The open-source, decentralised blockchain network Algorand recently rallied to a new multi-year high on the back of institutional investment, new governance features, and a groundbreaking new project with the government of El Salvador.
What is Algorand?
Algorand is a layer one blockchain leveraging a two-tiered structure and a unique variation of the proof-of-stake consensus mechanism, increasing transaction speeds and achieving quicker finality. It can supposedly process over 1,000 transactions per second, a significant improvement over the 17 transactions per second achieved by Ethereum. The blockchain, which was launched in June 2019 by computer scientist and MIT professor Silvio Micali, is another Ethereum rival, which have been piling up in the last months. In contrast to Ethereum, Algorand uses proof-of-stake and distributes block rewards to all holders of its ALGO coin.
Algorand’s main feature that allows it to achieve higher transactions per second with transaction finality under five seconds is its two-tiered blockchain structure. Its base layer blockchain supports the creation of new tokens, atomic swaps between different assets, and smart contracts. As a result, simple smart contracts are executed on its first layer, while the second layer is reserved for decentralised applications and more complex smart contracts. This allows simple transactions to be processed more quickly, without the network congestion caused by transactions from DApps, which is a common occurrence on Ethereum.
Algorand shoots to new heights
With its innovative in-built scaling solution, it was only a matter of time until Algorand would start seeing more real-world adoption. This, of course, is crucial to Algorand’s goal of becoming the base layer for the global financial industry. Thanks to an announcement by the government of El Salvador that Algorand would be recognised as legal tender, its price skyrocketed to a new all-time high on September 9. After a local bottom at $0.67 on July 20, ALGO had traded mostly sideways before the big news broke. El Salvador also announced that it would develop its own blockchain infrastructure with the help of Algorand.
This continues the trend of Algorand seeing increased attention from larger institutions and government thanks to its work on CBDCs (central bank digital currencies). The network also started hosting popular stablecoins like Tether (USDT) and USD Coin (USDC).
Another reason for the recent price surge was action by the Algorand foundation to increase community involvement and participation on the platform. That includes launching governance features for token holders, scheduled to go live on October 1 and work on decentralised finance and NFT applications. Both have been a cornerstone to increased adoption of other layer one blockchains.
The future of Algorand
Even though Algorand is yet to see the kind of parabolic growth that its layer one rivals Solana and Avalanche enjoyed, its targeted use case might benefit the network in the long run and allow Algorand to position itself as the go-to-solution for governments worldwide. Whether the network can publish more bullish news in the near future, which could further bolster its price, remains to be seen.