What is Algorand?
|— Algorand (ALGO) was launched mid 2019 and attempts to tackle the Blockchain Trilemma|
— Algorand uses a unique staking process, where no delegation is required: you just need to hold some ALGO on your address
— There are other cryptocurrencies running on the Algorand blockchain as well, known as Algorand Standard Assets (ASA)
— Algorand and the Algorand Standard Assets can now be managed directly in Ledger Live, and rewards can be claimed through it equally
With Algorand now being manageable directly in Ledger Live, we’d like to provide some more information on this new addition, from its goals to how it functions. Let’s take a closer look at the question “What is Algorand”.
Algorand: solving the blockchain trilemma
With the latest addition, we’d like to discuss exactly what is Algorand. Algorand often refers to itself as the cryptocurrency that focuses on solving a problem that most of them face: the Blockchain Trilemma. Launched mid 2019, Algorand (ALGO) has its own dedicated blockchain and does not concern a token. It uses an adapted version of Proof-of-Stake (PoS) which is called Pure Proof-of-Stake (PPoS) for validating blocks into its chain, seeing it as a solution to the Blockchain Trilemma. Let’s take a closer look at this concept.
For cryptocurrencies, there are three important technical factors: Security, Scalability and Decentralization. According to the Blockchain Trilemma nearly all cryptocurrencies can only choose two of these three important elements, meaning that the third one remains a challenge. For example, Bitcoin is praised for being the most secure and decentralized blockchain. Scalability is seen as a larger challenge for it compared to the other two.
Algorand’s solution to the Blockchain Trilemma is to use Pure Proof-of-Stake. Within it, the one to create the next block is not decided by whomever mines it first or has the most delegations. Instead, it will randomly select 1000 ALGO tokens to approve the next block created. Each single token has the same chances of being chosen, giving it its decentralization, while still having enough validators to ensure security. This random selection also allows for a low computation requirement, as well as creating a very fast validation mechanism. In simpler words: it greatly aids scalability.
Another interesting element to Algorand’s blockchain is its staking, which works a bit differently from other cryptocurrencies. Many Proof-of-Stake coins force you to either become a validator for the network or to delegate your cryptocurrencies. This isn’t the case with Algorand. With ALGO, you just need to hold at the very least 1 ALGO on your address and you will automatically start accumulating rewards. No further actions are required! These rewards are automatically claimed whenever a next operation takes place on your address. This can be either the sending or receiving of some ALGO. You can even already send out your pending rewards before having received them.
Algorand Standard Assets (ASA)
Algorand’s blockchain also allows assets other than ALGO to run on it. These are also known as Algorand Standard Assets (ASA), and function in a somewhat similar fashion as ERC20 tokens do on the Ethereum blockchain. One major difference, however, is that you first manually have to give your consent to receiving a certain token. This is also called “Opt-in”. Similarly, you can retract this acceptance by opting out. The feature effectively stops so-called “spam tokens”, since you cannot receive them if you haven’t opted in for them.
Ledger and Algorand
Algorand was initially only manageable through third party wallets, though this has now changed. In our continuous efforts to add more cryptocurrencies to Ledger Live to give our users more choice, Algorand has been added to it as well. We can proudly say that the inclusion of Algorand into Ledger Live also brought the Algorand Standard Assets (ASA) to it, including the opting in- and out of them. You can read more about this here.
With Algorand’s addition, we’re welcoming the fourth cryptocurrency which can be used to potentially gain passive rewards through staking. To allow users to claim their rewards without needing to receive or send their ALGO, we created a button to send the amount of 0 ALGO to yourself. This does contain some fees, but will effectively allow you to obtain the pending rewards.
We’re thrilled to add a new cryptocurrency to Ledger Live with Algorand, increasing the total amount of manageable coins to 27, with a plethora of tokens on top of this. This will be far from the last crypto asset to be joining our platform, and we’re excited for presenting you with even more options in the future.
Keep learning! If you enjoy getting to grips with crypto and blockchain, check out our School of Block video Blockchain Real Use Cases.