For years, developers and entrepreneurs have borne the idea that blockchain is the future technology; that it holds the secret to a more effective and equitable financial system.
Simply put, a blockchain is a public ledger. It is a chain of transactions arranged in blocks, guaranteeing that anyone can see and read any block, modify transactions in a blockchain, and write a transaction in a future block.
Using blockchain technology, Turing Award winner, Silvio Micali is building a robust financial system that solves the major financial problems facing the global economy. The Algorand blockchain, which was founded in the year 2017 is powerful; its consensus mechanism is permissionless and utilizes a Pure Proof-of-Stake (PPoS) protocol; which is referred to as the most beneficial in the blockchain space, in the sense that it guarantees maximum speed, decentralization, and security.
The Algorand Foundation is committed to implementing the revolutionary vision of blockchain technology by using the Algorand protocol and open-source software originally developed by Silvio Micali and other prominent experts. With its fundamental belief in building an open and permissionless blockchain, the Algorand Foundation is on a mission to create a system that offers opportunities for all to tap into the promise of an equal and completely borderless economy.
The Algorand network has its own official native cryptocurrency popularly known as “ALGO,” being its symbol which is used to power its economy and reward participants. The Algorand Foundation possesses ALGOs used to contribute for the stabilization of the Algorand blockchain and to support the Algorand ecosystem. Furthermore, ALGOs enter the ecosystem through a number of sources, including sales, development, and research grants. Every activity on the network is revealed to the community, which shows pure transparency.
Algorand Reward System
Like several newer blockchain networks, the Algorand blockchain addresses Proof-of-Work (PoW)’s problems with the idea of Pure Proof-of-Stake (PPoS). PPoS networks rely on validation protocols for the verification of transactions written to each block on the chain, unlike PoW miners.
Algorand uses a method called sortition to choose its validators, with a preference of validators having the highest number of coins, referred to as stakes. Like miners, validators are awarded for their work, but unlike the Proof-of-Work protocol, resources are not wasted.
The rewards normally reflect a percentage gain on a validator’s stake. In this way, validators’ economic benefits are specifically connected with their amount of stake to promote the network, that is, the greater your stake, the more you are involved in contributing to the wellbeing of the network, and the more rewards you receive.
The Algorand Foundation announced a proposition recently of an updated, long term ALGO Dynamics concept. This concept will concentrate on activities around community support, ecosystem support, decentralization of decision making and management in the Algorand blockchain – this is scheduled to run for a span of over 10 years. The central tenet of this proposition is a new reward system for the community that will help both current and future participants, that has pledged themselves to engage in the governance of the Algorand network and demonstrate their contribution by securing its ALGOs for a potentially long period of time.
This new reward method and proposal for ecosystem support is financed by the allocation of formerly unassigned funds from the 10 billion ALGO minted at Genesis, and these tokens will be dispersed through a new, completely autonomous decision-making process, as seen in the breakdown below:
1. Community Rewards
2.5 billion tokens will be locked initially and allocated over nearly 10 years as participation awards. The tokens are sent into governance reward channels through an automatically operating smart contract.
The beneficiaries of these tokens are those who decided to stake theirs in order to facilitate governance in view of the Decentralized Governance promised by the platform.
These tokens would be allocated in a wider, more time-consuming model that is designed for control of inflation and scarcity.
2. Governance Participation
Governance participation is said to be optional. For a given period of time, the accounts that wish to participate, the governing accounts, or precisely, the governors, will lock their tokens, initially planned to be one year. For their service, these governing accounts are rewarded. It is predicted that the benefits gained by governing accounts will be greater than the current rewards mechanism they will be replacing.
3. Ecosystem Support
1.25 billion tokens are distributed for enhanced support of the ecosystem and locked into a smart contract. Periodically, these tokens will be unlocked for a period of over 10 years, and only a maximum of 200M can be unlocked in a single year.
– Unlocking of tokens will occur according to the overall distribution strategy stated in Algo Dynamics.
– Unlocked tokens may be used to support strategic plans, grants, and R&D programs presented by the Algorand Foundation or other collaborating bodies for endorsement.
– Any unused tokens in a specified period will be re-locked and set to monthly unlock, following the 10-year period process.
In order to balance rewards, long-term commitment is necessary, because users would have a key role to play in distributing funds to various projects that launch over a lengthy period of time. As stated above, the volume of these rewards would be very competitive. A balanced and cautious transfer mechanism would incorporate the current to future reward mechanism change and is expected to have a major, beneficial impact on tokenomics.
Any account can currently engage in consensus but not governance on Algorand. Governance on the Algorand blockchain is the ability to decide non-consensus activities, just like financing of grant proposals or strategic plans; and any user that wishes to participate in governance will follow the processes laid out by the platform.
Algorand aims to implement a framework for every account as one of its vital steps in decentralizing the Algorand network. This new mechanism will not only enable users to engage in consensus but also govern on the platform.
Learn more about Algorand!
Official Website: https://www.algorand.com
Guest post contributed by Helen IMAH – Algorand Ambassador