Introduction
This post provides an overview of Anthony Scarmucci’s new Book, The Genius of Algorand. Mr. Scaramucci is the Founder and Managing Partner of Skybridge Capital, a business he built from the ground up over the past two decades. In reading The Genius of Algorand, Scaramucci’s hard work and focus are well reflected in a world class work product. He succinctly describes and makes available a plethora of information in a cogent, detailed, and digestible manner. All else being peripheral, if you haven’t already read the Book, you should.
Chapter 1 Anthony and the Algonauts
Scaramucci defines Algorand as the institutional blockchain because it has the pedigree of professionalism necessary to attract institutional capital. According to Scaramucci, “A huge advantage of digital money comes when it’s used to remove intermediaries and third parties – and eliminate all the expenses they accrue.” In other words, blockchains make moving money easier. He answers the question, “What is going to be the protocol that will best address the needs of large-scale institutions?” Algorand.
Chapter 2 Estimated Prophet
He explains the mathematical basis for Algorand and Silvio Micali’s work on the general match making problem. The work, according to Scaramucci, evolved into Micali’s invention of zero-knowledge-proofs as a solution to the blockchain trilemma problem: to develop a sufficiently decentralized, secure, and scalable technology. He also explains the resulting founding of Algorand, Inc. with founders Silvio Micali and Steve Kokinos joining forces to deliver the new solution to the world. Scaramucci puts a spin on the network’s past economic performance and touts the growing user base from 20 million to an expected amount over 200 million. Regarding competing blockchains, Scaramucci says, “I do think that Algorand will leapfrog the others.”
Chapter 3 Adopters of Algo
Scaramucci discusses the pressures of institutional adoption and describes DeFi as a disrupter. One of the Book’s most important points, Scaramucci talks about small business banking, the lack of access to banking services, and demand for decentralized financial services, such as Yieldly. Particularly, he discusses the benefits of accounting using a public ledger as well as the ability to use new DeFi products. For example, he discusses MAPay and its plans to help reduce red tape with institutional healthcare payments on Algorand using stable coins.
An important point Scaramucci makes is that the only way for the federal government to reduce its debt load at this point is to inflate the currency. He also explains DeFi reduces the need for third party intermediaries to act as middlemen between parties in payment transactions. This creates great opportunity for both small businesses and the lower and middle class generally which are most heavily burdened by the demands of banks an institutional finance – in other words DeFi creates freedom for the people.
Chapter 4 Those Who Chose Algorand
Scaramucci includes interviews with some of the best and brightest minds working on Algorand, such as Michael Arrington at Arrington Capital Management and Jack Clarke at AlgoFi. For example, Michael Arrington is a former securities lawyer, entrepreneur, and one of Time Magazine’s most influential people. He now manages Arrington Capital – a venture fund focused on funding Algorand projects. According to Scaramucci, “The Algorand community doesn’t just draw smart people, it draws principled ones as well.” No doubt, Algorand has some of the world’s best and brightest minds in business and technology and Scaramucci does a solid job highlighting the champions of Algorand.
Chapter 5 Planet Algorand
Scaramucci comments on the work of the Algorand Foundation and provides a roadmap for Algorand as a built to last technology. According to Scaramucci, blockchain is ultimately, “an inherently hopeful business model, and that is what attracts the best people to it.” Scaramucci adamantly argues, “it is more important than ever to build our digital world with a sense of permanency and stability.” I think this is one of the strongest points in the Book and the best case for Algorand as a keystone to the future of finance.
Critique & Comment
Investment Strategy
The corporate structure for Algorand is important because it defines the incentives for Algorand, Inc., equity shareholders, and token holders. Scaramucci’s strategy to invest institutional capital in Algo, a cryptocurrency, is novel insofar as the Algo cryptocurrency is independent of equity in an Algorand business. There are currently five corporate entities operating under the Algorand name.
- Algorand, Inc., Mass. Corporate ID: 001369603, Steven Kokinos, Annie T. Warner; 1,000 total shares
- Algorand, LLC, Mass. Corporate ID: 001274617, Silvio Micali
- Algorand, LLC, Mass. Corporate ID:001370108, Steven Kokinos, Silvio Micali, Jamie Goldstein
- Algorand Foundation Operations, PTE. LTD., Singapore Registration No: 202125769G
- Algorand Foundation LTD., Singapore Registration No: 201907381G
There are three for-profit companies operating out of Massachusetts and two non-profit entities operating out of Singapore. One issue from an investor’s perspective, especially an institutional investor, is that the for-profit Algorand companies are not publicly traded and therefore do not have robust reporting requirements. This creates an opaqueness around the business operations itself and creates a high-risk investment environment. Indeed, Algo tokens are an interesting institutional investment considering they are not equity in Algorand, Inc. nor the two Algorand LLCs. One may wonder whether the real value for Algorand is in the equity, which is backed by the potential for profit sharing from the company that is ultimately selling Algo.
Compliance
A keystone to governance for blockchain businesses is compliance, which is a process by which companies follow the law. Scaramucci talks about Algorand as the corporate blockchain, but for that to come too, Algorand needs to create a decentralized compliance program to support ecosystem projects. He notes in Chapter 3, “a small business owner doesn’t have the resources to complete anti-money laundering and other “know your customer” checks of every source of capital.” This is a problem Choice Coin is helping to solve on Algorand.
Indeed, Choice Coin is building automated compliance software to make it easier for small businesses to get access to compliance services. (Choice Coin Compliance) The software is available on an open source basis on GitHub and is also supported by the Solana Foundation. The Choice Coin compliance model takes a statistical approach to solving this problem, by consolidating laws and regulations to fundamental principles and generating optimized corporate compliance policies for each small business or project. Creating a culture of compliance is critical on Algorand to ensure value is created and captured in as cost-efficient manner as possible.
Technology
According to Scaramucci, Algorand has a great new technology based on Silvio Micali’s development of zero-knowledge proofs that gives it a competitive advantage over other blockchains, such as Ethereum. Scaramucci is not alone in arguing that Algorand has a superior blockchain technology. However, I think it’s important to recognize Algorand technology is still limited – particularly in developer resources, scalable infrastructure, and applications engineering. It’s true that Algorand’s layer-1 is faster and cheaper than Ethereum, but the unnecessary complexities of the TEAL language and web applications extensions create security vulnerabilities on Algorand.
That’s not to say Algorand can’t develop better technology eventually. But right now, Algorand is still too nascent to be considered an industry leader in technology. Algorand should seriously consider its value as an Ethereum scaling solution and the development of Solidity packages to support interoperability. Indeed, Algorand could certainly provide cheaper and faster Ethereum transactions, which would allow it to add value to the Ethereum ecosystem rather than trying to compete with it. In turn, this would rapidly enrich value on the Algorand blockchain, as well as the price performance of Algo.
Moving Forward
Scaramucci’s strongest point, that Algorand is built to last, is a persuasive one. He ties this theme together with the argument for corporate adoption, a sterling talent pool, and superior technology to convince the reader that Algorand is a great place to build. Ultimately, the Book is concise, extremely well written, and well worth the read.
To Mr. Scaramucci, thank you for your hard work, focus, and dedication to the Algorand community.