Algorand is a blockchain platform for building decentralized applications, or DApps, as well as for creating new Algorand-based tokens.
Founded by Turing Award-winning computer scientist Silvio Micali, Algorand — whose native cryptocurrency trades under the ticker ALGO — was designed to solve the "blockchain trilemma." This phrase was coined by Ethereum co-creator Vitalik Buterin and refers to the ultimate goal of all blockchains to be three things — decentralized, scalable and secure. The "trilemma" is that networks generally have to compromise on one of the three.
Algorand aims to solve this problem with its "pure proof-of-stake" — or PPoS — consensus protocol that rewards anyone who holds ALGO when new blocks are minted, rather than just dedicated blockchain validators. This approach will change by 2022, with long-term staking required to gain a share of block rewards.
The blockchain's consensus mechanism randomly selects users to propose a new block to the network, as well as to vote on the proposed blocks. The more ALGO someone holds, the more likely they are to be selected.
ALGO holders are also selected secretly in the PPoS system. The idea is that bad actors will be unable to target or collude with the selected holders, especially as blocks are finalized in just a few seconds. The PPoS mechanism also means that the Algorand chain cannot be forked.
One of the main arguments in favor of using proof-of-stake consensus for network security is that the mechanism does not have the same energy requirements of proof-of-work blockchains.
Algorand promises to be a "carbon negative" network by creating a sustainability oracle that automatically purchases carbon credits to offset the pollution it creates.
Unlike most PoS blockchains, Algorand has no so-called "slashing" penalties. This means that it ignores validators guilty of misbehavior, which can include non-malicious activities such as connectivity problems.
The ALGO supply has a hard cap of 10 billion coins. The asset is used to pay for transactions on the Algorand network, as well as for participation in network security, as described above.
There are about 3.08 billion ALGO in circulation as of June 2021. The distribution schedule for the total supply of ALGO was supposed to have finished in 2024, but was extended to 2030.
A unique feature of Algorand's PPoS consensus mechanism is that it awards newly minted coins to everyone who owns at least 1 ALGO, rather than just the validators who produced the new block.
That will be phased out in 2022, and replaced with a Governor Rewards system that begins at the end of 2021. The new system requires a quarterly staking commitment of locked funds and voting on how ALGO is distributed.
Algorand is the brainchild of computer scientist Silvio Micali, an MIT professor and winner of the Association of Computing Machinery's A.M. Turing Award. This is often referred to as the "Nobel Prize of Computing" and other recipients have included World Wide Web creator Tim Berners-Lee.
With long-time collaborator and Turing co-winner Shafi Goldwasser, Micali is credited with helping "make cryptography a precise science," according to the Turing Award website.
From a cryptocurrency perspective, one of his most notable co-creations with Goldwasser is the concept of zero-knowledge proofs. This is a method of confirming the validity of information without revealing the information itself.