Crypto Market Cap$2,290,754,844,638-6.42%
Proof-of-Stake Marketcap$383,654,888,166-8.87%
Global Staked Value$289,958,580,697-9.81%
SR20$921.4325.6% MTD
Benchmark Interest Rate10.11%-1.89%
Benchmark Total Staked52.82%-0.17%
Global Stakers3,605,876-1.3%
Crypto GDP$309,836,235,22595.14%
Proof-of-Stake Flippening PoW26.34%
Crypto Market Cap$2,290,754,844,638-6.42%
Proof-of-Stake Marketcap$383,654,888,166-8.87%
Global Staked Value$289,958,580,697-9.81%
SR20$921.4325.6% MTD
Benchmark Interest Rate10.11%-1.89%
Benchmark Total Staked52.82%-0.17%
Global Stakers3,605,876-1.3%
Crypto GDP$309,836,235,22595.14%
Proof-of-Stake Flippening PoW26.34%

      Introduction

      Algorand, founded by the 2012 Turing Award recipient Silvio Micali, is a Boston-based open-source software company that created a fully decentralized, secure, and scalable pure Proof-of-Stake (PPoS) blockchain that provides a common platform for building products and services for a borderless economy. Algo is Algorand’s native cryptocurrency powering its blockchain.

      Technology

      Algorand’s pure Proof-of-Stake consensus protocol was the first to solve the trilemma of having decentralization, security, and scalability. Because Algorand’s blockchain doesn’t fork, transaction finality is immediate and the approved block will forever be on the chain. Utilizing cryptographic sortition, blocks are created where users are selected randomly and approved blocks reveal a new unpredictable selection seed that indicates who will participate next. Blocks are only certified when a supermajority of the selected committee of voters acts honestly.

      Algorand’s Byzantine agreement protocol accounts for its scalability and security. Because it reaches consensus on a new block as fast as the block can be propagated throughout the network, if a malicious actor were to find which users to corrupt (which is already difficult because they are selected secretly and individually), it would already be too late because the users will have already fulfilled their responsibility and new ones would have been selected, again, secretly and individually.

      To optimize for transaction throughput and decentralization, Algorand has two types of nodes: relay and participation nodes. Relay nodes make communication pathways highly efficient and participation nodes propose and vote on blocks. Any user can host either node; however, the requirements are much less for participation. Node operators (validators) are neither rewarded nor at risk of slashing — although governance participants will be rewarded in the future. The most up-to-date information regarding Algorand’s technology is maintained by the Algorand Foundation and Algorand.

      Algorand Executive Team

      Leadership

      Silvio Micali, Founder – On MIT faculty since 1983 researching cryptography, zero-knowledge, pseudorandom generation, secure protocols, and mechanism design and blockchain. Co-inventor of probabilistic encryption, Zero-Knowledge Proofs, Verifiable Random Functions, and many of the protocols foundational to modern cryptography. Recipient of the Turing Award (in computer science), the Gödel Prize (in computer science), and the RSA prize (in cryptography). Oversees all research at Algorand.

      Steve Kokinos, CEO – Co-founder of Fuze (700 employees), BladeLogic (tech company acquired for $800 million), and Web Yes (tech company that served NetScape and Sun Microsystems). Kokinos is comfortable in the tech space and dealing with billion-dollar projects. Responsible for overall business vision and strategy at Algorand.

      W. Sean Ford, COO – Held several executive leadership roles including CMO at LogMeIn, CMO and COO of Zmags, CMO of Syncsort, and as vice-president of Global Business Unit (GBU) marketing at Oracle. Responsible for go-to-market execution and operations including product management, engineering, marketing, and global community development.

      Market

      As stated in an interview on Bloomberg Technology with Donald Tapscott, Blockchain Research Institute Executive Chair, “The 50 trillion dollar supply chain industry is moving to blockchain.” Smart contracts and the digitization of real-world assets are driving the market growth for blockchains that safely allow quick transaction settlement at a low cost. For this reason, Ethereum, the biggest smart contract platform and second-largest cryptocurrency by market cap, is migrating from the original Proof-of-Work protocol to a more efficient Proof-of-Stake protocol.

      Algorand has already partnered with dozens of organizations that leverage its technology. Algorand is currently supporting the first CBDC (Central Bank Digital Currency) with the Marshall Islands, powering Morgan Stanley-backed Securitize’s digital security platform, and working on many other projects. As more industries look to blockchains to digitize their supply chain operations, Algorand will be a top choice for a safe, scalable, and low-cost blockchain with a proven track record.

      Strategy

      Algorand’s PPoS protocol powers complex applications providing smart contracts, Algorand Standard Assets (stablecoins, NFTs), and Atomic transfers. Its platform will facilitate the blockchain migration of the $50 trillion supply chain market and the emergence of DeFi. Its blockchain is forkless, settles transactions instantly, and governance is decentralized; Algorand’s blockchain appeals to governing bodies and individuals alike. Algorand is focused on developing the best product as it actively recruits PhD-level computer scientists and structures everything from its reward mechanisms to blockchain protocol with long-term adoption and incentives in mind.

      Algorand Ecosystem
      Algorand’s Ecosystem of Applications. Source: graphic from Algorand Inc.

      Community

      Algorand has a strong community full of users and developers. The websites Algo Optimizer and Algo Explorer were developed from community efforts. In addition, many users and those looking to learn more about Algorand are present in communities on Discord, Telegram, Reddit, and other social media. According to Algo Explorer, over 2.8 billion Algos are actively participating in the consensus protocol. There are over 12.8 million accounts on Algorand’s mainnet, and over 306 million transactions confirmed.

      Due to Algorand’s consensus-based approach to protocol updates, community members can propose code changes on the network and stakeholders can use the PPoS consensus protocol to vote on whether to accept or reject the proposed changes. All users are allowed to participate in Algorand’s governance. Although the Algorand team is currently responsible for releasing protocol upgrades, the consensus-based approach gives node operators the power to determine whether to accept or reject the code changes.

      At least 90% of network nodes must approve the upgrade change (by upgrading their node) before the status of the code changes is considered active — or accessible to developers and users. Upon approval, the network nodes not yet upgraded have a grace period of 140,000 blocks (nearly seven days) to implement the upgrade before being “booted” from (unable to sync with) the network. Algorand democratizes governance for all Algo holders making community participation accessible to everyone, not just technically inclined validators.

      Staking in Algorand

      Staking in Algorand is currently very easy. It’s so easy, it’s technically not really staking, just “hodling”. Every address holding 1 Algo or more in a non-custodial wallet can earn rewards proportional to their Algo holdings. For addresses managed by custodians or centralized wallets/exchanges like Coinbase, it depends on the terms and/or policies of the custodian or wallet/exchange. For example, the current reward determined by the Algorand Foundation is a 5.64% annual yield (18 August 2021). On Coinbase, Algo holders are rewarded only 4% (while Coinbase pockets the difference for itself). The best way to achieve the full rewards is to download the Algorand Wallet and hold Algos there. 

      “Staking” on the Algorand Wallet is almost too simple. As an Algo holder you simply “hodl”, rewards will be shown on your wallet display, and to apply rewards, just send yourself a zero Algo transaction — that will cost .001 Algo — and the rewards will be applied to your total balance and will start compounding. When is the best time to apply your rewards, though? Is it every second? Every day? Every week? The answer changes depending on the size of your Algo balance and the annual yield rate.

      Thanks to the community, you don’t need to do the math yourself; if you want to optimize for how often your rewards are applied, you can use the community-created Algo Optimizer tool. Based on your balance and the current annual yield rate from Algo Explorer, the Algo Optimizer tool will send you a zero Algo transaction to facilitate the reward mechanism, adding the rewards to your balance to start compounding. If you want to calculate your estimated earnings, Staking Rewards provides a great earnings calculator that will save you time and headache with all the financial math.

      Long Term Algo Distribution Schedule

      Algorand Distribution Schedule
      Source: graph from the Algorand Foundation

      In the future, earning Algo rewards will not be as simple and will resemble more traditional forms of staking. It will move from its current reward system, designed to benefit all Algo holders, to a new system that benefits holders who participate in the ecosystem’s governance and prove their commitment by locking in Algos for a potentially long term. The rewards for governance participation are expected to exceed the current rewards rate. The Algorand Foundation provides a thorough explanation of Algorand’s Long Term Algo Dynamics for more detailed information.

      Competition

      Ethereum 2.0, Cardano, and Solana are Algorand’s biggest competition from a blockchain business and cryptocurrency perspective. They all offer competitive staking rewards near Algo’s 6%, quick settlement, and developer resources. All have community-driven projects on their respective blockchains, and all but Solana can point to successful projects and established partners at the level of Morgan Stanley. The competition largely falls short in transaction finalization and security. Algorand is the only blockchain of the four mentioned that will never fork. Ethereum, Cardano, and Solana can all fork and potentially put past transaction history at risk. Forking is a confusing process to navigate for blockchains that support NFTs and other applications that are supposed to be non-fungible. The market size that these projects will be serving will be at least tens of trillions of dollars, allowing space for each to exist, similar to how competing streaming platforms operate in parallel today.

      Investment Positives

      • Governance of a blockchain that could power trillions of dollars worth of applications.
      • Proven track record with diverse government and business clients.
      • Similar projects with comparable technology and management are valued 2X to 20X higher than Algo. This shows potential for Algo as retail investors learn about the project.
      • Added voter weight for time lock-up of tokens → long time horizon for project adoption.

      Investment Concerns

      • Like a stock, Algo doesn’t have to reflect the company’s performance.
      • Medium awareness as Algo market cap is over $3 billion (no BTC-Esque growth).
      • Not the first-to-market blockchain, beat by Ethereum and Cardano.

      Summary

      Investing in Algos is investing in the widespread adoption of the Algorand ecosystem and holding a stake in its governance. It is a value investment that pays dividends for merely “hodling” and will soon pay dividends for governance participation. The market for blockchains like Algorand is huge, it has traction with institutional clients, and is a proven innovator led by a team that combines technology business expertise with a Turing award-winning computer scientist’s creation. 

      Its market cap size (~$3 billion) is both concerning and comforting. A multi-billion dollar market cap is nothing to balk at, but why is it not ~$25 billion like Solana or ~$85 billion like Cardano? Is Algorand’s potential unrealized or is its market dominance already solidified? The answer will reveal itself as blockchain adoption grows; regardless, Algorand isn’t positioned as a pump-and-dump coin. It’s a tangible company that has made blockchain innovations, led by leaders in tech and cryptography, and continues to make decisions focused on its long-term adoption. Algorand is for the long-term investor, not the short-term speculator.

      About The Author

      Micah Casella

      is a digital asset investor with a background in traditional banking. Working on the inside, he has seen the benefit that a little digital disruption can have on the archaic finance industry. He sees blockchain and digital assets similarly modernizing other industries for the better.

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