What is Elrond?
| — Traditional blockchains are faced with the blockchain trilemma, where a blockchain has to compromise with one of its three fundamental features — decentralization, security, and scalability — to effectively attain the other two.|
— Most blockchains today choose to reduce scalability to ensure decentralization and security. However, the lack of high throughput and cheap and fast transactions currently pose a major hurdle in the way toward mainstream adoption of blockchains.
— To address this, multiple third-generation blockchain projects were founded around 2017, and one that has achieved this in the most effective way is Elrond. It is a smart contract blockchain that can currently process 15,000 transactions per second for a fee of just $0.001.
— So what is Elrond? In this article, we will dive into the concept of blockchain trilemma, why it’s critical to solve the concern, and how Elrond achieves this.
You might be hearing about emerging blockchains and how they respond to some of the key problems faced by crypto. Here, we ask what is Elrond? And how does it fix those issues?
It often takes years or decades to completely understand a technology, materialize its theories, bring it to reality, and unleash its full potential. The same is happening with blockchain.
A blockchain-like concept was first proposed in 1991, but its first practical application was seen 18 years later in the form of the Bitcoin network. Even after 11 years since the creation of Bitcoin and significant advancements in blockchain technology, developers struggle to understand and conquer one critical aspect of blockchains that is now popularly known as the blockchain trilemma.
What’s the blockchain trilemma?
Blockchain is a novel technology used for storing records of transactions in a decentralized way. The three core features that define its effectiveness are decentralization, security, and scalability. What exactly do these mean in the context of blockchain technology?
Decentralization and security are more or less correlated. You can imagine the decentralization of a blockchain as the number of individual systems that work together to decide whether a set of data is valid or not. It’s obvious that the more systems that participate in this, the more difficult it will be to manipulate the data, and thus, the system will be more secure. Lastly, scalability is about how many transactions a blockchain can process per second. And that’s where the blockchain trilemma comes in.
As explained by the Ethereum co-founder, Vitalik Buterin, blockchains and their developers must sacrifice, to a considerable extent, one of these three fundamental features of blockchain to maximize the other two. Most blockchains find it most reasonable to compromise scalability to attain decentralization and security.
For example, Bitcoin and Ethereum are the most decentralized and most secure blockchains, but they sacrifice scalability to achieve that. Both these networks can only process around seven and 14 transactions per second (TPS) respectively.
So, what does that mean for you?
The case of low-scalability blockchains like Ethereum is currently similar to how it would be if Apple designed the best phones but failed to produce enough units to meet the demand.
Ethereum is a promising technology and it has the most number of decentralized applications built on top of it. However, for it to support the transactions made by the hundreds of millions of people joining the crypto space, it must be able to process way more than just 14 transactions per second. To add to that, Ethereum is so designed that when the demand for transactions increases, its fees soar substantially. And the fact is, most of us do not want to pay $100s of dollars in transaction fees.
Same is the case for Bitcoin. It has millions of users but if you wanted to pay BTC on the Bitcoin network at a grocery store, you may have to wait anywhere between 10 minutes to over an hour for your transaction to go through. Then, of course, we have high fees on Bitcoin transactions too.
This goes on to say that although Bitcoin and Ethereum are great on many different fronts, they are not the best means for transacting value on the internet due to their lack of scalability.
To solve this, there have evolved a number of new blockchains. And one that achieves this effectively is Elrond.
What is Elrond?
It’s safe to assume that half the world, maybe you too, first heard about cryptocurrencies and blockchains in 2017. As an obvious result, the demand for cryptocurrency transaction volumes saw a steep rise. It was a time of excitement and celebration with the dream of wide crypto adoption finally coming true. But then, everyone realized that existing blockchains were not ready for that party to start yet, let alone being prepared for the hundreds of millions of people that were to join over the next four years.
So, what happened? Research, experimentation, and implementations to make blockchains more scalable. Elrond is one such project that was developed in 2017 to meet the rising demand of blockchains. Similar to Ethereum, Elrond is a smart contract blockchain network that enables developers to build decentralized applications, protocols, and crypto tokens on top of it.
Elrond differs from Ethereum in the fact that it is able to offer a transaction throughput of over 15,000 transactions per second. That’s a 1,000 times better performance than Ethereum in terms of speed (before Ethereum 2.0)
But that’s not it. Elrond claims that it can scale the transaction speed to six figures, which would be significantly useful when blockchain technology goes mainstream. What’s more interesting is that transactions on Elrond cost just $0.001 each, making the network way cheaper to use than Ethereum or any other first and second-generation blockchain.
Compared to Ethereum, Elrond also claims to offer smart contracts that are “easy to write, lightweight but feature-rich, fast to execute, and lucrative.” Another unique feature is the option for developers to modify the smart contracts to fix bugs and errors after deployment.
Does it have a native token?
Elrond has a native token EGLD that fuels its economics. You can see the price of Elrond here.
EGLD is the primary way of transacting within the network, be it paying fees, running smart contracts, staking, or distributing rewards to contributors.
Now, it’s obvious to wonder how Elrond achieves such high scalability if the early blockchains could not? So let’s dive right in!
How does Elrond achieve high scalability?
As blockchains advanced through the years, there have evolved new ways to address the blockchain trilemma and make blockchains more effective. One method of making blockchains more scalable is through a process called sharding, which is key to Elrond’s high scalability. The second is a new consensus protocol called secure proof-of-stake (used by most modern blockchains).
Sharding simply means that you’re splitting a bigger amount of data into smaller chunks. With the help of transaction sharding, Elrond splits the thousands of transaction requests made on the network into smaller groups of transactions. It then sends the transactions to equally decentralized and secure side networks (shards) for processing, where their respective nodes or verifiers validate the transactions and send them back to the main chain to be recorded immutably.
How does that help? It’s the same as splitting a bigger task among a group of people to complete it faster. 10 or more chains can obviously verify a thousand transactions faster than one chain verifying a thousand transactions all on its own.
Blockchains like Bitcoin and Ethereum (for now) use proof-of-work consensus to verify transactions. This process requires high-power computing devices and a huge amount of electricity, thus limiting the network’s scalability.
As an alternative, Elrond, like most new blockchains, implements another consensus protocol called proof-of-stake. Instead of setting up costly computing hardware, this protocol requires users to stake Elrond’s native token EGLD to become validators. The network then randomly chooses a group of validators and a block proposer to propose, verify, and add the transactions to the blockchain. Those with a higher stake are given more weightage and get to approve more transactions as they have a higher chance of acting in favor of the network due to their bigger stake.
Note: Even the Ethereum network is currently in the process of implementing sharding and proof-of-stake to increase its transaction speed and lower transaction fees.
Aiding the future of blockchain
Speed. In this era, we all love speed. Faster travel, faster product deliveries, faster web browsing, and whatnot. So, why compromise with transaction speed on blockchains? Thankfully, we don’t have to anymore.
Elrond ensures that we can enjoy transaction rates higher than that of traditional systems while still being in a decentralized and secure system. And although the scalability of Elrond may not be fully used at this point, it will be necessary for blockchain-based systems in the future. Considering that the number of users of blockchain-based applications is rising rapidly, we can say that this scalability will come in handy sooner rather than later.
Knowledge is power.
Trust yourself and keep on learning! If you enjoy getting to grips with crypto and blockchain, check out our School of Block video all about passing on your hard earned crypto.