A Comprehensive Analysis of Algorand

Introduction

The Algorand Blockchain was created by Silvio Micali and a team of leading scientists as an ecosystem that is more open, inclusive, scalable, decentralized, and secure than other blockchains on the market. This goal has progressed since the launch through the distribution of Algos from the Foundation and the initial investors to an increasingly large community.

About Algorand

Algorand is the first publicly-licensed Pure PoS blockchain protocol that is currently the most likely to achieve scalability, security and true decentralization. Performance on the Algorand platform exceeds 1000 transactions per second (TPS) with a latency of fewer than 5 seconds, comparable to the throughput of major global payment networks without compromising security or decentralization. Algorand represents a direction in the development of the underlying technology of the blockchain.

Project release time: June 19th, 2019
Total supply of Algos: 10 billion
Circulated supply of Algos: 2.96 billion (of which about 2.5 billion does not participate in secondary market circulation)
Blockchain browser: algoexplorer.io

Brief Assesment of Algorand

Investment value: Algorand is one of the more worthwhile value investments in all blockchain projects.
Team: The Turing Award winners lead the team, the lineup is very strong. In addition to the shiny executive team, there are scientists consultant team, economics consultant team, and even cryptography consultant team.
Community operations: The blogging platform is very hot, for example, Twitter. The community has a large number of people and are highly active.
Technical aspects: Algorand is a public-chain project based on VRF and PPOS. It achieves a certain degree of breakthrough through ingenious design. It is expected to achieve balance within the impossible triangle of the blockchain: Safety, Decentralization and Scalability.
Market risk assessment: After nearly 50 days of decline, the market value returned to normal, and a lot of risks have been released.

Algorand’s Market Analysis

Algorand’s innovative consensus mechanism distinguishes it from traditional mainline projects, and the goal of solving the “impossible triangle” of blockchain has attracted countless attention. Well-known public chain projects such as Ethereum, EOS, NEO, etc. all have defects in the consensus mechanism and are trapped in the “impossible triangle” problem, but Algorand emerged to solve these problems, which is enough to highlight its distinctiveness. Although Algorand has been bearish after listing, Algorand continues to absorb market attention, relying on the strong background strength of the project team and the unique innovation in the consensus mechanism. At present, the circulation market value of the project has reached a reasonable range. For the moment, Algorand can be regarded as one of the projects worthy of value investment in the blockchain project.

Critical conclusions from the “Report on the State of the Algorand Economy”

Conclusion 1: The Algo distribution process produces excessive dilution and inflation effects that may impair the economic stability of the ecosystem. More sustained and comprehensive measures are needed to maintain stability and balanced growth. Strategic actions will be taken from both supply and demand to promote the long-term development of the Algorand economy.

Conclusion 2: The Algorand Foundation’s suspension of node release awards does have an impact on changing the existing supply on the market. Algo Market issued 3.2 million Algos per day as a node reward before the suspension of Algo’s release of the award. Algo’s performance is usually lower than the overall market, except for the Algorand Foundation’s repurchase action, which temporarily reduced the available supply. After the announcement of the suspension, Algo’s movements immediately aligned with the market. The original release ratio led to an underestimation of Algo’s market behaviour. Effective market performance can only be restored if the daily cashing impact on supply is significantly reduced.

Conclusion 3: Algorand’s only way to achieve a non-speculative, borderless economic goal is to eliminate the “technical” imbalance of supply and demand. The most relevant evidence is a downward trend compared to the reference cryptocurrency market, which empirically seems to be related to the generation of oversupply. IThistrend will only disappear when supply and output are reduced. The estimated annualized volatility during the pre-suspension release period is close to 150%. The annualized valuation after the suspension of the redemption was 82%, still higher than expected, but ultimately consistent with the cryptocurrency market. This stable benign process is the basis for Algo’s commitment to its utility and application. EAC will recommend long-term reforms in its conclusions to avoid stifling this stable benign process that has just entered.

Conclusion 4: The release of relay nodes has been the most important source of supply on the Algo market. However, it is not unique. Another source of supply is “Participation rewards.” This supply has been considered excessive and has been reduced by the suspension of auctions and the release of a period. If Algorand wants to adopt a holistic approach to addressing supply imbalances, participation rewards need to be reduced, at least proportionally. This does not require a change in the total amount invested in these awards. However, it needs to fundamentally change its overall distribution over time.

Conclusion 5: The market reacts strongly to the current actual supply and expected short- and medium-term expectations. EAC recommends not assigning a fixed bonus to everyone, as it will increase Algorand’s perceived structural inflation resulting in excess supply. In the future, Algorand will introduce additional incentives to ensure long-term infrastructure support and health. It’s time to move from the original approach to a sustainable long-term approach in which reward pools are used as incentives for beneficial behaviours in blockchain development, such as committing Stake Algos overtime to participate in consensus. Different rewards for participants based on their commitment to ecosystem health have always been a successful strategy in the blockchain because, in the long run, community commitment must be the only one in a truly decentralized economy.

Conclusion 6: An indefinite pause in auctions will harm demand dynamics, which is another fundamental variable in Algorand’s future economy. It is wise for the Algorand Foundation to suspend the auction after the first auction because they avoid exacerbating the oversupply for the first three months. However, this is an option that cannot be continued. The indefinite suspension of this commitment will harm demand dynamics, which is another fundamental variable in Algorand’s future economy. EAC believes that Algorand should not aim at price increases, but should aim at market value growth. The size of the market is very important for the security and decentralization of the blockchain. This applies in particular to blockchains like Algorand, which have the ambition to provide important distributed services for financial and industrial companies. Such a business needs to be protected by a network of economies of scale compared to the scale of the business it maintains. We have seen that even after some measures have been taken to make this situation sustainable, there is still expected growth in the supply of Algorand. This sustainable supply growth must be aligned with sustainable demand growth, to create a stable market and expand market capital. This requires some specific commitment. Breaking the vicious circle of oversupply and negative bias compared to the reference market trend are prerequisites for demand.

In summary, this report analyzes market trends since Algorand went live. Evidence suggests that node rewards will be redistributed over time. These rewards are now suspended. When the supply is restored, the goal of stabilizing the market requires them to adjust so that the total supply inflow is still significantly lower than the supply inflow before the suspension. The goal should be to achieve stability and to make the supply grow more slowly before recovering a higher amount of release. Similar reasoning also applies to participation rewards. Besides, it seems that it is time to more closely link these rewards to the ecosystem-friendly behaviours of the current state, such as active participation. At the same time, according to the Algorand Foundation’s analysis, if the supply is increased again in the short term, keeping it even higher before the suspension will lead to another strong devaluation. The Algorand Foundation showed a zero-tolerance attitude towards another phase of depreciation.

Algorand’s Github

There are 23 repositories. Among them, “go-algorand (main-net)” has 171 releases, 208 stars and 84 forks. Both code quality and update frequency are of high quality.

Algorand’s huge achievements within 5 months

Algorand has established partnerships with several blockchain companies:

  1. DUST identity partners with Algorand to offer a physical building to blockchain and to ensure authenticity.
  2. Reach expands into the Algorand community, which will enable tens of millions of developers to participate in the blockchain community, rather than only the thousands that participate today, by drastically lowering the barrier to entry into blockchain and drastically raising the productivity of DApp developers.
  3. AssetBlock launches an Algorand-based investment platform that will allow Algo to exchange $60 million in public interest.
  4. Securitize to enable digital securities on the Algorand platform.
  5. Ethereum’s largest decentralized exchange IDEX plans for next-generation decentralized exchange on Algorand.
  6. Bleumi launches consulting practice dedicated to enterprises building on Algorand. The company also joins a growing list of organizations accepting payment in Algos.
  7. Digital Bull uses Algorand’s technology to win the 2019 Barclays Financial DerivHack Hacking Contest.
  8. VC Fund dedicated to projects on Algorand closes at $200 million.
  9. Randlabs accepts Algos for payments.
  10. PureStake launches API service for Algorand developers.
  11. The Algorand Blockchain Museum opens.

Conclusion

Algorand innovatively uses the VRF random and zero-knowledge proof algorithm to solve the “impossible triangle” problem that plagues the public chain. This is a bold attempt. This new “consensus mechanism” enables the system to be efficient and secure while being sufficiently decentralized. Ideally, Algorand’s blocks can reach their final state in seconds, and the transaction throughput of the entire blockchain network will be comparable to that of large financial networks. If the Algorand public chain is fully realized, the project and the entire blockchain industry will benefit greatly. No matter which dimension is analyzed, the project will not lack market attention or market, and the key factor determining the future development of the project is technical feasibility.

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