Is Algorand Sustainable?

General
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  • Revenue << Costs

The cost of running Algorand Inc., Foundation and Relay nodes are in the order of tens (or even hundreds) of millions. Even if the tx# goes 100x, with current transaction fees and considering that higher tx# greatly increases costs for the network (all blockchain data, which will be in tera/peta bytes is replicated in hundreds of relay nodes, whereas each node will be a cluster of servers with very high bandwidth connections), the network revenue can barely cover the minimum costs. Stepping back for example it doesn’t make sense to replicate most transactions (e.g., planetwatch tx) on hundreds of servers for years. This is just not economically viable.

Is there any source of revenue other than selling Algo tokens? What happens when all tokens are sold and easy money is gone? The Algorand inc. revenue from other sources is likely very small. In general Algorand Inc. doesn’t have a good business model if it doesn’t come up with something that can generate billions in revenue. The blockchain technology as a decentralized trustless network has very limited use-cases (relative to tech in general) that justify using the approach. In most cases other solutions are a few orders of magnitude better.

  • Long-term development and support

Algorand inc. is the only entity that is capable to develop and maintain the Algorand software. The relationship between the inc. and the foundation is unclear. What if inc. and the foundation/network incentives diverge at some point. Algorand inc. at the end is a private company that needs to make money and its incentives by definition cannot be 100% aligned with the Algo-holders interests.

Also companies die at some point and Algorand inc. is (likely) not an exception. However a blockchain is expected to stay around forever.

To put the above issues into perspective, bitcoin with all its limitations doesn’t have any of the above concerns. The only major concern for bitcoin is quantum computing, which optimistically and in theory can be addressed by a number of network upgrades.

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If you’re going to make these claims, can you provide some numbers?

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  • From the recent foundation transparency report: Daily operations, Staff costs, and other programs and fiat expenses: USD 27.9M
  • I suspect the Algorand inc. costs are higher than the foundation.
  • You can calculate the network revenue by tx-fee* tps* time-s. I have done some basic calculations here.
  • Relay nodes cost is already in millions and that significantly goes up with much larger blockchain data, tps and traffic.
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I think these are valid points and questions to ask. It’s a difficult balance to strike with a public blockchain and private companies who are the de facto owners. The incentives may be better aligned if Algorand went public through an IPO. You’re right to point out that the main revenue source is selling Algorand tokens, but the equity in Algorand Inc. and LLC is distinct and privately held. (Algorand Corporate Information)

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I think, eventually market will price it. With more adoption, Algo price will go up. Storage cost per GB of data also goes down over the time.

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bitcoin has fee concerns that could make it insecure. just go to twitter and see how they’re losing it

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(Daily operations, Staff costs, and other programs and fiat expenses: USD 27.9M)
for period (October 2021 - March 2022)
from: (https://algorand.foundation/the-algo/transparency-report-march-2022)

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Running btc nodes (51%) was cost about $700M per 2017 year.
from: (https://www.quora.com/How-much-would-it-cost-to-run-51-of-all-bitcoin-nodes)

Opportunities and ease of use #Algorand seems to me tens times higher than #Bitcoin.

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Doesn’t cost millions, they spent millions because they could pay in Algo, and there were so many Algo…

The Foundation has been particularly “generous” until now, and is not obliged to be so forever

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I was thinking the same thing. IPO would be ideal. Maybe acquire some companies that can bring in revenue. Im only dreaming here, but sure would be awesome, if they got big enough to acquire etrade or maybe a smaller brokerage firm or something.

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My Man! Great post - I agree 100%. But be careful, @Ben might ban you for writing about revenue. He hates new inventions, cogent ideas, and things that work.

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