The Marshall Islands is a country with a population of around 50 000 people dispersed over a thousand different islands in a remote portion of the Pacific Ocean. Now the country is strongly reliant on cross-border trade and finance, and the system’s intricacies can make it difficult for individuals to obtain certain goods and financial services promptly. The federal government of the marshall islands has adopted a digital currency named SOV.
Sov is powered by algorand and cryptocurrency. Experts believe that this move from the Marshall Islands will help curb high transaction costs, making it easier to comply with international partners and safeguard them against inflation. So what is algorand? What’s so special that made an entire country accepted?
In this article, we are going to explain what algorand is, and how it works and at the end of this article, we’ll get into the tokenomics so that you can decide if it’s worth investing in a quick side fact, the marshall islands is the first country to adopt A national digital currency algorand is a decentralized network designed to solve the blockchain trilemma of achieving speed security and decentralization all. At the same time, algorand was created in 2017 by a team led by Silvio McCauley, a computer scientist specializing in cryptography and a professor at MIT. He has also received numerous awards for his research, including the famous Turing award in 2012, for his research in cryptography, which, by the way, is similar to a Nobel prize in the field of computer science.
3. Designed as Blockchain
So right off the bat, we know this guy is smart. The algorand project is designed to be a blockchain similar to Ethereum, but with faster transactions and a strong focus on achieving near-instant completion, which means processing up to 1 000 transactions per second and finalizing transactions. In less than five seconds.
4. Proof of Consensus
The algorand blockchain uses something fancy that the creator calls a pure proof of consensus mechanism and it gives validator rewards to all holders of the algo cryptocurrency. Now, in a normal proof-of-stake mechanism, validators must set up a special computer to be able to verify new blocks and also lock up their coins to become a validator. Pure proof of stake is a little different. Now, this is kind of cool, and here’s what it means you do not necessarily need to stake. Your algo coins to earn more algo all algo coin holders receive the equivalent of 4 to six percent apr of the number of algo coins simply by holding their coins. This means everyone’s wallet increases at a rate of around four to six percent per year.
5. Decentralized Applications
If you didn’t know, algorand uses smart contracts, and this means it’s capable of having decentralized applications which are also known as dabs. If you don’t know what smart contracts or daps are go check out our articles on them as they’re quite helpful to beginners. The increase in gas fees on the Ethereum network has led many dapp developers to find other networks to build on, and some of them have been turning to algorand as an Ethereum alternative.
6. Algorand Standard Asset Protocol
Algorand has this thing called the algorand standard asset protocol. That’s a little similar to the erc20 protocol on Ethereum but is a standard for creating and deploying new tokens on the network. The ASA differs from the erc20 protocol because, instead of writing the smart contract code yourself, you actually fill out a form to create a new asset and then build smart contracts around that asset, which removes certain security flaws.
7. Create a Token
Using these standards, we can create a token similar to other networks too, for example, tether and usdc are two tokens that have been created and transferred to the algorand blockchain. Another thing to mention here is that, as central banks continue to research networks to host their central bank, digital currencies on algorand have become a viable option and have been chosen to host the marshall island cbdc, which we mentioned at the beginning of this article. Algorand has announced that 16 other cbdc projects were in the works a few months ago.
8. 2 Layer Blockchain
Getting a little more technical. I want to get into the structure of the algorand protocol, so algorand has a unique two-layer blockchain structure. The base layer, layer 1 supports smart contracts, tokens, and even nft creation. Most of these easier processes take place at layer 1 of the algorithm blockchain, which helps ensure security and compatibility. However, complex smart contracts may take up more space, may need more computing power, or might just be too complex. They are reserved for layer 2, which is verified off the main chain.
Now from time to time, snapshots of layer 2 are given back to the layer. 1 to check in with this allows algorand to scale while also being secure. Now you might be wondering about many of Ethereum's layers, 2 scaling solutions are secondary blockchains.
So how does algorand achieve this? In short, algorand randomly selects a committee of nodes already on the network, which means validators that are already validating, and they select them to execute these more complicated smart contracts as they are needed. So this way the algorithm blockchain has built-in scalability. This is a unique solution to the scalability trilemma.
10. Algorand Foundation
The next things I want to talk about are the algorand foundation and the algorand INC. Algorand is a new blockchain with two supporting communities. The non-profit community organization called the algorand foundation and the grant inc. The foundation focuses on protocol governance and open source development, while the inc helps with the enterprise adoption of the technology. The foundation has also supported a lot of training and education in the algorand development. Specifically, a few universities around the world, namely MIT and UC Berkeley, have adopted some classes specifically on the algorand blockchain other than the many sponsored blockchain events, courses, certifications, and hackathons.
That they’ve helped with the foundation and also have two accelerator programs, algorand Asia, and algorand Europe is two projects in this accelerator program that have helped developers create new projects. It's also worth noting that the layer one blockchain is developed and improved by algorand inc, not the foundation.
11. Algorand INC
The INC is open source and allows anyone to contribute new ideas to the algorand blockchain. One last thing I want to share before we get into the tokenomics of algorand is that the blockchain is actually what we call carbon negative. This means it not only doesn’t add to the global carbon problem, but it is also actively working on reducing it, since the consensus mechanism is a variation of proof of stake, the carbon emissions are super low anyways, but the algorand inc is also donating money to climate Trade, a company, that’s a leader in creating solutions to offset carbon emissions. I thought this was a great pr stunt.
Moving on, let’s get into tokenomics. Algo is the algorithm’s native coin and is used to make all transactions on the network. Since algorand is proof of stake. This means that currently, algo is inflationary, since new coins are minted and then given to stakers there’s also a maximum supply of 10 billion algo coins. But right now, there are only around 6.15 billion algo circulating the distribution of the coins is a little confusing, but this chart helps clear some things up, as you can see, the algorand inc currently has a large amount of algo, which some people say makes this protocol centralized In the short term, I do want to clarify this, though, that the network is decentralized itself and one person owning a large majority of the coins does not take away from the benefits of decentralization. I think the fear of most investors is regarding that this one person who holds a large majority of coins could sell them all at once, causing havoc around the price. Well, it seems to me that the decisions of algorand inc certainly aren’t made by one person.
13. Governance System
The algorithm project also has a unique governance system where any algo holder can vote on changes and, in fact, earn rewards by voting to become a governor in the algo ecosystem. All you have to do is commit your coins for a 90-day voting period, which is a little bit different than other staking voting mechanisms. One of the last things I’d like to say about algorand is that it is requested in the comment section fairly often meaning that there’s a need for people to better understand
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