🌐Algorand: Why Relay Nodes May Not Be Sustainable?📉 SEC delays decision on BlackRock and Fidelity's spot Ethereum ETF proposals.📱NTT Docomo launches web3 wallet
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In today’s edition:
Deep Dive into Algorand
SEC Delays Approval Of BlackRock And Fidelity's Spot Ethereum ETF Proposals
Japan’s largest mobile phone firm, NTT Docomo, launches web3 wallet
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Total Read Time: 9 Min 39 Seconds
🔎 Deep Dive
Algorand: Why Running Relay Nodes May Not Be Sustainable & Threaten the Future of the Platform
Welcome to our Deep Dive section, where we examine the cutting-edge technology behind Web3 infrastructure. In this section, we'll explore the details of Algorand, a proof-of-stake blockchain revolutionizing decentralized technology.
We'll explore the inner workings of Algorand's unique consensus algorithm, examine the benefits and challenges of using a permissioned centralized relay node system, and discuss this exciting technology's current market trends and prospects. Whether you're a seasoned blockchain enthusiast or just starting to explore the world of Web3, this deep dive will undoubtedly provide valuable insights into the rapidly evolving landscape of decentralized technology. So let's get started!
Here is How Everything Started. (History & Founders)
Algorand was founded by Silvio Micali, a professor of computer science at the Massachusetts Institute of Technology (MIT), in 2017. Micali is renowned for his contributions to cryptography, including co-inventing zero-knowledge proofs and other cryptographic protocols. He received the Turing Award (in 2012) for his fundamental contributions to the theory and practice of secure two-party computation, electronic cash, cryptocurrencies, and blockchain protocols.
The idea behind Algorand was to create a blockchain platform that addresses the limitations of traditional blockchains, such as slow transaction speeds, scalability issues, and reliance on resource-intensive consensus mechanisms. Algorand aims to provide a scalable, secure, and decentralized solution by introducing a unique consensus mechanism known as Pure Proof-of-Stake (PPoS), which allows for efficient and decentralized selection of block proposers and verifiers.
This approach reduces the need for expensive mining hardware. It enables near-instantaneous transaction processing, making Algorand suitable for various applications requiring fast settlement, including financial transactions, decentralized exchanges, and gaming platforms. Security is a fundamental consideration in Algorand, and cryptographic techniques like Verifiable Random Functions (VRFs) are integrated to ensure the integrity and authenticity of transactions and blocks. The platform is designed to be resilient against tampering and fraud, and its emphasis on decentralization ensures that it remains open and permissionless, allowing anyone to participate and contribute to its ecosystem.
Here's how Algorand works🤔
Algorand's working mechanism is based on its unique consensus protocol known as Pure Proof-of-Stake (PPoS), which addresses the limitations of traditional Proof-of-Work (PoW) and Proof-of-Stake (PoS) mechanisms by providing a scalable, secure, and decentralized solution. Here's how it works:
Cryptographic Sortition: Algorand uses a cryptographic sortition process to select a committee of validators for each round of block creation. This committee is chosen based on the amount of Algo (the native cryptocurrency of the Algorand network) held by each user, ensuring that the committee is composed of users with a stake in the network. This process ensures that every user has an equal opportunity to participate in the consensus process, promoting decentralization and inclusivity.
Proposal Generation and Block Voting: Once the committee is formed, it engages in a two-step process to reach a consensus. In the first step, each committee member proposes a block, which is then broadcast to the network. In the second step, committee members vote on the proposed blocks privately, using Verifiable Random Functions (VRFs) to ensure the integrity and fairness of the process. The block with the most votes is selected as the next block in the chain, which is then added to the blockchain.
Scalability and Security: PPoS allows for parallel transaction processing, resulting in faster and more efficient processing. It ensures security by preventing any single entity from gaining control over the network and using cryptographic techniques to prevent malicious activity. The mechanism is also highly energy-efficient, consuming significantly less than PoW mechanisms.
Fork Resistance and Finality: Algorand's PPoS prevents forks by using a unique mechanism called "binary Byzantine agreement." This mechanism ensures that all participants agree on the validity of transactions and maintains the integrity of the blockchain. It achieves fast transaction finality in a single consensus round, instantly confirming transactions.
Decentralization and Governance: PPoS allows token holders to participate in decision-making, ensuring a decentralized and inclusive governance model. This promotes a more inclusive and democratic network where decisions are made collectively.
The Current Project Update of Algorand
Algorand's latest news, ‘Algorand 2024 Timeline,’ states its project roadmap and plan for achieving its goals in 2024.
In 2024, Algorand is committed to improving its permissionless blockchain infrastructure while setting new standards in performance and usability. The network's performance will be elevated with dynamic round times, and developers can now use Python to build on Algorand. Two upgrades to the protocol will increase its decentralization, giving users more power and improving the chain's autonomy. Algorand aims to redefine the blockchain landscape, focusing on performance, resilience, and usability.
The Sicilian Defense: Dynamic round times
Sicilian Defense: A combative opening strategy that typically results in positions characterized by dynamism and sharpness.
Algorand's dynamic round times increase network performance, allowing for higher throughput and lower block times. The upgrade adjusts block finality based on network congestion, resulting in average round times of less than 3 seconds. This protocol upgrade was voted on January 10th and went into effect on January 17th, marking a significant step towards improving Algorand's performance.
The Ruy Lopez: AlgoKit 2.0
Ruy Lopez: A formidable chess opening, widely embraced by players of all skill levels, and sure to bring about winning results.
Algorand has integrated Python programming language to enable wider adoption of decentralized technology. AlgoKit 2.0, a comprehensive toolset, makes it easy for developers to build, test, and deploy on Algorand. Python on Algorand is available for developer preview. AlgoKit will see upgrades throughout 2024, including improvements to local net and sandbox, Python unit testing, a visual debugger tool, smart contract upgrades, and app-building libraries.
The Queen’s Gambit: Non-archival relays
Queen’s Gambit: A popular chess opening that involves sacrificing a pawn for a greater strategic advantage. Note: The pawn can be regained.
Algorand is modifying its network topology to make it more efficient and environmentally friendly. Instead of requiring all relay nodes to store a complete copy of the ledger, only some nodes will be tasked with that responsibility. This transition will significantly reduce costs and make the network more streamlined.
The Réti: Consensus incentivization
Réti: An opening for strategically-minded players renowned for its reliability and effectiveness, especially in long-term positional battles.
Algorand will incentivize participation in its Pure Proof-of-Stake mechanism, which will increase the number of consensus nodes and boost network security and decentralization. Consensus incentives will come from transaction fees, and the Algorand Foundation will contribute funds in the short-to-medium term.
To learn more about the proposed design for implementing consensus incentivization, read “Algorand Consensus Incentivisation: An Algorand Foundation discussion paper” or watch John Woods, Algorand Foundation CTO, talk through the paper.
The Capablanca Variation: P2P gossip network
Capablanca Variation: Moves played by a world chess champion known for his endgame skills and unmatched ability to look at a position briefly and come up with the best move.
Algorand is shifting from a relay-style network to a P2P gossip network to promote decentralization. This means data flows directly between consensus nodes, reducing reliance on relay nodes and making the network more resilient. This aligns with the core ethos of decentralized technology and ensures Algorand's autonomy in the long run.
A Glimpse into 2025
Embarking on the next chapter of innovation in 2025, Algorand will continue to pursue technical excellence, further solidifying its commitment to redefining accessibility in the blockchain. They will support even more programming languages in AlgoKit 3.0 and incorporate more world-class tooling and debugging capabilities, promising an unparalleled development experience. Algorand developers will have an even more diverse set of tools at their disposal, fueling the long-term evolution of blockchain development.
The current market of Algorand (ALGO)
As of 16 March 2024, the live MNT price is $0.3097, with a 24-hour trading volume of $195,480,326 USD. This represents a 3.38% uptrend in 24 hours, and signals increased market activity.
Here are some additional statistics:
Market Cap: $2,493,641,658 USD
Trading Volume in the last 24 hours: $195,574,241 USD
CoinMarketCap ranking: #53
Circulating Supply: 8,066,824,360 ALGO
Total Supply: 8,066,824,360 ALGO
Fully Diluted Market Cap: $3,090,592,642
The Highest Price: $3.56 - Jun 20, 2019 (over 4 years)
The Lowest Price: $0.08751 - Sep 11, 2023 (6 months)
Projects by category on Algorand
Total value locked (TVL) in DeFi, March 2023. Source
According to Changelly.com
By 2024, Algorand's price is predicted to range between $0.47 to $0.71, with an average of $0.59.
By 2025, the price is expected to range between $1.01 to $1.52, with an average of $1.27.
By 2035, the price is predicted to range between $1812.49 to $2718.73, with an average of $2265.61.
These are just predictions and should never be considered financial advice. Always do your due diligence before investing in cryptocurrencies. Various factors, including market trends, technological advancements, and the regulatory environment, can influence the future value of ALGO.
Algorand: Why Algorand's Centralized Relay Nodes Spell Disaster for Decentralization
Algorand offers several advantages and unique features that set it apart from other blockchain platforms:
Pure Proof-of-Stake (PPoS): Algorand uses a unique PPoS consensus mechanism, which is designed to avoid the "rich getting richer" problem by selecting miners at random, regardless of their investment in the system. This approach addresses security, scalability, and speed-related concerns, making it a significant improvement over traditional Proof-of-Work (PoW) systems.
Scalability and Speed: Algorand is designed to solve the blockchain trilemma, which involves achieving scalability, speed, and security simultaneously. It achieves this through its Byzantine Agreement (BA) protocol, which allows for low-latency transactions and no forks, ensuring that all transactions are completed within seconds.
Transaction Fees: Algorand offers minimal transaction fees, with the fee determined solely by the transaction size. This is in contrast to Ethereum, which charges gas fees for transactions. Algorand's architecture also supports the creation of Algorand Standard Assets (ASA), which can be executed off-chain, further reducing transaction fees.
Two-Tiered Blockchain Architecture: Algorand employs a two-tiered blockchain design, with layer 1 for creating ASA and layer 2 for more complex smart contracts and decentralized apps that run off-chain. This design allows Algorand to handle transactions at a rate comparable to large payment networks, enhancing its scalability and efficiency.
Security and Stability: Algorand's architecture is designed to protect against Sybil attacks, scale to accommodate millions of users, and resist denial-of-service attacks. It uses cryptographic sortition to select committee members confidentially and non-interactively, ensuring that the network remains secure and stable.
Community Governance: Algorand has a community governance initiative that allows ALGO holders to participate in decision-making about the future of the platform. This feature fosters a sense of ownership and engagement among its users.
Interoperability and Innovation: Algorand is positioned as a contender in the smart contract race, with a focus on creating the greatest technology possible in the DeFi and NFT space. Its innovative approach to blockchain technology, including layer-2 scaling solutions and off-chain computing, positions it as a leader in the blockchain ecosystem
Like any other project, the Algorand has its disadvantages and challenges that users may face. Here are some of the main ones:
Permissioned centralised Relay nodes: Algorand's high performance is due to powerful relay nodes that handle network traffic instead of validators. However, running relay nodes is expensive, limiting decentralization. People running relay nodes are rewarded with newly minted Algo tokens, but only if approved by the Algorand foundation, making it permission. Relay nodes indirectly influence consensus by choosing which blocks or transactions to relay.
Prone to Censorship: Ethereum faced significant problems when the US Treasury banned Tornado cash, leading many validators to comply with OFAC rules and not include such transactions in their blocks. However, independent validators ultimately prevented any censorship. Conversely, if Tornado cash were on Algorand, Relay nodes would most likely not relay any blocks containing such transactions, resulting in censorship. This is because Algorand lacks a backup option for Relay nodes. It is crucial to use high-powered hardware for scaling, but it is equally important to have a more decentralized backup option in case powerful nodes collude and censor.
Lack of long term incentives for Relay nodes - Relay nodes serve as the fundamental backbone of the network, and the cost of running them is incredibly high. Unfortunately, the cost is so steep that people cannot afford to run them voluntarily. However, Algorand will hit its maximum supply after 2030 and will no longer be able to provide rewards for running relay nodes. The question is, will people continue to run them without these incentives? Although there are discussions of funding relay nodes through fees, Algorand's fees are relatively minute. It would require the network to run almost continuously at full throttle to generate enough fees to cover the costs of the relay nodes.
No longer easy to stake or run nodes: It is important to note that the requirements for running an Algorand validator or node have significantly increased. Previously, a cheap Raspberry Pi could easily handle the job, but now you need at least an 8-core CPU and a 1 GB/s connection with low latency. These specs are approaching those of data centers and are no longer accessible for the average user.
Extremely poor distribution: Almost all Algo tokens went to the team and insiders. Algorand has one of the worst token distributions in the space. Only 0.05% went to the public.
Lack of incentive to stake: Algorand's decision to stop offering rewards for staking has led to a significant decrease in the number of validators. Despite the increased validator requirements, there is no incentive for people to stake with Algorand, resulting in very few people actually doing so.
Even the founder Silvio Micali has acknowledged that incentives are necessary for a successful system. Previously, over 80% of Algo tokens were staked when rewards were being offered, but now that incentives are no longer available, only 34% of tokens are staked. This lack of incentive is putting the security of Algorand at risk. Additionally, the initial distribution of Algo was very poor, which means that the 34% may just be held by a few entities, making it difficult to assess the actual distribution of the stake.
No adoption: Despite boasting strong connections with businesses, supporting massive throughput at fast speeds, and having a well-known brand within the space, Algorand's lack of adoption is a significant concern. The poor distribution has resulted in no strong community of early adopters, and the price has not done well even for those who did adopt early, leading to bitterness within the community.
While any chain with high throughput is prone to state bloat, Algorand's adoption rate is not high enough to make state bloat an immediate issue. However, it is important to note that Algorand is working on state sharding as a potential solution in their longer-term roadmap.Lower robustness
Percentage of voting power required for liveness:
Longest chain: 51%
Classic BFT: 67%
Algorand: 75%
Avalanche: 80%
It’s not as bad as Avalanche, but Algorand is less robust than most other cryptocurrencies. Because the Classic BFT model introduced randomness, the liveness requirements had to be increased in case an attacker was randomly given a high percentage of the subsample for a block.
Algorand Foundation wasting money: It seems evident that the Algorand Foundation is recklessly squandering funds by sponsoring extravagant events such as the Drone Racing League with a staggering $100 million for 5 years, especially considering that the league was worth only $200 million at the time of sponsorship. This type of behavior is discouraging potential investors from purchasing Algo as it indirectly funds the Foundation's wasteful spending.
Conclusion
In conclusion, Algorand presents a compelling vision for the future of blockchain technology, boasting innovative features such as Pure Proof-of-Stake (PPoS), scalability, speed, and minimal transaction fees. Its commitment to decentralization, security, and community governance sets it apart in the competitive landscape of blockchain platforms. However, it is crucial to acknowledge the challenges and drawbacks that Algorand faces, including concerns about centralization due to relay nodes, potential censorship risks, lack of long-term incentives for network participants, poor token distribution, and limited adoption.
Despite these challenges, Algorand continues to evolve and address its shortcomings, as evidenced by its ongoing efforts to improve decentralization, scalability, and usability through protocol upgrades and community initiatives. As an investor or participant in the Algorand ecosystem, it's essential to weigh these advantages and disadvantages carefully and consider the project's long-term prospects.
In the competitive landscape, Algorand faces rivals such as Headera, Celo, Fantom, Avalanche, Archway, etc. Each project has unique strengths and focuses, making the storage industry dynamic and highly competitive.
Ultimately, whether to engage with Algorand depends on individual risk tolerance, investment goals, and belief in the project's potential to overcome its challenges and achieve its vision. As with any investment or participation in blockchain technology, thorough research, due diligence, and careful consideration of the risks and rewards are paramount.
📌Must Read
SEC Delays Approval Of BlackRock And Fidelity's Spot Ethereum ETF Proposals
Summarized: The piece discusses the current state of the Ethereum ETF market, including recent delays in the SEC's decision on spot Ethereum ETF applications from BlackRock and Fidelity, and analyzes the potential impact of Ethereum ETFs on the market, including the possibility of increased institutional investment and mainstream adoption.
The SEC is having a sweet time deciding on BlackRock and Fidelity's spot Ethereum ETF applications. They've delayed their decision - yes, again! But don't worry, it's not all doom and gloom. The price of Ether continues to soar, up 56.7% in the past month alone! And let's not forget that May 23rd is just around the corner, which could be a big day for VanEck's spot Ethereum ETF application.
Now, we know what you're thinking... will Ethereum ETFs even make a splash in the market? Bloomberg ETF analysts James Seyffart and Eric Blachunas seem to believe they won't be as impactful as Bitcoin ETFs. They've described them as "small potatoes" compared to their Bitcoin counterparts. But hey, who knows? Maybe they'll surprise us all!
On another note, have you ever considered whether Ethereum is even a commodity? It's a question worth pondering. Commodities typically have fewer regulations, and the SEC watches securities more closely. So, what does this mean for Ethereum ETFs? SEC Chair Gary Gensler might see ETH as a commodity, but the SEC hasn't officially commented on this.
Let's talk about the age-old debate - do people even want an ETH ETF? Some argue that more investment means a higher Ethereum price, which sounds great! Who wouldn't want a life-size wax figure of Stone Cold Steve Austin cracking a beer in their home office? 🤣 On the other hand, others believe that putting too much Ethereum in financial firms' hands risks centralizing network control. Food for thought, right?
Here's the kicker, though - it might not even matter what we think! The SEC has already approved the trading of Ethereum futures in the US, essentially painting themselves into a corner. This means they'll probably have to approve an ETH ETF, just like they did with Bitcoin.
Japan’s largest mobile phone firm NTT Docomo, launches web3 wallet
Summarized: NTT Digital, a subsidiary of NTT Docomo, has launched a consumer-facing Web3 wallet in Japan, aiming to provide easy access to cryptocurrencies and NFTs for both experienced and novice users, with plans to expand its services through partnerships and APIs.
NTT Digital, a subsidiary of telecoms giant NTT Docomo, has just launched a consumer-facing Web3 wallet in Japan. And here's the kicker - it's not just for seasoned crypto enthusiasts; they're aiming to make it accessible to everyone, including those who are new to the wild world of non-fungible tokens (NFTs)! 🤯
So, what sets this wallet apart from the rest? Well, for starters, signing up is super easy - all you need is your phone number! 📱 Plus, they've included nifty features like backup options for your private keys and biometric authentication.
But wait, there's more! They're supporting not one, not two, but FOUR blockchains right out of the gate: Ethereum, Avalanche, Polygon, and Astar Network. 🌐 If that wasn't enough, they plan to release an API later this year for corporate clients who want to integrate this tech into their own apps. 💻
You might be wondering how NTT Digital got into the Web3 game. Well, they launched their Web3 subsidiary last year and have been building relationships with various companies ever since. We're talking big names like Startale Labs (the founder of Astar Network), Hitachi, and Sumitomo Mitsui Trust Bank! 🔍
Did we mention that NTT Docomo invested 500 to 600 billion Yen ($3.4 bn to $4.1bn USD) in Web3 technology after the FTX collapse in 2022? Yeah, they're pretty serious about this stuff! 💰
Finally, they've even partnered up with Monex, the owner of Japan's largest crypto exchange, Coincheck, to create a joint venture focused on securities brokerage and security tokens. 💸
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