All publications of Hamza Umer . اسلام آباد , Pākistān
Algorand’s Pure Proof Of Stake Consensus Advantages
The rapid development of blockchain technology and their numerous emerging applications has received huge attention in recent years. The distributed consensus mechanism is the backbone of a blockchain network. It plays a key role in ensuring the network’s security, integrity, and performance. Most current blockchain networks have been deploying the proof-of-work consensus mechanisms, in which the consensus is reached through intensive mining processes. However, this mechanism has several limitations, e.g., energy inefficiency, delay, and vulnerable to security threats. To overcome these problems, a new consensus mechanism has been developed recently, namely proof of stake, which enables to achieve the consensus via proving the stake ownership. This mechanism is expected to become a cutting-edge technology for future blockchain networks.
What is pure Proof of stake?
Pos consensus model called Proof-of-Stake. It has benefits of being both fast and secure. It works by randomly choosing small committees from a large pool of validators for each consensus round. The large pool of validators ensures decentralization and randomization ensures security, while the use of small committees for consensus makes for a fast and highly scalable consensus method. Proof of Stake took a significantly different path to reaching consensus. Unlike the Proof of Work algorithm, which uses computational resources to solve cryptographic problems to secure the network and validate blocks, the Proof of Stake algorithm uses an election process that selects the node that will validate each block.
This election process can use a number of factors including randomization, the number of coins being held in the staking wallet, the staking age of coins, or other factors.
Difference between POW and POS
Proof of Work and Proof of Stake systems differ in how their cryptocurrencies are created and how individuals are rewarded. In the case of Proof of Work blockchains the miners are rewarded with newly created cryptocurrency as part of the mining process. In the case of Proof of Stake blockchains the stakers are typically rewarded using transaction fees.
One other difference that is immediately noticed with Proof of Stake systems is that their blocks are “forged” rather than being “mined” like in Proof of Work systems. Many of the Proof of Stake systems begin as Proof of Work systems and later switch, while others will get their start by selling a stash of pre-mined coins.
Algorand Pure Proof-Of- Stake approach:
Algorand is an open source public blockchain based on a pure proof-of-stake consensus protocol that supports the scalability and transaction finality for billions users, and protocol that aims to deliver decentralization, scale, and security for everyone. Whose goal is to create a transparent system in which everyone can achieve success through decentralized network using POS protocol.
Main advantage by choosing proof of stake:
⦁ Easily scalable to accommodate thousands of transactions per second;
⦁ As the number of nodes increases so to does security and speed increase;
⦁ Each individual virtual chain is able to customize its consensus model to optimize for cost-savings, throughput, fairness or latency;
⦁ The use of Byzantine fault tolerance.
Proof of stake solves the resource usage issue, because it does not use miners to solve complex puzzles. Instead it uses validators, or entities who hold coins (a stake in the system) and are able to prove transactions and blocks based on their “stake” in the system.
In the proof of stake, the validators are paid only the transaction fees of the network, there are no mining payouts. The chance of being selected to create the next block in the chain is dependent on the amount of coins held by the validator. More coins means a greater change to be chosen. So, a person with 5,000 coins is five times more likely to be chosen to create the next block versus someone with 1,000 coins.
Once the block is created it is then committed to the blockchain, typically by having some system to sign off on newly created blocks. There are different ways to handle this, but they are all subject to the same problem. Thus proof-of-stake consensus mechanisms, effective governance and community coordination can protect networks even after a 51% attack. Honest nodes can ‘fork’ the network to render the attackers’ resources worthless.
This cross-chain access is achieved through the use of smart contracts, One example of this in action is an atomic swap. where developers are capable of securely moving a part to expand across the globe, by tokenized assets such as derivatives, options, swaps, securities, and more. A cross-chain atomic swap may indeed take 3 hours to complete. In Algorand, all transactions are final and instantly confirmed.
Cross-chain Interoperability Advantages
⦁ It avoids the need for difficult and painful migrations if a move from a private to public blockchain (or vice-versa) is needed;
⦁ Developers are able to use the layer 2 ecosystem for their tokens (i.e. exchanges and wallets)
⦁ Take advantage of both scalability and the liquidity of the base-layer
How Staking Works
Those users interested in participating in the forging process on a Proof of Stake blockchain can do so by locking a number of coins as their stake. The size of the stake is used to determine if an individual node will be selected to validate and forge the next block. Those with a larger stake have a greater chance of becoming the next to validate a block and receive a reward.
Any time a node is selected to forge a block it begins by checking each transaction in the block to determine if they are all valid. If they are the node will forge the block and add it to the blockchain. In return the node receives the transaction fees associated with that block as a reward.
Several unique variations on the basic Proof of Stake algorithm have been added to this process in order to avoid the wealthiest nodes being favored consistently in the selection process. Two of these methods are Coin Age Selection and Randomized Block Selection.
Coin Age Selection
This method chooses validating nodes based on how long the coins held there have been staked. The number of coins being staked are multiplied by the length of time those coins have been held to determine coin age.
After forging a block the coin age is reset to zero which has the effect of making certain a period of time must pass before those coins can be used again to forge a block. This method prevents nodes with large stakes from controlling the blockchain.
Randomized Block Selection
In this method the selection isn’t really as random as you might think based on the name. The validating node is selected by searching for nodes that have the combination of the largest stake and the lowest hash value. Because blockchains make the holdings of each address, and thus the size of stakes, public it is usually possible to forecast the next forger based on available information.
There are many different cryptocurrencies using the Proof of Stake method, and each one has its own combination of methods and rules used to validate and forge new blocks. Each combination was selected as what the developers feel is best for the blockchain and for its users.
Why Use Staking?
The stake in the Proof of Stake system is a financial incentive for the operation of nodes, and to ensure that nodes will not validate fraudulent transactions.
This works because any time the network detects a fraudulent transaction the node that forged the transaction loses some part of its stake, and is blocked from forging blocks in the future. This means as long as the stake remains higher than the forging reward the validating node stands to lose more by forging fraudulent transactions.
This is also a secure system because to control the network and freely approve fraudulent transactions a node would have to own a stake equal to 51% or more of all staked coins. In nearly every case this is impractical if not impossible given the large value of most blockchains. Imagine trying to control 51% of the circulating supply of a cryptocurrency with a market capitalization of $1 billion.
As you can see by this point, the major advantages of using the Proof of Stake algorithm are energy or resource efficiency and blockchain security.
Where Proof of Work systems have seen mining become increasingly centralized due to the expenses involved with running a mining rig, the Proof of Stake systems are increasingly decentralized because it is both cheap and easy for users to run their own nodes.
This encourages an ever greater number of users to set up their own nodes. Additionally, the small forging reward and decreased need for releasing large amounts of coins as a reward often helps to stabilize the price of any particular Proof of Stake cryptocurrency.
Algorand (ALGO) was created as a decentralized, permissionless blockchain with the goal of enabling a borderless economy. It aims to solve the major blockchain problem of scalability while maintaining decentralization and security. Algorand does all this and also gives users extremely low transaction fees, which is crucial if the project expects to create a borderless economy.
Algorand uses a unique consensus algorithm known as Pure Proof of Stake (PPoS). It allows the system to reach consensus without a central authority, and can tolerate malicious actors in the system so long as the majority of the stake is not malicious. Unlike some other Proof of Stake systems, PPoS has no mechanism for delegation, which avoids the problem of a single user or small set of users gathering a majority of voting power.
The Algorand network also allows for the construction of decentralized applications, and with a reported throughput of 1,000 transactions per second it is a good alternative for dApp developers looking for a faster, low cost network.
Anyone holding 1 ALGO or more in any non-custodial wallet is able to earn staking rewards with each block created. The staking rewrds were initially set at a 10% annual rate, but as of April 2020 the annual reward is 5.46% according to StakingRewards.com or about 8% on Binance Staking.
We like Algorand for staking because it is made quite simple. No nodes need to be run, and there are no other special requirements. Users only need to hold their ALGO in a supported non-custodial wallet, and payments are made roughly every 20 minutes.
To protect from the possibility of a 51% attack, the proof protocol seems like a good choice. It offers the benefits of both of the most utilized consensus algorithms, and the hybrid is more secure than either separately. proof-of-stake consensus mechanisms, effective governance and community coordination can protect networks even after a 51% attack. Honest nodes can ‘fork’ the network to render the attackers’ resources worthless.
Join us : https://www.algorand.com/
The new-age Network:-Algorand and DeFi,decentralized finance solutions
Decentralized Finance (DeFi) is the merger of traditional bank services with decentralized technologies such as blockchain. DeFi can also go under the name Open Finance due to its inclusive format. Importantly, the DeFi community seeks to create alternatives to every financial service currently available. These services include items such as savings and checking accounts, loans, asset trading, insurance, and much more. The DeFi stands for Decentralized Finance and what does this really mean? Looking at the evolution of currency from trade by barter to digital currency, currency has always been controlled by a centralized body otherwise known as Central Bank. Decentralized finance, in a nutshell, has to do with all the financial application that is running on top of the blockchain. It is a system of controlling our assets through an open-source and through an ecosystem that allows everybody to have access to financial transparency without waiting for any central authority to take decisions. With decentralized finance, everyone is giving the chance to interact with the system throughout P2P and Dapps.
What is DeFi Offering?
Unlike traditional finance which can also be referred to as centralized finance, decentralized finance does not need any third party or intermediaries before users can have control over their assets or interact with the system. DeFi is offering you control of your own assets.
Though many new-age banks and fin-tech firms promise to provide more control to the users, in reality, you are still trusting in them to manage your funds. The objective of DeFi is to give you full control of your assets, and it can because of decentralization and blockchain technology. Also, many developers of financial apps are adopting open-source protocols for trading through decentralized exchanges.
Importance of DeFi:
DeFi continues to play an important role in the evolution of the financial sector for many reasons. For instance, DeFi expands the functionality and reach of money. Since all you need to participate in the DeFi sector is a Smartphone, there is huge potential to expand the global economy. Consequently, analysts see this sector as one of the most important currently under development in the crypto space. This commitment to the development of a DeFi ecosystem is easy to recognize. Importantly, DeFi is the fastest growing sector in blockchain.
The Algorand blockchain is entirely decentralized, which means there is no powerful central authority or single point of control. .A unique committee of users is randomly and secretly selected to approve every block. It solves the blockchain trilemma by providing scalability, decentralization, and security at the same time without compromising anyone of the element. The fact that all protocols are open-source allows anyone to build new financial products on top of them. Developers across the globe can collaborate with each other to create new products leading to faster innovation and a secure network.
Anyone can store, trade, and invest their assets in blockchain securely and earn a much higher return than from the traditional financial system. Since there no intermediaries handling your asset, you have complete control over your investments.
Algorand protocol runs on Pure Proof of Stake, that is built on byzantine agreement. A design implementation that defines how people can participate in a decentralized network while preventing forged identities at the same time. It is a mechanism that when combined with a Byzantine agreement protocol creates a way for a large group of people to achieve consensus. Pure proof-of-stake means that for anyone wanting to participate in the Algorand network, they can signal that intent by flagging an account with Algo as a participant.so there is no centralization involved in this Blockchain Network.
How categorize DeFi solutions on Algorand:
The Algorand protocol is the ideal blockchain. To understand DeFi solutions and capabilities with an efficient blockchain infrastructure should look in the Algorand protocol. Instead, these platforms integrate advanced smart contracts to streamline their business systems. Smart contracts are preprogrammed protocols that initiate upon receiving crypto to their address. Importantly smart contracts can handle a huge variety of tasks from customer approval to making payments. It’s important to understand what characteristics and reason give Algorand for the DeFi solution are these:
Open-Source and permissionless:
AS Algorand is an open sourced and permissionless platform. Open source coding refers to the fact that the coding is made public. Additionally, anyone can participate in DeFi Dapps without concern for approval. Additionally, anyone can participate in the Network without concern for approval and participate from all over the world, and make their users decision free. In this way, anyone can audit it and validate its functionality, security, and capabilities. Open-source codes are far more stable and secure than private codes because of this community interaction. Additionally, it provides more confidence in the platform because users can rest assured that no hidden malicious coding is operating in the background
Algorand provides the world with new levels of transparency. Transparency provides trust for the users. Network participants have the ability to access holdings and transactions of public addresses using a block explorer, used to search the blocks of a blockchain, their contents, and their relevant details. Programs such as block explorers can help people track and trace decentralized transactions of non-privacy focused coins.
True Decentralization of Finance:
Algorand offers true decentralization. Any platform that is based on Algorand’s protocol will be truly and fully decentralized. Eventually, Finance will be truly decentralized if DeFi is incorporated on Algorand. It store data cryptographically on a distributed ledger so that all users have equal rights over the data. Algorand’s pure PoS protocol and consensus mechanism is what makes it able to offer true de-centralization.
Interoperability is the main pillar of the ecosystem, Interoperability is critical because it ensures that as more developers enter the space, all the previous work is not lost. Instead, users can stack their DeFi products to expand their exposure to this new age economy. For instance, it’s common for a single user to utilize Stablecoin, decentralized exchanges, and wallets together. This strategy is possible due to the seamless integration DeFi applications possess by a dedicated community of global users who shares Algorand’s same vision of decentralized and borderless future.
In Algorand the users of the applications, who validate blocks on the chain should be rewarded with specific tokens or digital assets that have value. So users can stake their Algo in their wallet. In addition of new block that is added on the chain rewards are given by their staking amount. Excellent wallet! Users are encouraged by the rewards that are paid into wallet just for holding Algo
Faster transaction,high level of security:
While processing transactions on Algorand, there is no need to integrate a payment gateway to accept funds. Hence, the processing of transactions becomes faster. The smart contracts are governed by private keys, which ensures a high level of data security.In Algorand, user have full control of the money without a trusted third-party. With increased anonymity, the signup process is short and does not take much time. The data records available are more reliable as users can access the public blockchain to evaluate the transaction information. Another unique feature of Algorand’s protocol is it’s atomic transfers. This feature helps to achieve split-second transfers with negligible costs and so on. As far, when a user exchanges an asset via a decentralized exchange, the platform never holds the assets directly. Instead, smart contracts are used to enable a simultaneous wallet-to-wallet swap. In this way, there is no main point of weakness within the platform for a hacker to exploit. All of the applications, that run on Algorand, a secure and open blockchain network, which offers high security and is immutable from hacks and intrusions.
To sum up!
Overall, it may be said the main systems of our society undergo a transformation towards decentralization, there will be more demand for DeFi in the future. These new-age applications continue to disrupt the current business systems in remarkable ways. Soon, decentralized applications will set the new standard for the economy moving forward. Consequently, the global economy could receive a huge boost in participation in the coming years. We have seen, how Algorand help to make De-Fi more acceptable and adoptable in the financial sector, and provides the world with a glimpse into a more scalable, open, and decentralized and secure platform to spread out the solutions.
Algorand real world use cases and possible industry applications
Algorand may still be discussed as a hot new topic by many, but it is already embedded in many real-world applications. Algorand Technology is a tool not only for secure, decentralized transactions, but also for greater speed and efficiency. It seems there is no limit to the diversity of use cases.
This article will explore the real world use cases and related technologies, and focusing on how Algorand help to grow your business across a variety of industries and what significant benefits are achieved.
The use-cases we will be looking into will be distributed among the following categories:
Algorand in Capital market:-
Blockchain based technology Algorand has fundamentally changed the way of capital markets approach the exchange of value and will provide the services in increased operational efficiency. In recent decades, capital market infrastructure has been subjected to complicated layers of rules, red tape, and liability. The associated risk incurs high operational costs, and hinders companies by hurting the bottom line and potential customers by raising the bar of entry. Algorand technology can optimize the back-end cost of operations through a secure, permission less, immutable, and single shared source of truth among capital market stakeholders. As we know the Border-less VC Fund also invests in the projects leveraging all the new features of Algorand 2.0.As business build applications on Algorand’s Blockchain, bringing in millions of users, the need for infrastructure development will prompt more infrastructure based startups to join the ecosystem. Algorand and Asia Accelerator powered by capital launch is one of the example.
Algorand in Digital identity:-
Algorand Blockchain-based digital identity system provides a unified, interoperable, and tamper-proof infrastructure with key benefits to enterprises, users, and IoT management systems. The solution ensures protection against theft, assures companies or individuals storing customer information, and provides individuals greater sovereignty over their data. Algorand with shaft Network and Dust identity is one of them.
Why do we need Algorand for digital identity?
Algorand identity management systems could be used to eradicate current identity issues such as
• Data insecurity
• Fraudulent identities
Algorand in social goods:-
Our mission is to leverage emerging technologies to solve the world’s most pressing issues. We will collaborate with NGO’s enterprises, and universities to achieve the sustainable development goals
Algorand in supply chain and product authentication
As we know Supply chains underpin the macro economy and global markets. Algorand provides next-generation solutions to achieve the interoperable exchange of transaction information, transaction history, and transaction statements in compliance with industry standards, and Physical Security and End-To-End Visibility of Supply Chains.
Algorand in sports:-
Major sports organization around the world recognize the potential of Algorand block chain technology to enhance fan interaction, streamline existing operations, enhanced loyalty programs ,and provide new revenue models through tokenized. Chess federation introduces Algorand, you can see Algo on world chess platform.
Algorand in Real estate:-
Real estate is the largest asset class in the world. Algorand Blockchain presents a practical solution to realize the real estate industry benefits are
• tokenization of the real estate assets
• process efficiency of industry operation
• reduced costs from process automation
• access to global asset distribution
• portfolio management
Algorand is the foundational blockchain technology for AssetBlock, ensuring that accuracy, access, transparency, and best-in-class security standards are met. Algorand serves as a record of ownership of real estate assets, asset-related information, proof of loan transactions, and key loan documents.
Algorand in borderless payment:-
Payments are the first and foremost use case of any financial system As we all known that borderless economy is very important now a days .Algorand provides a platform where cross border transactions are executes within seconds .Algorand Decentralized finance leverages principles, to unlock liquidity and growth opportunities, increase financial security and transparency, and support an integrated and standardized economic system,i.e
Algorand Foundation and Circle Bring Digital Dollars Powered by USDC to Algorand Blockchain English
Algorand Provides Native Support of the Pocket Network's Next-Generation Decentralized Infrastructure
Algorand in legal industry:-
The legal industry has been slow to modernize. Algorand alleviates manual process while providing increased accessibility, transparency, cost savings, speed, efficiency and data integrity to the legal industry
• Cost savings
• Data Integrity
Algorand in Government and public sector:-
An Algorand based digital government can protect data, streamline process, and reduced the fraud, and abuse while simultaneously increasing trust and accountability.These are the examples of these:-
Algorand blockchain to develop the CBDC (Central Bank Digital Currency) of the Marshall Islands dubbed Marshallese Sovereign (SOV). SFB Technologies chose the Algorand protocol for its speed, scalability, and security.
Algorand and Blockstack join to adopt Clarity blockchain smart contract language.
An Algorand Blockchain based network government has the potential to solve all the legacy points and enable the following advantages
• Secure storage of government
• Reduction of excessive costs associated with managing accountability
• Reduce potential for corruption
• Increased trust in online civil system
Algorand in Healthcare :-
The healthcare industry can greatly benefits from Blockchain technology. Blockchain technology can help healthcare experts and the overall healthcare industry to improve performance, patient data transparency, tracking, and accountability, as well as reduce costs. Algorand Solutions works with a range of Blockchain products that can be tailored to address various healthcare applications, including the following:
• Secure management of electronic health records
• Patient consent management
• Drug traceability
• Data security in clinical trials
• Incentivization through micropayments
Algorand in Banking and financial services:-
The Algorand Blockchain network enables more openless,inclusive and secure business networks, shared operating models, more efficient process, reduced costs, and new products and services in banking and finanace.It enables digital securities to be issued within shorter period of time, at lower unit costs, reduced counterparty risk. With greater levels of customization.
Algorand demonstrating the following benefits of financial services are:-
Algorand Continues Development of Advanced Financial Assets on the Blockchain as Member of International Swaps and Derivatives Association (ISDA)
Monerium and Algorand enter partnership to issue e-money on the Algorand protocol
Algorand joins wall-street blockchain.
Algorand Foundation Announces Sharia Certification for Islamic Financial Markets Incivility
Blockchain startup Algorand is making its way into Islamic finance
Algorand in energy and sustainability:-
Blockchain technology has the potential to transform the energy sector. The energy industry has been consistently catalyzed by innovations. Algorand presents itself as the next emerging technology to spur growth in the energy sector through its smart contracts and systems interoperability.
• Reduced costs
• Environmental sustainability
• Increased transparency for stakeholders while not compromising privacy
It is obvious, major governments, central banks,
And financial powerhouses are seriously investing in Algorand Blockchain business cases and recognizing that the tide is already turning. And these industries already know the real value of this Blockchain project. Algorand has seen a number of innovative and high-profile use cases now a days and in future as well.