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How To Earn With Algorand

27 October 2021
in Algorand, Articles, Opinion, Tutorials
Reading Time: 8 mins read
120 6
Home Explore Algorand

Contents

Toggle
  • Origin of Algorand
  • Algorand’s Consensus Mechanism
  • The scalability and speed of Algorand
  • Is Algorand good for investment?
  • Algorand rewards
  • How to stake with Algorand
  • Where can one stake Algorand?
  • How safe is an Algorand wallet?
  • In Conclusion…

Last updated on November 16th, 2022 at 11:58 am

Decentralization is the watchword for different blockchains, and that is one thing that sets apart the technology from what is obtainable in the centralized world. Algorand is one of the new blockchains that has actively tried to solve the issues that older blockchains like Ethereum have. Like every other network out there, it has its native token, called the ALGO. The native currency is used by community members to enjoy the features in the ecosystem or practice governance system. 

An underlying concept of this network was to offer users and developers access to a blockchain that is highly centralized, secure, scalable,  and consumes as much energy as the previous platforms. It wanted to offer the Holy Grail of the industry, the Blockchain Trilemma- decentralization, security, and scalability. 

In the past, many networks had to sacrifice one for the other two. Ethereum, which is still a Proof of Work network as at the time of writing this, offers decentralization and security to decentralized apps and users, but it is experiencing some issues in the aspect of scalability. Its ETH 2.0 promises to solve the malady. 

Algorand has blossomed since the dawn of 2021, climbing the ladder to occupy the eighteenth position on the list of coins with the highest market cap, according to Coinmarketcap.

As at the time of writing this, based on the data gathered from Coinmarketcap, Algorand has a massive market cap of $10.53 billion, and a price of $2.02.

Origin of Algorand

Algorand was made public in 2019 and has been linked to Silvio Micali, a computer scientist, a Turing Prize winner, and a professor at the Massachusetts Institute of Technology.

According to his biography, “Silvio Micali has been on the faculty at MIT, Electrical Engineering and Computer Science Department, since 1983. Silvio’s research interests are cryptography, zero-knowledge, pseudorandom generation, secure protocols, and mechanism design, and blockchain. In particular, Silvio is the co-inventor of probabilistic encryption, Zero-Knowledge Proofs, Verifiable Random Functions, and many of the protocols that are the foundations of modern cryptography.

In 2017, Silvio founded Algorand, a fully decentralized, secure, and scalable blockchain that provides a common platform for building products and services for a borderless economy. At Algorand, Silvio oversees all research, including theory, security, and crypto finance.”

Algorand’s Consensus Mechanism

Algorand uses a variation of the Proof of Stake consensus mechanism noticed in many new generations of blockchain. In its case, it utilizes the Pure Proof of Stake, which is theoretically a solution to the issues that it wants to solve in the Proof of Work consensus system. 

Proof of Work is notably known for its mining process, which means that miners have to expend massive computing energy and electricity to verify transactions and create new blocks. Usually, different miners compete fiercely to solve complex mathematical puzzles, and the first person to offer the solution is allowed to mint the block. They are also rewarded with tokens. As time goes on, the complexity of the mathematical puzzles increases. 

Algorand’s algorithm doesn’t need any of the processes listed above because it uses a variation of Proof of Stake, meaning that miners and large computing energy are not needed for the platform to function. 

In Algorand’s Pure Proof of Stake consensus mechanism, different participants are randomly selected by the network to validate transactions and create new blocks. To prevent bad actors from infiltrating the system, the network offers those that have much to lose a greater chance of being chosen. This means that validators with large pools of tokens have a higher chance of being chosen at random by the network. 

The scalability and speed of Algorand

The technology that Algorand offers has attracted the attention of different organizations. Some well-known financial organizations like Circle are currently building on Algorand. Though the blockchain is a new one, the trust in it has risen because of the strategy it uses to instill scalability in its network. 

Its high transaction speed is linked to two layers that carry out different purposes, thereby making sure that the network is not clogged.  The first layer offers minor smart contract functionality and atomic swap ability. For developers that want to create more advanced smart contracts and decentralized apps, they use the second layer. Layering up the network has improved the transaction speed and reduced the gas fees of completing transactions. 

Is Algorand good for investment?

DeFi Planet always suggests that potential investor carries out their research before investing in any crypto asset. Some examples of carrying out research are reading the whitepaper, looking up the crypto’s data, listening to the news, and so on. Possessing the right data makes the decision process a lot easier. 

Now that this has been addressed, let’s analyze why ALGO may be a good investment. 

  • Injection of capital

Though Algorand is relatively new, it has been able to become a household name. Arrington Capital, a notable firm, injected $100 million into the development of Algorand. The aim of the investment is to improve the development of projects and functionalities within the network. This capital injection has improved the value that Algorand has in the blockchain space, and has driven astute developers to create their decentralized apps on the platform because they may be eligible to enjoy assistance from the earmarked Fund. 

As more projects are created on the network, the value may increase, thereby making it a potentially good investment. 

  • Launching of Algomint

A new feature, Algomint, was launched on the Algorand network to improve the liquidity of the ecosystem. This digital asset minter, created by AJ Milne and Michael Cotton, will usher in incredible features into the platform. 

Liquidity is, sometimes, a big issue in PoS networks because of staking. Staking locks the liquidity of a token until after the staking period comes to an end. Algomint injects liquidity by allowing users to mint digital assets that “are 1:1 backed and redeemable on-demand,” thereby “providing a bridge to mint a variety of assets bringing equity and usability to the ecosystem.”

Since its launch, the network allows users to mint goETH and goBTC to inject liquidity and more digital assets into the network. 

To use this feature, the community member has to undergo a KYC process, then “add Algomint tokens to your Algorand wallet, and mint/burn testnet goBTC and goETH tokens with testnet BTC and ETH.”

Algorand has created a guide on the process of using this feature. 

This is not advice to purchase ALGO or be involved in the Algorand community. It is important that potential community member does their research and decide that this is what they want to do. 

Algorand rewards

Algorand wallet rewards those that hold ALGOs without them carrying out any additional process. As long as there is at least 1 ALGO in the wallet, the user is eligible for a reward. 

Algorand Foundation sets the reward rate that accrues to community members, and this rate changes as the network develop. “This rate is not guaranteed as these numbers will change over time as the rewards schedule changes, the total supply grows, and transaction fees increase/decrease.”

How to stake with Algorand

Staking Algorand is quite simple. The first step that should be taken is to look for where to stake it. Popular exchanges and also wallets have this option. Once the staking platform has been chosen, the steps that should be taken are usually stated there. 

Generally, these steps may be necessary, but it is important that it is confirmed from the staking platform. 

  • Sign up

If it is a wallet, the user may be expected to sign up and save their recovery phrase. 

  • Deposit 

The user can then deposit their existing AlGOs in the wallet or buy it on an exchange, then move it to the wallet. 

  • Get rewards 

Depending on the wallet or exchange the user opts for, an additional process may not be needed before they can earn the rewards. 

Where can one stake Algorand?

Algorand can be staked in different exchanges and wallets. Popular exchanges like Binance, Huobi, Kucoin, and Coinbase have this feature. 

Some wallets like Trust Wallet and even Algorand Wallet offer this feature. It is important to do your research and find out the level of credibility that the staking platform has, their ratings, rewards level, and so on, before opting for them. 

How safe is an Algorand wallet?

The team behind the network has added layers of security in the Algorand wallet, and one of them is the Ledger Nano X integration. This integration offers the users a cold storage feature to easily store their private keys offline. 

In Conclusion…

  • Algorand is a Pure Proof of Stake blockchain, a variation of the standard Proof of Stake consensus mechanism. 
  • It achieves scalability with two important layers that do diverse activities. 
  • Its wallet is outfitted with Ledger Nano X.
  • Users can enjoy rewards on Algorand Wallet.
  • Before you invest in any crypto, including Algorand, carry out your research. 

 

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