What is Algorand? - The Blockchain Network That Grew 600% In 2021

Mateusz Raczyński
11 January 2022 · 8 min read

We often get inquiries for solutions that would be built on blockchain – but the founders are still not sure on which technology should they build on. There’s no straight answer here, but we frequently encourage using Algorand in favor of other technologies.

We’re not limiting our services to this blockchain, but we genuinely believe in this stellar technology, and that’s why we've become one of Algorand’s official development partners. As a company that has delivered plenty of solutions both on Algorand and using other technologies, we’re in a good position to lay out why you might want to use it in your project and when it’s time to reconsider.

First, let’s focus on where’s the potential and what could put Algorand in a position to grow 600% in 2021.

What is Algorand?

Simply put, Algorand blockchain is a distributed, decentralized, and open-source network that uses a variation of the Proof of Stake consensus algorithm, coined as Pure Proof of Stake (PPoS).

In 2017, the computer scientist and MIT Professor Silvio Micali co-authored the white paper of the Algorand platform with Jing Chen. Professor Micali is considered as one of the fathers of modern cryptography who has received a prestigious Turing Award for his accomplishments in the field. He co-created Zero-Konwledge Proofs which–in short–enable proving that one party knows a secret without actually revealing it to the verifier. ZKPs were already used in the blockchain sphere, for example by ZCash (2016) or Monero (2014) and several others – although none of them was associated with Mr. Micali.

The network has been launched in 2019 and ever since gets positive reception, supported by the continuous network growth.

Algorand’s native cryptocurrency, Algo tokens, powers the Algorand protocol and is currently a leading cryptocurrency, with a supply cap of 10 billion Algo. Block validators receive their fee in Algos, while protocol users use these tokens for staking, governance, and–of course–payments.

Why Algorand is one of the highest quality projects in the space? We believe that these are the top traits:

  • Simple programming language
  • Faster transaction speeds
  • Cheap transaction costs
  • High scalability
  • Energy efficient
  • Secure smart contracts
  • Developer-friendly
  • Carbon-negative

Now, let’s get into another level of detail. Let's elaborate on these features to grasp why Algorand is one of the best distributed and decentralized platforms in the crypto domain.

The Features Of Algorand

The following characteristics make Algorand the most sought after technology in the blockchain sector:

Easy Smart Contract Programming Language

Algorand uses the TEAL (Transaction Execution Approval Language), Clarity, Reach, and Python programming languages for communicating with Algorand Virtual Machine (AVM) and writing smart contracts.

Contrary to Ethereum’s Solidity, these languages are decidable, meaning that the developer can understand the code’s outcome while looking at it. This eliminates whole classes of bugs and improves security.

Code Auditability

The most important difference between Solidity and Algorand’s programming languages is their auditability – both financially and from a security standpoint. Code audits of Ethereum smart contracts can be extremely costly – we’re talking about six figure costs in USD. That’s still pricey in Algorand, but the quotes are significantly lower – you’ll save a good few dozen thousand dollars on that part.

High Transaction Speed

The blockchain records transactions in a few seconds, making it an extremely fast blockchain process. The block proposal time is just 0.5 seconds and the new block finalization time is 2.5-4.5 seconds – this is the real transaction time from the user’s perspective.

Low Transaction Cost

Unlike Ethereum, Algorand does not involve gas fees. However, a transaction requires some money depending on its size, with the minimum fee being just 0.001 Algo or $0.002, depending on the current Algo prices.


Running on the Proof of Stake mechanism makes the network highly scalable, with nearly 1200 transactions per second (TPS). The block pipelining process is set to further increase the performance of Algorand to 45,000 TPS.


The network is extremely energy-efficient with negative carbon footprint, making it a highly sustainable process. Algorand Proof of Stake produces 0.0000004 kg of carbon dioxide compared to 200 kgs in a different blockchain for minting a single NFT.

Even with such low CO2 emissions, Algorand partnered with ClimateTrade to offset the remaining carbon with smart contracts and a sustainability oracle, making it carbon negative on a technology level.

Forkless nature

Algorand is forkless by design. This solves a problem that might make some NFTs questionable in the future. For example, whenever Ethereum updates as a fork, it leaves the legacy chain running. If there were NFTs on the chain prior to the fork, that means the new network will create their duplicates and that might impact their prices. That also creates problems with identifying the true owner – if they can be sold separately on the two forks, which is the ‘real’ one?

Developer Friendly

Algorand encourages developers to build in this ecosystem through various initiatives. There’s a set Algorand Standard Assets (ASA) framework for token development, which also simplifies dApp development. Developers can also use a set of existing tools or contribute to the platform’s development, since it's open-source.

How Does Algorand Work?

Algorand boasts of some of the most enviable traits in the blockchain domain. But what is the process that makes the Algorand Foundation so efficient?

To begin with, the protocol runs on a variation of the Proof of Stake consensus, called Pure Proof of Stake. The PPoS mechanism is very democratic, as users need to stake just 1 Algo for participation. Algorand Pure Proof of Stake runs on a two-stage block production process: the block proposal and block finalization phase.

To propose a new block, a Participation Node is selected depending on its Algo stake. During the proposal phase, Algorand leverages the Verifiable Random Function (VRF), a mechanism that randomly and secretly selects a block leader. The secrecy and randomness ensure additional security because hackers will never know whom to target.

In the second stage, the consensus protocol adopts a voting process through which a rotating committee checks for errors in the blocks. If the committee finds no instances of double-spending or overspending, the protocol adds the block to the blockchain.

Algorand also utilizes a two-layer smart contracts system for transaction finality. The Layer-1 Algorand Smart Contracts (ASC1s) are used for assets launch and instantaneous tokens and data transfer.

On the other hand, Layer-2 Algorand contracts facilitate complex contract execution and dApps development. This means that Algorand can offer immediate transaction finality with near-instantaneous block finality through performing transactions on layer 1 and taking complex, more resource-heavy calculations to the second layer.

What Is Algorand Used For?

Algorand, with its highly advanced and open source technology, is well-positioned to create a borderless economy where everyone can participate.

For example, Algorand has multiple uses in the Decentralized Finance (DeFi) sector. Thus, users have access to a wide range of exchanges, investment platforms, borrowing/lending protocols, securities trading, etc.

Algorand also facilitates NFT trading, which is currently a growing trend in the market. Low fees and faster settlement provide the perfect opportunity for trading card games, in-game assets, and digital art pieces. Moreover, fractionalization of NFTs following the ASA framework introduces additional liquidity to the luxury collectibles and virtual real estate market.

Stablecoins are creating their market as well, appealing especially to a user who is yet to completely let go of traditional finance. Algorand’s stablecoins provide the option to gain exposure to the crypto market for accessing high yields, without being subject to market volatility. In fact, the Marshall Islands government has chosen Algorand for its central bank digital currency (CBDC).

Additionally, users are utilizing Algorand to participate in the entertainment, supply chain, insurance, infrastructure, digital identity, and miscellaneous sectors. You can read more about Algorand’s use cases here.

The Shortcomings Of Algorand

In spite of such diverse use cases, Algorand does have a couple of drawbacks:

Smaller Network Scale

The Algorand network is not as big and well-connected as Ethereum. Thus, in terms of the scale of the network and the community size, Algorand is significantly smaller. This translates into limited open-source technology support for developers and the individual user.

Early Stage Ecosystem

Due to its nascence, the Algorand ecosystem is not yet fully developed. At the moment, there are fewer bridges (Yieldly and Algomint) and automated market makers (AMMs) integrated into Algorand. There is only the Tinyman AMM and Algodex is coming soon. We’re also building such a solution for Algorand.

What Does The Future Hold For Algorand?

Algorand is still in its early days, but that also means there’s much potential to grow in the coming years. In fact, there are certain factors that work to the advantage of Algorand.

Algorand engineers have learned from the mistakes of their predecessor blockchains to create a system with high security and sustainable architecture. Additionally, there is less competition within the network, leaving the developers free to build without any kind of pressure and getting more interest from the already Algorand-native users.

However, the most important advantage of Algorand is that it boasts of a future-proof architecture. The blockchain uses one of the most advanced consensus models available in the domain to make the network cheaper, faster, scalable, secure, and carbon-negative. Thus, the ecosystem is already ready to host the innovations of the crypto sector in the coming decade.

Looking for a blockchain to develop your dApp, an NFT collection, or solution for sustainability? Algorand should definitely be on your shortlist, but bear in mind that the whole crypto space is early on its way to mainstream use. The situation might unfold in numerous ways, but Algorand has everything to stay around for the next decades, together with other great blockchain projects.

Note: We hope you found this article useful, but remember to always do your own research – we can advise you on which blockchains might be the best for you from a technology perspective, but that’s not an investment advice.

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Read also:

Best white label crypto exchange

List of smart contracts platforms

Whitelabel NFT Marketplace by Ulam Labs

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