Algorand (cryptocurrency platform)

Last updated
Algorand
Algorand mark.svg
CodeALGO
Development
Original author(s) Silvio Micali
White paper https://arxiv.org/abs/1607.01341
Initial releaseApril 2019
Code repository https://github.com/algorand
Development statusActive
Written in Go
Developer(s) Algorand, Inc.
Website https://www.algorand.com/
Ledger
Ledger startJune 2019
Block time4.5 sec
Block explorer https://algoexplorer.io/
Circulating supply6,131,888,224 Algo (as 05th Oct 2021)
Supply limit10,000,000,000 Algo

Algorand is a blockchain-based cryptocurrency platform that aims to be secure, scalable, and decentralized. [1] The Algorand platform supports smart contract functionality, [2] and its consensus algorithm is based on proof-of-stake principles and a Byzantine Agreement protocol. [1] [3] [4] Algorand's native cryptocurrency is called Algo. [2]

Contents

History and development

The development of the Algorand platform is overseen by Algorand, Inc., a private corporation based in Boston. It was founded in 2017 by Silvio Micali, a professor at MIT. [5] [6]

The Algorand test network was launched to the public in April 2019, [7] and the main network was launched in June 2019. [8]

Design

Consensus algorithm

In the Algorand network, the consensus algorithm is permissionless, and all users who hold an Algo balance can participate. The consensus algorithm works in rounds, with each round made up of two phases. The first phase is the block proposal phase, during which blocks are proposed as the new block; the second phase is the block finalization phase, during which a vote on the proposed blocks is taken. [1]

The first phase (the block proposal phase) uses proof of stake principles. During this phase, a committee of users in the system is selected randomly, though in a manner that is weighted, to propose the new block. The selection of the committee is done via a process called “cryptographic sortition.” In cryptographic sortition, there is not a central authority that designates who the members of the committee are and then communicates that information across the network; rather, each user determines whether they are on the committee or not by locally executing a Verifiable Random Function (VRF). If the VRF indicates that the user is chosen, the VRF returns a cryptographic proof that can be used to verify that the user is on the committee.

Only a given user knows whether they are on the committee, unless/until they send a message to other users indicating that they are. The likelihood that a given user will be on the committee is influenced by the “stake” (i.e., the number of Algo tokens) held by that user, in proportion to the size of the user's stake. [1] [3] [4]

After determining that they are on the block selection committee, a user builds a proposed block and disseminates it to the network for review/analysis during the second phase. The user includes the cryptographic proof from the VRF in their proposed block, which demonstrates that the user was in fact an eligible committee member. [3] [4]

In the second phase (the block finalization phase), a Byzantine Agreement protocol (called “BA⋆”) is used to vote on the proposed blocks. In this second phase, cryptographic sortition as described above is again used to determine a committee; this second-phase voting committee will be different from the committee from the first phase, though it is possible that there could be overlap in membership between the two committees. When users have determined that they are in this second-phase voting committee, they analyze the proposed blocks they have received (this will include verifying that they were in fact proposed by users from the first-phase committee) and vote on whether any of the blocks should be adopted or not. If the voting committee achieves consensus on a new block, then the new block is disseminated across the network as the new block. [1] [3] [4]

The Algorand consensus algorithm possess the characteristic of “player replaceability”; i.e., as noted above, membership in the different committees (in both the block proposal and block finalization phase) changes every time the phase is run. This protects users against targeted attacks, as an attacker will not know in advance which users are going to be in a committee. [1]

Algorand is resilient against arbitrary partitions, also known as asynchronous safety. Two different blocks cannot reach consensus in the same round, i.e. it is mathematically guaranteed that Algorand will not fork. [9] The asynchronous safety has also been formally verified by Runtime Verification Inc. and compared to their previous verification models, the model also accounts for timing issues and adversary actions, e.g., when the adversary has control over message delivery. [10]

Smart contracts

Algorand supports two types of smart contracts: stateless smart contracts and stateful smart contracts. Stateless smart contracts are intended for the purpose of authorizing transactions; stateful smart contracts store data persistently and can be used for broader purposes. [2]

Algorand smart contracts can be written in a programming language called Transaction Execution Approval Language (TEAL). TEAL is a bytecode-based stack language, with a programming interface for Python that is called PyTeal. While some smart contract programming models are Turing-complete (for example, Solidity is Turing-complete), the Algorand smart contracts model is not Turing-complete. The Algorand smart contracts model does support transaction atomicity. [2]

In some other blockchain systems, smart contracts are used to define user-defined assets; for example, in Ethereum, smart contracts implement the ERC20 and ERC721 interfaces to define new assets. In Algorand, in contrast, user-defined assets are supported natively, and Algorand smart contracts are able to manipulate user-defined assets (for example, by transferring ownership of given amounts of them) using built-in transaction types. [2]

Use cases

In March 2021, the Società Italiana degli Autori ed Editori (SIAE), the Italian copyright collecting agency, uploaded over four million non-fungible tokens (NFTs) to the Algorand blockchain, representing copyrights in works produced by SIAE's members. [11]

In February 2021, Ditto Music announced the launch of a project on the Algorand network called Opulous; Opulous will be a decentralized finance (DeFi) loan pool, where loans will be guaranteed against artists’ past streaming revenues and artists’ copyrights will be held as collateral. [12]

In June 2020, Republic, a company that facilitates crowdfunding campaigns for startups and small-to-medium businesses (SMBs), issued a profit-sharing token on the Algorand platform. [13]

In February 2020, PlanetWatch, a spinoff of CERN, announced a program involving the deployment of a global network of air quality sensors, where the sensors record measurement data onto the Algorand blockchain. [14]

In 2020, two stablecoins, Tether and USD Coin (USDC), were launched on the Algorand network. [15] [16]

Related Research Articles

Proof of work (PoW) is a form of cryptographic zero-knowledge proof in which one party proves to others that a certain amount of a specific computational effort has been expended. Verifiers can subsequently confirm this expenditure with minimal effort on their part. The concept was invented by Cynthia Dwork and Moni Naor in 1993 as a way to deter denial-of-service attacks and other service abuses such as spam on a network by requiring some work from a service requester, usually meaning processing time by a computer. The term "proof of work" was first coined and formalized in a 1999 paper by Markus Jakobsson and Ari Juels. Proof of work was later popularized by Bitcoin as a foundation for consensus in permissionless blockchains and cryptocurrencies, in which miners compete to append blocks and mint new currency, each miner experiencing a success probability proportional to their computational effort expended. PoW and PoS are the two best known Sybil deterrence mechanisms. In the context of cryptocurrencies they are the most common mechanisms.

In cryptography, a verifiable random function (VRF) is a public-key pseudorandom function that provides proofs that its outputs were calculated correctly. The owner of the secret key can compute the function value as well as an associated proof for any input value. Everyone else, using the proof and the associated public key, can check that this value was indeed calculated correctly, yet this information cannot be used to find the secret key.

A smart contract is a computer program or a transaction protocol which is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the reduction of need in trusted intermediators, arbitrations and enforcement costs, fraud losses, as well as the reduction of malicious and accidental exceptions.

Proof of stake (PoS) protocols are a class of consensus mechanisms for blockchains that work by selecting validators in proportion to their quantity of holdings in the associated cryptocurrency. Unlike a proof of work (PoW) protocol, PoS systems do not incentivize extreme amounts of energy consumption. The first functioning use of PoS for cryptocurrency was Peercoin in 2012. The biggest proof-of-stake blockchain by market capitalization is Cardano.

Ethereum Open-source blockchain computing platform

Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether is the native cryptocurrency of the platform. Amongst cryptocurrencies, Ether is second only to Bitcoin in market capitalization.

Nxt

NXT is an open source cryptocurrency and payment network launched in 2013 by anonymous software developer BCNext. It uses proof-of-stake to reach consensus for transactions—as such there is a static money supply. Unlike Bitcoin, there is no mining. NXT was specifically conceived as a flexible platform around build applications and financial services, and serves as basis for ARDR (Ardor), a blockchain-as-a-service multi-chain platform developed by Jelurida, and IoTeX (cryptocurrency) the current steward of Nxt as of 2021. NXT has been covered extensively in the "Call for Evidence" report by ESMA.

Blockchain Distributed data store for digital transactions

A blockchain is a growing list of records, called blocks, that are linked together using cryptography. It's also described as a "trustless and fully decentralized peer-to-peer immutable data storage" that is spread over a network of participants often referred to as nodes. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. The timestamp proves that the transaction data existed when the block was published in order to get into its hash. As blocks each contain information about the block previous to it, they form a chain, with each additional block reinforcing the ones before it. Therefore, blockchains are resistant to modification of their data because once recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.

Hyperledger is an umbrella project of open source blockchains and related tools, started in December 2015 by the Linux Foundation, and has received contributions from IBM, Intel and SAP Ariba, to support the collaborative development of blockchain-based distributed ledgers.

Proof of space (PoS) is a type of consensus algorithm achieved by demonstrating one's legitimate interest in a service by allocating a non-trivial amount of memory or disk space to solve a challenge presented by the service provider. The concept was formulated in 2013 by Dziembowski et al. and by Ateniese et al..

Firo (cryptocurrency) Cryptocurrency

Firo, formerly known as Zcoin, is a cryptocurrency aimed at using cryptography to provide better privacy for its users compared to other cryptocurrencies such as Bitcoin.

Cardano is a public blockchain platform. It is open-source and decentralized, with consensus achieved using proof of stake. It can facilitate peer-to-peer transactions with its internal cryptocurrency, Ada.

NEO (cryptocurrency) Cryptocurrency

Neo is an open-source decentralized blockchain decentralized application platform founded in 2014 by Da HongFei and Erik Zhang. Since its rebranding to Neo from Antshares in 2017, the project's vision is to realize a "smart economy" by utilizing blockchain technology and smart contracts to issue and manage digitized assets.

A non-fungible token (NFT) is a unique and non-interchangeable unit of data stored on a digital ledger (blockchain). NFTs can be used to represent easily-reproducible items such as photos, videos, audio, and other types of digital files as unique items, and use blockchain technology to establish a verified and public proof of ownership. Copies of the original file are not restricted to the owner of the NFT, and can be copied and shared like any file. The lack of interchangeability (fungibility) distinguishes NFTs from blockchain cryptocurrencies, such as Bitcoin.

A blockchain is a shared database that records transactions between two parties in an immutable ledger. Blockchains document and confirm pseudonymous ownership of all existing coins within a cryptocurrency ecosystem at any given time through cryptography. After a transaction is validated and cryptographically verified by other participants or nodes in the network, it is made into a "block" on the blockchain. A block contains information about the time the transaction occurred, previous transactions, and details about the transaction. Once recorded as a block, transactions are ordered chronologically and cannot be altered. This technology rose to popularity after the creation of Bitcoin, the first application of blockchain technology, which has since catalyzed other cryptocurrencies and applications.

Tezos Decentralized blockchain network

Tezos is a decentralized, open-source proof of stake blockchain network that can execute peer-to-peer transactions and serve as a platform for deploying smart contracts. The native cryptocurrency for the Tezos blockchain is the tez which has the symbol XTZ. As of August 2021, there are about 400 block validating nodes on the Tezos network.

Tron (cryptocurrency) Open-source blockchain computing platform

TRON is a decentralized, open-source blockchain-based operating system with smart contract functionality, proof-of-stake principles as its consensus algorithm and a cryptocurrency native to the system, known as Tronix (TRX). TRON was established in March 2014 by Justin Sun, former chief representative and advisor for Ripple in Greater China and current CEO of TRON Fondation and Rainberry. He is also the founder and current CEO of mobile social app Peiwo. The development of the project is overseen and supervised by the TRON Foundation since 2017, a non-profit organization which based in Singapore and was established in the same year. It is originally an Ethereum-based ERC-20 token, which switched its protocol to its own blockchain in 2018.

Bancor Protocol is a standard for decentralized exchange networks used to allow for the automated conversion of cryptocurrency tokens into other tokens, including across blockchains, without the need for an order book or counterparty to facilitate the exchange. Bancor invented the world’s first blockchain-based automated liquidity pool, or automated market maker (AMM) called a Smart Token, a digital currency with an embedded converter that allows it to be issued or exchanged automatically for any token in its network. Bancor Network consists of all the different tokens utilizing the Bancor Protocol and connected through BNT, the Bancor Network Token, which serves as the hub token for the network through which any token can be converted into any other token.

Decentralized Finance is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments, and instead utilizes smart contracts on blockchains, the most common being Ethereum. DeFi platforms allow people to lend or borrow funds from others, speculate on price movements on a range of assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts. DeFi uses a layered architecture and highly composable building blocks. Some DeFi applications promote high interest rates but are subject to high risk. By October 2020, over $11 billion was deposited in various decentralized finance protocols, which represented more than a tenfold growth during the course of 2020. As of January 2021, approximately $20.5 billion was invested in DeFi.

Solana is a public blockchain platform. It is open-source and decentralized, with consensus achieved using proof of stake and proof of history. Its internal cryptocurrency is SOL. Bloomberg considers Solana to be "a potential long-term rival for Ethereum". Like Ethereum, Solana can interact with smart contracts.

Proof of identity (PoID) is a consensus protocol for permission-less blockchains, in which each uniquely identified individual receives one equal unit of voting power and associated rewards. The protocol is based on biometric identification, humanity identification parties and additional verification parties.

References

  1. 1 2 3 4 5 6 Lepore, Cristian; Ceria, Michela; Visconti, Andrea; Rao, Udai Pratap; Shah, Kaushal Arvindbhai; Zanolini, Luca (14 October 2020). "A Survey on Blockchain Consensus with a Performance Comparison of PoW, PoS and Pure PoS". Mathematics. 8 (10): 1782. doi: 10.3390/math8101782 .
  2. 1 2 3 4 5 Bartoletti, Massimo (2020). "A formal model of Algorand smart contracts" (PDF). Financial Cryptography and Data Security 2021. arXiv: 2009.12140 .
  3. 1 2 3 4 Xiao, Y.; Zhang, N.; Lou, W.; Hou, Y. T. (28 January 2020). "A Survey of Distributed Consensus Protocols for Blockchain Networks". IEEE Communications Surveys and Tutorials. 22 (2): 1432–1465. arXiv: 1904.04098 . doi:10.1109/COMST.2020.2969706. ISSN   1553-877X. S2CID   102352657.
  4. 1 2 3 4 Wan, Shaohua; Li, Meijun; Liu, Gaoyang; Wang, Chen (2020-11-01). "Recent advances in consensus protocols for blockchain: a survey". Wireless Networks. 26 (8): 5579–5593. doi:10.1007/s11276-019-02195-0. ISSN   1572-8196.
  5. ↑ Zhao, Helen (2018-02-23). "Bitcoin and blockchain consume an exorbitant amount of energy. These engineers are trying to change that". CNBC. Retrieved 2021-04-03.
  6. ↑ "MIT professor debuts high-speed blockchain payments platform Algorand". VentureBeat. 2018-02-15. Retrieved 2021-04-03.
  7. ↑ "Algo VC Fund Raises $200M to Fast-Track Its Own Cryptocurrency". www.bizjournals.com. Retrieved 2021-04-03.
  8. ↑ "Bahrain's Shariah Review Bureau Certifies Blockchain Firm Algorand As Shariah Compliant". Crowdfund Insider. 2019-10-23. Retrieved 2021-04-03.
  9. ↑ Chen, Jing; Micali, Silvio (2019-07-19). "Algorand: A secure and efficient distributed ledger". Theoretical Computer Science. 777: 155–183. doi: 10.1016/j.tcs.2019.02.001 . ISSN   0304-3975.
  10. ↑ Alturki, Musab A.; Chen, Jing; Luchangco, Victor; Moore, Brandon; Palmskog, Karl; Peña, Lucas; Roşu, Grigore (2020). "Towards a Verified Model of the Algorand Consensus Protocol in Coq". Formal Methods. FM 2019 International Workshops. Lecture Notes in Computer Science. 12232. pp. 362–367. arXiv: 1907.05523 . doi:10.1007/978-3-030-54994-7_27. ISBN   978-3-030-54993-0. S2CID   196471153.
  11. ↑ "Il diritto d'autore diventa asset digitale su blockchain". Il Sole 24 ORE (in Italian). Retrieved 2021-04-03.
  12. ↑ "Ditto launches Opulous platform to help artists access funding without the need for traditional banks". Music Business Worldwide. 2021-02-01. Retrieved 2021-04-03.
  13. ↑ "Crypto Push by Republic Platform Sparked by New Token". Bloomberg.com. 2020-06-24. Retrieved 2021-04-03.
  14. ↑ "Blockchain al servizio dell'ambiente: un registro pubblico di qualità dell'aria". Il Sole 24 ORE (in Italian). Retrieved 2021-04-03.
  15. ↑ Castillo, Michael del. "Visa Partners With Ethereum Digital-Dollar Startup That Raised $271 Million". Forbes. Retrieved 2021-04-03.
  16. ↑ Confidential, Crypto. "Stimulus Checks From A Crypto Exchange; Bitcoin Rebound". Forbes. Retrieved 2021-04-03.
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