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Last updated on July 11th, 2023 at 11:34 pm

Out of many popular blockchains out there, Algorand is a new one that was made available to the public in 2019. Its underlying principle is focused on solving the blockchain trilemma, which is decentralization, security, and scalability. It is not news that older blockchains tend to sacrifice one aspect for the other two. Algorand wants to be the novel blockchain that breaks the trend of sacrificing by offering every aspect of its ecosystem.

Algorand’s Architecture

Algorand was birthed by Silvio Micali, an MIT professor who wanted to offer solutions to the blockchain trilemma. This blockchain was designed to increase scalability, clamp down on transaction fees, improve security while ensuring that there was no need for custodial intervention. Some blockchains may throw around the term, ‘decentralization’ when they describe their innovations, but that is not always the case. When they are looked at critically, one can tell that there is a speck of centralization imbibed in its operations.

Algorand’s Proof of Stake Consensus Mechanism

When its founder started working on Algorand in 2017, he wondered what consensus mechanism would make Algorand truly decentralized. During that period, PoW chains were quite popular, as the forerunners in the crypto world, Ethereum and Bitcoin used Proof of Work. PoW needed a massive level of computing power to verify transactions, which may not be truly decentralized because only those that could afford the expensive mining rigs and farms could get involved.

Another option that Silvio considered was the Proof of Stake. Algorand uses PoS, which allows anyone to have a stake in the chain, and the verification process. The PoS consensus mechanism meant that a massive level of energy was not expended in the validation process, and everyone was allowed to get involved. Those that were eligible to validate blocks had to possess a stake in Algorand, making them act in the best interest of the community.

Unlike other PoS consensus variants out there, this community doesn’t allow the use of a fixed set of validators to validate the blocks. When it is time to validate a transaction and add it to a block, a random set of validators are chosen, and once they validate a block, another set is chosen randomly to replace them. The process repeats itself, thereby preventing any set from having a massive advantage over others.

Algorand protocol can ensure that the selection process is truly random by using a Verifiable Random Function. If a set of validators can tell when they will be called upon to validate a block beforehand, it could lead to an exploitation of the consensus mechanism.

Every validator in Algorand is allowed to use the Verifiable Random Function to see if they have been selected to join the next validating committee. Once they are done with their validation, the committee is disbanded, and a new one is created. A great feature of this innovation is that none of the selected validators knows one another in the committee while the validation process is happening. Once they have validated the block, the identity of every validator is disclosed.

Algorand’s Two Layers

Algorand boasts of a fast transaction speed that runs into a thousand transactions per second, which is incredibly fast compared to what is seen on Ethereum and Bitcoin blockchains. Algorand’s high scalability is linked to the two-layer architectural system that it is based on, which seems quite effective. For the first layer, only atomic swaps, basic smart contracts, and new assets are allowed. On the other hand, the second layer caters to bigger smart contracts that are needed to run decentralized apps.