Algorand Blockchain In A Nutshell

Algorand’s technology features a set of high-performing Layer-1 blockchains that ensures security, scalability, complete transaction finality, built-in privacy, Co-Chains, and smart contracts that are indispensable in the advancement towards a Future-FI world.

What is Algorand?

Algorand, with its native currency, ALGO, is a public cryptocurrency blockchain and protocol. This cryptocurrency’s design is to bring about decentralization, scalability, and security among all participants. Algorand employs a permissionless proof-of-stake protocol. Thus, all ALGO holders are automatically qualified and eligible to participate in the full protocol functionalities, such as participating in decision making by proposing and voting on blocks, depending on the proportion to their stake, that is, how much ALGO they possess.

Value Model

Algorand exercises a core philosophy that circles the principle of “democratic” user participation. With this in mind, Algorand aims to advance its upgraded Proof-of-Stake and self-validating transactions. This protocol is contrary to the mining-based, Proof-of-Work design that Bitcoin and other existing cryptocurrencies employ.

The Algorand project has set specific goals contingent on the implementation and execution of its concept and technologies:

Algorand is promoted as an open-door platform, meaning anyone can join without seeking approval from an officially appointed gatekeeper authority. With the openness that Algorand champions, its developers hope to cultivate a healthy exchange of ideas among various user profiles.

Algorand operates on the same principle as open-source software, housing a whole range of actors from small business owners, individual investors, and even large corporations, and having access to a permissionless blockchain.

Furthermore, distinct from a blockchain with permissions that may hinder the users’ innovation potential, Algorand allows its users to freely offer new market applications regarding ownership records that are publicly accessible on the blockchain. This permission should help Algorand build wholly innovative markets that do not just imitate their real-world counterparts but bring something new to the table.

Blockchain Model

Building a “Borderless” Economy

Firstly, Algorand’s economic innovation lies in creating a blockchain that offers genuine appreciation and value to advancing the building of a “borderless” economy.

Algorand aims to make the bridge that links companies and organizations to relatively untapped markets. With Algorand’s technology featuring a decentralized, secure, scalable, and distributed ledger, this is made feasible. However, this would remain a vision and would count for nothing if the blockchain platform on which Algorand rests cannot perform adequately to keep abreast with this type of economy’s demands. Moreover, the Algorand blockchain provides immediate transaction finality, thereby eliminating the risk of forking or uncertainty based on its unique consensus algorithm.

Once implemented, each new block remains on the chain indefinitely, ensuring that all transactions on this blockchain are final. Upon the launch of the Algorand MainNet, the network reported a processing rate of 1,000 transactions per second, not far behind the performance level of mainstream payment networks such as VISA, which is reportedly able to handle an estimate of 1,700 transactions per second.

Recognizing Ownership Rights Over Assets

Secondly, at the core of Algorand’s Pure Proof-of-Stake protocol operation is recognizing one’s ownership rights over assets. This focus on ownership rights should make Algorand more readily acceptable in its planned financial industry implementation. Its Pure Proof-of-Stake is a unique consensus algorithm developed by Silvio Micali to succeed in this venture.

This Pure PoS also accounts for a significantly decreased demand for computing power as it can settle transactions within just a few seconds. Thus, the system can reach a consensus without necessitating the presence of a central authority. Plus, it has a tolerance for malicious users, as long as the bulk of the stakes are under honest users’ care.

Moreover, each user can read every block and has the opportunity to write a transaction in a future block. As established earlier, users can impact selecting a new block depending on the size of their stake in the system, that is, by the number of ALGO tokens they possess. Based on random selection principles, users are selected, allowed to propose blocks, and vote on block proposals, discreetly. No matter random, the likelihood of being chosen is still proportional to the user’s stake volume.

Distribution Model

As the project proves viable over time its distribution will highly depend on the use cases built by developers joining the blockchain platform (as smart contracts in specific industries are the key value proposition to the Algorand project)  To sustain its development bya  core team the more it will attract now investors that are willing to sustain that the more it will become viable over time. Thus in this phase it’s critical for Algorand to keep its core development team aligned, while involving a developer’s community and investors.

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Read Also:  Proof-of-stakeProof-of-workBitcoinDogecoinEthereumBlockchainBATMoneroRippleLitecoinStellarDogecoinBitcoin CashFilecoinTRON BlockchainChainlink, ETHO CoinUniswapPolkadotDfinity, NEO.

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Related Blockchain Business Frameworks


Web3 describes a version of the internet where data will be interconnected in a decentralized way. Web3 is an umbrella that comprises various fields like semantic web, AR/VR, AI at scale, blockchain technologies, and decentralization. The core idea of Web3 moves along the lines of enabling decentralized ownership on the web.

Blockchain Protocol

A blockchain protocol is a set of underlying rules that define how a blockchain will work. Based on the underlying rules of the protocol it’s possible to build a business ecosystem. Usually, protocol’s rules comprise everything from how tokens can be issued, how value is created, and how interactions happen on top of the protocol.

Hard Fork

In software engineering, a fork consists of a “split” of a project, as developers take the source code to start independently developing on it. Software protocols (the set of rules underlying the software) usually fork as a group decision-making process. All developers have to agree on the new course and direction of the software protocol. A fork can be “soft” when an alteration to the software protocol keeps it backward compatible or “hard” where a divergence of the new chain is permanent. Forks are critical to the development and evolution of Blockchain protocols.

Merkle Tree

A Merkle tree is a data structure encoding blockchain data more efficiently and securely. The Merkle tree is one of the foundational components of a Blockchain protocol.


The nothing-at-stake problem argues that validators on a blockchain with a financial incentive to mine on each fork are disruptive to consensus. Potentially, this makes the system more vulnerable to attack. This is a key problem that makes possible underlying blockchain protocols, based on core mechanisms like a proof-of-stake consensus, a key consensus system, that together the proof-of-work make up key protocols like Bitcoin and Ethereum.

51% Attack

A 51% Attack is an attack on the blockchain network by an entity or organization. The primary goal of such an attack is the exclusion or modification of blockchain transactions. A 51% attack is carried out by a miner or group of miners endeavoring to control more than half of a network’s mining power, hash rate, or computing power. For this reason, it is sometimes called a majority attack. This can corrupt a blockchain protocol that malicious attackers would take over.

Proof of Work

A Proof of Work is a form of consensus algorithm used to achieve agreement across a distributed network. In a Proof of Work, miners compete to complete transactions on the network, by commuting hard mathematical problems (i.e. hashes functions) and as a result they get rewarded in coins.

Application Binary Interface

An Application Binary Interface (ABI) is the interface between two binary program modules that work together. An ABI is a contract between pieces of binary code defining the mechanisms by which functions are invoked and how parameters are passed between the caller and callee. ABIs have become critical in the development of applications leveraging smart contracts, on Blockchain protocols like Ethereum.

Proof of Stake

A Proof of Stake (PoS) is a form of consensus algorithm used to achieve agreement across a distributed network. As such it is, together with Proof of Work, among the key consensus algorithms for Blockchain protocols (like the Ethereum’s Casper protocol). Proof of Stake has the advantage of security, reduced risk of centralization, and energy efficiency.

Proof of Work vs. Proof of Stake


Proof of Activity

Proof-of-Activity (PoA) is a blockchain consensus algorithm that facilitates genuine transactions and consensus amongst miners. That is a consensus algorithm combining proof-of-work and proof-of-stake. This consensus algorithm is designed to prevent attacks on the underlying Blockchain.

Blockchain Economics

According to Joel Monegro, a former analyst at USV (a venture capital firm) the blockchain implies value creation in its protocols. Where the web has allowed the value to be captured at the applications layer (take Facebook, Twitter, Google, and many others). In a Blockchain Economy, this value might be captured by the protocols at the base of the blockchain (for instance Bitcoin and Ethereum).

Blockchain Business Model Framework

A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.


Blockchain companies use sharding to partition databases and increase scalability, allowing them to process more transactions per second. Sharding is a key mechanism underneath the Ethereum Blockchain and one of its critical components. Indeed, sharding enables Blockchain protocols to overcome the Scalability Trilemma (as a Blockchain grows, it stays scalable, secure, and decentralized).


A decentralized autonomous organization (DAO) operates autonomously on blockchain protocol under rules governed by smart contracts. DAO is among the most important innovations that Blockchain has brought to the business world, which can create “super entities” or large entities that do not have a central authority but are instead managed in a decentralized manner.

Smart Contracts

Smart contracts are protocols designed to facilitate, verify, or enforce digital contracts without the need for a credible third party. These contracts work on an “if/when-then” principle and have some similarities to modern escrow services but without a third party involved in guaranteeing the transaction. Instead, it uses blockchain technology to verify the information and increase trust between the transaction participants.

Non-Fungible Tokens

Non-fungible tokens (NFTs) are cryptographic tokens that represent something unique. Non-fungible assets are those that are not mutually interchangeable. Non-fungible tokens contain identifying information that makes them unique. Unlike Bitcoin – which has a supply of 21 million identical coins – they cannot be exchanged like for like.

Decentralized Finance

Decentralized finance (DeFi) refers to an ecosystem of financial products that do not rely on traditional financial intermediaries such as banks and exchanges. Central to the success of decentralized finance is smart contracts, which are deployed on Ethereum (contracts that two parties can deploy without an intermediary). DeFi also gave rise to dApps (decentralized apps), giving developers the ability to build applications on top of the Ethereum blockchain.

History of Bitcoin

The history of Bitcoin starts before the 2008 White Paper by Satoshi Nakamoto. In 1989 first and 1991, David Chaum created DigiCash, and various cryptographers tried to solve the “double spending” problem. By 1998 Nick Szabo began working on a decentralized digital currency called “bit gold.” By 2008 the Bitcoin White Paper got published. And from there, by 2014, the Blockchain 2.0 (beyond the money use case) sprouted out.


An altcoin is a general term describing any cryptocurrency other than Bitcoin. Indeed, as Bitcoin started to evolve since its inception, back in 2009, many other cryptocurrencies sprouted due to philosophical differences with the Bitcoin protocol but also to cover wider use cases that the Bitcoin protocol could enable.


Ethereum was launched in 2015 with its cryptocurrency, Ether, as an open-source, blockchain-based, decentralized platform software. Smart contracts are enabled, and Distributed Applications (dApps) get built without downtime or third-party disturbance. It also helps developers build and publish applications as it is also a programming language running on a blockchain.

Ethereum Flywheel

An imaginary flywheel of the development of a crypto ecosystem, and more, in particular, the Ethereum ecosystem. As developers join in and the community strengthens, more use cases are built, which attract more and more users. As users grow exponentially, businesses become interested in the underlying ecosystem, thus investing more in it. These resources are invested back in the protocol to make it more scalable, thus reducing gas fees for developers and users, facilitating the adoption of the whole business platform.


Solana is a blockchain network with a focus on high performance and rapid transactions. To boost speed, it employs a one-of-a-kind approach to transaction sequencing. Users can use SOL, the network’s native cryptocurrency, to cover transaction costs and engage with smart contracts.


In essence, Polkadot is a cryptocurrency project created as an effort to transform and power a decentralized internet, Web 3.0, in the future. Polkadot is a decentralized platform, which makes it interoperable with other blockchains.


Launched in October 2020, Filecoin protocol is based on a “useful work” consensus, where the miners are rewarded as they perform useful work for the network (provide storage and retrieve data). Filecoin (⨎) is an open-source, public cryptocurrency and digital payment system. Built on the InterPlanetary File System.


BAT or Basic Attention Token is a utility token aiming to provide privacy-based web tools for advertisers and users to monetize attention on the web in a decentralized way via Blockchain-based technologies. Therefore, the BAT ecosystem moves around a browser (Brave), a privacy-based search engine (Brave Search), and a utility token (BAT). Users can opt-in to advertising, thus making money based on their attention to ads as they browse the web.

Decentralized Exchange

Uniswap is a renowned decentralized crypto exchange created in 2018 and based on the Ethereum blockchain, to provide liquidity to the system. As a cryptocurrency exchange technology that operates on a decentralized basis. The Uniswap protocol inherited its namesake from the business that created it — Uniswap. Through smart contracts, the Uniswap protocol automates transactions between cryptocurrency tokens on the Ethereum blockchain.

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