12. July 2022  • clock 3 min •  Daniel Mitrovsky

Elrond – A New Era of The Digital Economy

We are going to introduce another cryptoasset from our dynamic portfolio – Elrond. Elrond is a highly scalable blockchain that has brought several innovations to the cryptocurrency ecosystem.

History of Elrond

The idea of creating a new, highly scalable protocol dates back to 2019 when the team behind the Elrond project published a technical white paper called Elrond – A Highly Scalable Public Blockchain via Adaptive State Sharding and Secure Proof of Stake.

This document describes the creation and all technical specifications related to the new blockchain architecture, which is optimized to process a high number of transactions per second through Adaptive Sharding technology and the new Secure Proof-of-Stake (SPoS) consensus algorithm.

In its beginnings, Elrond was designed and created by a team of 13 developers with experience from companies such as Microsoft, Google, Intel and NTT Data. The project is headed by Beniamin Mincu, a Romanian developer and technological innovator considered one of the biggest blockchain pioneers in Europe. Mincu previously worked as a product and business developer in the NEM protocol. He later founded his own investment fund, MetaChain Capital, focused on investing and supporting new and innovative blockchain platforms.

The Elrond network is currently one of the platforms that, due to its specific and unique design, arouses the ever-growing interest of investors. With a market capitalization of more than 1.2 billion dollars, Elrond is part of the top 50 cryptocurrencies on the market.

What Is Elrond?

Elrond is generally characterized as a distributed compute protocol designed to provide high transaction throughput and near-instant execution of smart contracts compared to alternative smart contract platforms.

Developers on the Elrond network use Rust, C or C++ programming languages to write smart contracts and create new decentralized applications, through which developers can offer various decentralized and community-driven products and services to investors and the general public.

Key Features

Elrond’s key features include:

  • Full Decentralization – As Elrond is a decentralized blockchain platform, it does not need to rely on any third party that could be a potential point of failure.
  • Robust protection – Through Elrond, it is possible to carry out fast and, most importantly, secure transactions.
  • High scalability – Elrond can currently process up to 15,000 transactions per second at $0.001 per transaction fee, making it directly competitive with centralized digital payment systems such as Visa or Mastercard.
  • Efficiency – The Elrond network can provide all network services with minimal power and computing requirements.
  • Efficient data storage – Elrond works with the Crust Network’s decentralized storage, giving developers building on the Elrond network access to more than 2,000 petabytes (2,000,000 TB) of storage space on more than 7,000 IPFS (InterPlanetary File System) servers spread across the world.
  • Interoperability – The Elrond network was built to easily and securely interact with external services and other blockchain platforms.


Sharding was used for the first time in database systems as a method of horizontally dividing the database into several smaller parts called shards to distribute data between different computers in the network.

In the world of blockchain technology, the term sharding represents a scaling technique used to divide network state and transaction processing so that each node processes only a portion of all transactions in the network.

Sharding enables efficient transaction processing, provided that there is a sufficient number of nodes in the network that verify each transaction in parallel, thus ensuring high reliability and security of the network. Dividing the blockchain into multiple smaller parts through the parallelization mentioned above allows the processing of many more transactions, thereby significantly improving network throughput.

Today, sharding is one of the most effective tools for increasing throughput because the network can scale even more efficiently with the growing number of users. This feature is also called horizontal scaling.

In practice, there are three main types of sharding:

  • Network sharding – solves the way nodes are grouped into shards and can be used to optimize communication because messages within a shard are much faster in practice than the propagation of messages within the entire network.
  • Transaction sharding – solves the way in which transactions are assigned to individual shards where they will be further processed.

  • State Sharding – In the case of traditional blockchains, each node stores all information about the state of the network. When state sharding is used, individual nodes store only partial information about the state of the network (they maintain only part of the state of the network). If entities from two different shards carry out transactions with each other, executing this transaction will require a state change (update) in both of these fragments.

Source: Medium

Adaptive State Sharding

The team behind the Elrond platform created the so-called Adaptive State Sharding, which dramatically reduces the memory requirements for individual network nodes and simultaneously allows the network to scale efficiently.

The design of the Elrond network’s adaptive sharding was created as a compromise between network, transactional and state sharding. By combining the advantages of the individual methods, the developers managed to create a protocol that can not only scale efficiently but also communicate securely inside the created shards.

Thus, adaptive sharding is a database partitioning technique that enables horizontal scaling by automatically moving data between servers as system load increases or decreases.

Source: Researchgate

In the case of the Elrond network, adaptive sharding works by dividing nodes into network shards, with the total number of shards dynamically adjusting based on the total number of nodes in the network.

For example, if during network epochs, the number of nodes in the network increases above a certain threshold and the average number of transactions also exceeds a specific upper limit set by the protocol, the number of network shards will increase to optimize scaling. The same applies to the opposite – the number of fragments decreases with a decreased activity in the network.

SPoS Consensus Protocol

Elrond uses a so-called Secure Proof-of-Stake (SPoS) to achieve network consensus, which requires a minimal amount of computing power to achieve network consensus. It was developed to improve and perfect the Proof-of-Stake algorithm. SPoS brings an innovative approach to how validator nodes are chosen to reach a consensus from individual shards and also defines the steps that validators perform in the validation process.

Since the Elrond network does not operate as one complex chain but is spread over several separate shards, SPOS selects validating nodes as part of the validation process to create blocks only within a particular shard and not across the entire network as is the case with traditional Proof-of-Stake blockchains.

The entire consensus-building system is based on two categories of nodes – the so-called Block Proposers and Block Validators. To reach the final state of the network, validators from each shard must check the work of the block proposers and synchronize with other shards in the network. Block validators protect the network from abuse and control block proposers. To ensure the trustworthiness of transactions, validators are moved to other shards every 24 hours to prevent unwanted malicious activity.

SPoS selects validator nodes to reach consensus based on the amount of EGLD tokens staked. Furthermore, each block validator has its own rating score derived from its activity. If any verifier has a rating score that is too low, a situation may arise in which the node could lose its function as a verifier and simultaneously lose part of the staked EGLD tokens.

Elrond WASM Virtual Machine

The execution of smart contracts is one of the most important functions of smart contract platforms, which try to bring their users the best possible user experience at the lowest possible costs.

The Elrond Virtual Machine can be defined as one complex canonical computer whose state is agreed upon by all participants of the Elrond network. It is essentially a single network point whose state is maintained by thousands of nodes worldwide and which executes smart contracts.

The Elrond Virtual Machine is based on the WebAssembly (WASM) standard, which means it can execute contracts written in any programming language.

Source: Elrond

Smart contracts can call each other (call action) using the virtual machine’s asynchronous API. Since Elrond is a network divided into multiple smaller shards, there may be a situation where the execution of a smart contract will lead to a call to execute another smart contract stored in another shard. Elrond WASM can effectively read smart contracts in different programming languages stored in different shards, ensuring the continuity and smooth execution of contracts throughout the system.

Elrond Ecosystem

The Elrond network ecosystem currently consists of more than 120 projects in the fields of decentralized finance and NFTs, which include, for example:

  • Maiar DEX – The largest decentralized exchange created directly by the developers behind the Elrond platform. It is the first decentralized exchange in the Elrond network.
  • Trust Market – The first and currently the largest NFT marketplace on the Elrond blockchain.
  • Elrond Apes – A collection of 10,000 unique and randomly generated monkeys in 3D NFT form.
  • Knights of Cathena – A tactical PVP game based on blockchain technology.
Source: Decentralizedfinance

Network Native Token – EGLD

The native token of the Elrond network is the EGLD token, which users use primarily for staking and block validation activities, for which validators collect rewards in the form of new EGLDs. Additionally, the EGLD token is used to pay transaction fees related to the execution of smart contracts and to vote on the Elrond network’s governance model.

There are currently over 22 million EGLD tokens in circulation, with the maximum amount of coins in circulation never exceeding 31,415,926 EGLD.

You can start with a deposit of as little as €50.


Did you come across a term you didn’t understand? Don’t worry. You can find all essential terms regarding cryptocurrencies in our Fumbi Dictionary.

Avatar photo

Daniel Mitrovsky


Share with others

More articles with Fumbi