25. May 2022  • clock 7 min •  Daniel Mitrovsky

Algorand – Carbon Neutral Blockchain

The following article will introduce you to another cryptoasset from our dynamic portfolio – Algorand. The algorithm is a decentralised blockchain platform whose main goal is to solve the lingering problem of the blockchain trilemma.

History of Algorand

The idea to create a decentralised Algorand platform originated in 2017. It came from Silvio Micali, a professor at the Massachusetts Institute of Technology (MIT) and one of the winners of the prestigious annual Turing Award from the Computer Association for technical contributions to the world of computer science.

Silvio Micali has been involved in cryptography since the 1980s. He is one of the co-inventors of zero-knowledge proofs, pseudo-random generation, and verifiable random functions, which are currently at the core of many modern blockchain platforms, including Cardano, Dfinity, and Elrond.

Micali designed Algorand in collaboration with an internationally recognised team of researchers, mathematicians, cryptographers, and economists to ensure the network’s true decentralisation while providing the maximum possible security and scalability.

The Algorand network was officially launched in June 2019, and its blockchain already contains more than 20.7 million verified blocks.

What is Algorand?

Algorand is a decentralised open-source blockchain infrastructure whose primary goal is to solve the so-called blockchain trilemma.

Blockchain trilemma is a concept solving the challenges that developers face when designing individual blockchains. The trilemma problem is that developers are forced to compromise in one of three essential areas when creating blockchains:

  • Decentralisation – the creation of an autonomous blockchain system that does not rely on any central point.
  • Security – the ability of a blockchain system to defend against attacks, bugs, and other unforeseen issues and function as expected from it.
  • Scalability – The ability of a blockchain network to handle an ever-increasing number of users without time constraints and rising fees.

Algorand is a network that seeks to achieve equilibrium in all of the above areas. Additionally, Algorand is designed as a network focused on fast payments and near-instant completion of transactions.

Key Features

Key features that have made Algorand popular among users include:

  • Low fees – Algorand fees are calculated based on the size of the transaction, and the user can choose to increase the fee if they want the transaction to be confirmed as soon as possible. However, there is no gas fees concept in Algorand, as is the case with other smart contract platforms. The minimum transaction fee is 0.001 ALGO ($0.0006)
  • Transparency – The whole Algorand code is open-source, so it is accessible to anyone, anytime, anywhere.
  • High throughput – On Algorand, blocks are produced on average every 4.5 seconds, with each block containing up to 5,000 transactions. Therefore, the network can process up to 1,000 transactions per second. At the present load, the network processes an average of 11.1 transactions per second, according to the web portal.
  • Finality – Transactions on the Algorand network are final as soon as they are confirmed in the block, so there is no need to wait for multiple network confirmations.

Consensus Protocol

According to the founder of the Algorand network, the problem with many current blockchains is that when using traditional consensus algorithms, blockchains must sacrifice at least one of the three key features for individual networks to work effectively. Silvio Micali and his team decided to solve this problem by inventing a new consensus protocol called Pure Proof-of-Stake (PPoS), which they subsequently implemented into the Algorand protocol.

PPOS is built on the basis of a two-phase block production process consisting of proposing and voting. The protocol in each block round uses the verifiable random function to select the block proposer and a group of voting commissions that approve the proposed block. The block proposer and the groups of voting commissions are selected at random from all ALGO token holders (i.e. the accounts on which the tokens are held). The probability of selection is directly proportional to the holder’s share of the total number of ALGO tokens.

The block proposal is followed by a voting process in which the network nodes check and confirm that there are no double or excessive spending transactions in the block. If the commission agrees that everything is fine, the block is added to the blockchain. If a problem occurs in the block or malicious activity is detected, the network goes through a recovery process in which the faulty block is dropped, and the process of selecting a new block proposer begins.

It is the simple process of restoration and discarding the wrong block that has often been the target of broader criticism. This is because the network does not use any mechanism to punish bad block proposers, as is common in other blockchain networks. Instead, the network goes through a simple recovery process that simply discards the faulty block. Although this system supports the speed and efficient scalability of the network, it does not penalise the designers of faulty blocks in any way.

Source: Binance

Staking in the case of Algorand works particularly efficiently. Basically, it is enough just to keep ALGO coins in your wallet, and the coins are automatically staked without the need to perform any further operations. The only specificity is that the user’s rewards become part of the total balance but do not automatically participate in the staking process.

Accumulated rewards become part of staking only if the user performs an operation with them – for example, once in a while, sends them to another address and back.

Smart Contracts in the Algorand Network

Decentralised finance is currently the fastest-growing sector of the global blockchain ecosystem. However, there is still room for improvement in sophisticated decentralised applications, which already allow easy sending and receiving of money and much more complex functions of loan return, insurance, or asset tokenisation.

Algorand belongs to protocols that have the functionality of smart contracts. Smart contracts in the Algorand network are contracts that can be controlled from any network node in the blockchain once deployed in the protocol. After the contract is deployed, its specification is transferred to a specific application which gets its ID assigned. A specific type of transaction then triggers applications called an Application Call Transaction.

Smart contracts are usually written in TEAL, the syntax of a programming language to specify a program that is eventually converted to bytecode to AVM. For easier understanding, in the case of the Ethereum network, smart contracts are written in Solidity language and converted into bytecode for execution via EVM (Ethereum Virtual Machine). However, it is also possible to write smart contracts in Algorand in Python using the PyTeal library or Reach, similar to JavaScript.

In the case of Algorand, the changes in the state of the network are recorded by the so-called Algorand Virtual Machine (AVM) that runs programs associated with transactions from individual network nodes.

Forkless Technology

The term fork characterises a situation in which one blockchain branches into two separate chains. In practice, branching can occur, for example, if part of the community does not want to receive new updates or when significant protocol changes are not backwards compatible with an older version of the software client. Additionally, a fork also occurs when two miners in the network mine a new block at almost the same time and the information about the extracted blocks has not yet managed to be distributed among all network nodes. To maintain the continuity of the blockchain, one of the branches always gets abandoned and the transactions that are part of it become invalid.

The PPoS consensus algorithm uses a collective voting mechanism to verify blocks, ensuring immediate finality of transactions and eliminating the possibility of foreclosure. In the Algorand network, it is never possible to add two blocks to a blockchain at once because only one block can always reach the required limit of votes from selected voting commissions. In practice, after each block is verified, users can be immediately sure that the block containing their transactions will be part of the blockchain forever. Thanks to this technology, there is no need to wait for several block confirmations for transactions in the Algorand network. In Bitcoin’s blockchain, it is often necessary to have at least three block confirmations before the resources are credited to the wallet.

Green Blockchain

In the ecosystem of cryptoassets, Algorand is considered to be one of the most effective and ecological blockchains. Since April 2021, the platform has even become carbon-negative, which means that it buys more carbon credits than its actual carbon emissions.

Obrázok, na ktorom je text, laser

Automaticky generovaný popis

Source: Twitter

Algorand Foundation

The mission of the Algorand Foundation is to create a decentralised and borderless global economy based on Algorand technology. The Algorand Foundation assists in this goal by taking responsibility for project tokenomics management and overseeing decentralised project management as well as a healthy and prosperous ecosystem.

An important part of the vision are also the so-called Algorand ambassadors. They help build local communities to spread knowledge and understanding about the development of this blockchain ecosystem around the world. The Algorand Foundation has created a global program for these ambassadors for their work in creating national and international communities. The foundation also rewards ambassadors for creating educational content for ecosystem development.

Algorand Ecosystem

The most popular projects from the Algorand ecosystem include:

  • AlgoFund – A project to support innovative and revolutionary projects built on the Algorand platform.
  • Kaafila – Decentralised media and education project based on Algorand technology and IPFS.
  • Openfabric -An ecosystem for creating and connecting artificial intelligence applications.
  • Folks Finance – A protocol aimed at providing decentralised loans, in which, among other things, it is possible to deposit free funds and collect interest in return.
  • CryptoTrees – CryptoTrees uses a carbon-neutral Algorand blockchain to plant trees and save forests around the world. Users can obtain tokens through games and initiatives while contributing to the fight against climate change.

Native Network Token – ALGO

The native currency of the Algorand network is the ALGO coin, which is the cornerstone of the entire infrastructure. Rewards in the Algorand network are distributed to all ALGO coin holders instead of only network validators collecting the rewards. This means that all ALGO coin holders can collect rewards of approximately 7.5% per year.

The maximum number of ALGO coins is fixed at 10 billion. There are currently 7.1 billion coins in circulation, with up to 2.5 billion coins owned by the Algorand Foundation and Algorand Inc.

Invest With Fumbi Today

If you are considering investing in cryptocurrencies, Fumbi is here for you. Our algorithm-administered portfolio accurately tracks the growth of the entire cryptocurrency market. Fumbi is the first of its kind to offer cryptocurrencies to the general public, even at small deposits. Investing in cryptocurrencies through Fumbi is very easy and minimises risks. 

You can start with a deposit of just €50.


Did you come across a term you didn’t understand? Don’t worry. All essential terms regarding cryptocurrencies are in our Fumbi Dictionary.

Avatar photo

Daniel Mitrovsky


Share with others

More articles with Fumbi