the present. Via graphics (screenshots required.)
Source :screenshot
According to coingecko, Algorand's price today is $1.66 with a 24-hour trading volume of $252,087,755.It has a circulating supply of 6.3 Billion ALGO coins and a total supply of 6.76 Billion. ALGO price fell by -1.9% in the last 24 hours.
Source :screenshot
However, at the beginning of this year, ALGO was valued at $0.3994. The first quarter of the year saw a steady bullish rise in the price of ALGO. During the second quarter of the year, price dwelled within the ranges of $0.8 and $1.7 due to a ranging market, but the third quarter took a bearish turn as the price fell to $0.6 before a sharp rise at the beginning of the fourth quarter to $2.3 before a gradual drop to its current price at $1.64
Conclusion
Algorand has ushered blockchain technology and cryptocurrencies into a new era with the implementation of the Byzantine consensus algorithm which uses the PPoS protocol.
The PPoS protocol was able to solve the blockchain Trilemma by providing. Secure, scalable, and decentralized blockchain.
The future of cryptocurrencies is bright and it will be wise for everyone to jump on the train now.
Thank you for reading!
