While it’s still the case that those with larger amounts of ALGO will have higher chances of being picked by the algorithm to Validate a block or to attest to the authenticity of proposed blocks, those with smaller stakes still get to participate and benefit from the rewards even if the chances of them getting picked by the algorithm are non-existent. Unlike other proof-of-stake blockchains, which are scalable but suffer from the gradual domination of the validation process by Validators with large stakes, Algorand gives all and sundry an opportunity to become Validators. The PPoS consensus mechanism is the backbone for Algorand’s scalability, security, and speed. How does the Algorand Pure Proof-of-Stake Mechanism Work? With Algorand, you benefit from the rewards of creating new blocks without having to Validate any blocks to earn it. The minimum a holder needs in order to participate in staking and share rewards is 1 ALGO, which means the barrier to entry is incredibly low while the passive income gains to be made can be quite significant. Whenever a new block is created and new ALGO coins are minted (which happens every 10 minutes or thereabouts), the reward is distributed among all ALGO holders.ĭue to this approach to staking, it is estimated that all ALGO coin holders can receive an APY of between 5% to 8% as their share of the staking rewards throughout the course of a year. The Algorand platform is designed to ensure the gains from the validation of new blocks are not restricted to a select number of people i.e. Unlike some other cryptocurrencies which support staking, holders of ALGO do not need to stake their ALGO or do anything to earn staking rewards. It is also the currency with which Validators are rewarded for creating new blocks. What is ALGO?ĪLGO is the native cryptocurrency of the Algorand platform. The levels of speed, security, and scalability provided by Algorand’s blockchain have made it a valuable alternative to Ethereum, to the extent that it has been adopted by the government of the Marshall Islands to host its Central Bank Digital Currency. By reserving tier two for the more complex smart contracts and dApps, the simpler transactions carried out on tier one can be executed rapidly because they will not be bogged down by more complex transactions. The creation of two tiers and the designation of separate functions to these tiers is the reason why Algorand can process transactions rapidly and achieve finality at the speeds it does. On Tier 2, the Algorand blockchain supports the more complex forms of smart contract and dApp development.On Tier 1 of the blockchain, which is the base layer, support is provided for smart contracts, asset creation, and atomic swaps.The two-tiered approach to its blockchain is a unique iteration adopted by Algorand which serves a functional purpose: The exorbitant nature of gas fees on the Ethereum at present have made alternatives like Algorand attractive to developers and traders. The Algorand network is an open-source and permissionless system with a decentralized blockchain that operates a two-tiered structure to facilitate rapid transactions (1,000 per second) and achieve what the platform calls “finality” (validating transactions in less than five seconds).Īlgorand’s two-tiered structure allows it to support a rapid payments infrastructure and at the same time host the development and scaling of decentralized applications (dApps). In this article, we will discuss how Algorand’s PPoS consensus protocol makes it stand out from the crowd and how these differences will influence your staking strategy. One major feature that Algorand leverages to solve the aforementioned issues is its ‘pure proof-of-stake’ (PPoS) consensus mechanism, which eliminates the barrier to entry for staking Algorand and allows everyone and anyone to become a Validator. The Algorand blockchain was built to deal with three common blockchain issues, namely, scalability, speed, and security while ensuring appropriate decentralization. The Algorand mainnet network and its associated currency, ALGO, were both launched in June of 2019. Algorand was founded in 2017 by professor Silvio Micali, a computer scientist at the Massachusetts Institute of Technology.
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