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Algorand Explained | A beginner’s guide to blockchain

Algorand is a decentralised blockchain platform that prizes itself on its ability to facilitate large volumes of quick transactions. Founded in 2019 by award-winning MIT Professor Silvio Micali, Algorand uses a pure proof-of-stake consensus whereby validators are selected entirely at random, enabling true decentralisation. Algorand is also one of the most energy-efficient blockchains. 

Algorand is often pitched as a direct competitor to Ethereum. Like Ethereum, Algorand executes smart contracts, supports Dapps and can host multiple currencies, but transaction fees are significantly lower.

Good to know

Algorand founder Silvio Micali was awarded the prestigious Turing Prize for his work in computer science, the Gödel Prize in theoretical computer science and the RSA prize in cryptography.

Algorand projects 

Algorand hosts a broad range of projects from trading platforms to NFT marketplaces. Some include:

  • LimeWire, which re-launched in 2022 as an Algorand-powered NFT marketplace for music, arts and entertainment.
  • Algorand is the official blockchain partner of FIFA
  • Al Goanna, an Algorand-native NFT project that drives real-world change by planting trees.
  • Humble Defi, a platform that enables users to swap, pool and earn on Algorand assets.

You can view the full Algorand ecosystem here

FIFA president Gianni Infantino alongside Silvio Micali, celebrating the FIFA X Algorand partnership
What is ALGO?

Algo (ALGO) is the native currency of Algorand. It’s used to secure the blockchain and to pay for processing fees on Algorand-based transactions. It’s also a digital currency that can be traded and spent on most exchanges. 

As of February 6, 2022, the price of ALGO is around $0.25 USD. The highest recorded price of ALGO was $3.59 in 2021.

How does Algorand differ from Ethereum? 

Algorand hosts the same functionality as Ethereum, but it boasts faster and cheaper transactions. Ethereum’s block time is 12-14 seconds, whereas Algorand’s is 3.6 seconds with instant finality. Transaction speeds and fees aside, a key difference between Ethereum and Algorand is the staking and rewards mechanism.   

Algorand uses a pure proof-of-stake consensus mechanism which selects validators secretly and randomly. Any user holding algo can participate in consensus, and only that user will know that they have been selected as a validator (i.e. there is no communication among users). 

This random selection ensures true decentralisation since consensus doesn’t rely on a small number of validators with large stakes as other proof-of-stake blockchains do. Although users with higher stakes of algo are more likely to be selected, there is no minimum stake entry barrier to participate.

What’s an Algorand Governor?

Until 2022, Algorand users earned rewards through participating in consensus, funded by The Algorand Foundation. On October 1st, 2022, Algorand users began to earn rewards through governance, whereby holders earn rewards by participating in the decision making process relating to the growth and development of the Algorand ecosystem. 

The more a user participates in voting, the higher their rewards.

To become an Algorand governor, users must:
  1. Sign-in and commit a some algo to the upcoming governance period
  2. Participate in all the voting sessions during the governance period 
  3. Maintain the same amount committed during the entire period

This system of governance means that Algorand and its tokens are effectively a DAO. According to AlgoGard, Algorand Governance had over 50,000 participants in period one alone, making it one of the largest and most active DAOs in the world.

Advantages of Algorand
  • Cheap, fast transactions with an average fee of just 0.001 ALGO. Algorand’s transaction speed and capacity is on par with major payment processors. 
  • Algorand has a unique staking model that gives users rewards through governance, ensuring true decentralisation. 
  • It’s one of the greenest blockchains and is dedicated to going carbon negative through its partnership with ClimateTrade
Disadvantages of Algorand
  • Although Algorand has the same functionality as Ethereum, it’s likely that Ethereum will always have a first-mover advantage, particularly among retail users. 
  • Demand for ALGO is low compared with its competitors because the network focuses more on catering to institutions rather than retail users.

Where can I buy ALGO?

ALGO is available to purchase on most major exchanges including Binance, Coinbase Pro, Kucoin, OKX, Kraken, Bybit and more. You can read a full list of exchanges that list ALGO here.

To buy ALGO, you will need to create an account on one of the listed exchanges. You will then need to verify your identity and deposit your local currency into your account to purchase the token. Once you have purchased the token, you will need a wallet that supports ALGO, such as Pera Wallet, Algorand Atomic Wallet, MyAlgo Wallet, Coinomi, Binance, Coinbase or 

If you purchase ALGO through an exchange such as Binance, the token will be automatically stored in your Binance wallet. If you purchase a large sum, it’s best to transfer your funds to a non-custodial cold wallet such as Ledger or Trezor.

Our top three Algorand wallets are:

  1. Pera Wallet (non-custodial, most compatible)
  2. Ledger Nano X (non-custodial, cold wallet)
  3. Trust Wallet (non-custodial, beginner friendly)

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