This article will take a look at decentralisation, and how looking at the use of pure proof of stake in ensuring a decentralised Algorand blockchain
What is Decentralization?
The best way to look at decentralisation is as a structure where the power is separated from the centre. A decentralised system operates in a way that gives all units the ability to function and carry out activities independently. They have autonomy over their operations.
Decentralization is synonymous to delegation, and comes with a lot of advantages. Just like delegation, decentralisation allows transparency and supervision since power is not centralized in one place. Also, operations like decision making and executive initiatives are fast since there’s no interference.
Louis’ definition points out that decentralisation takes power from the centre and shares it among the different units.
“Decentralisation refers to tire systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central points.” —Louis A. Allen
A Look at Proof of Stake Mechanism
There was a need to solve the problems faced with the proof of work algorithm, that’s why in 2011 the proof of stake consensus algorithm was introduced.
Both proof of work and proof of stake share the same goal, which is to reach a consensus in the Blockchain, however, the process of achieving it is different.
Proof of stake is a type of consensus algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus. What makes PoS-based cryptocurrencies unique is that the creator of the next block is chosen via various combinations of random selection and wealth or age.
How Does the Proof of Stake work?
PoS uses a random selection process that looks like balloting to pick a node that will be the validator of the next block. Some of the factors that influence the balloting process are:
- Staking Age
- Node’s Wealth
A Brief History of Pure Proof of Stake
Sunny King and Scott Nadal are referred to as the pioneers of PoS in their white paper for Peercoin. We cannot undermine their contributions, but their project (Peercoin) is merely a combination of PoW and PoS.
The first time a real permissionless, pure PoS consensus was ever used was with Algorand, which was launched in June 2019.
Algorand Inc. was founded by Silvio Micali a cryptography pioneer, Turing award winner and MIT professor.
His project Algorand was built with an internationally recognized team of researchers, mathematicians, cryptographers, and economists—from the scratch—to guarantee true decentralization, scale and security.
An Introduction to Algorand(ALGO)
Algorand was created as a public blockchain and protocol with the aims of delivering a decentralised, saleable, and secured ecosystem for all participants.
It uses the ALGO as in inbuilt currency. Algorand proof-of-stake protocol is permissionless and pure this means all users who hold ALGOs are automatically eligible to participate in all functionalities of the protocol, including participating in consensus by proposing and voting on blocks, in proportion to their stake (how much ALGO they have).
Algorand Use Cases
Algorand has a public version which is built basically to enable other developers their cryptocurrency applications.
The platform has already been used in different capacity including; real estate, copyright, microfinance, and many more.
Algorand will help users solve three major challenges plaguing the cryptocurrency world today, crypto experts refer to them as the Blockchain trilemma. This is security, scalability and decentralisation.
Why Build on Algorand?
- It offers transaction latency under 5 seconds optimizes the end-user experience
- 1,000 transactions are carried out within a second. It also offers a point-of-sale speed that scales billions of transactions with ease
- The Algorand transactions are finalized almost immediately.
- The Algorand blockchain cannot be forked.
- It is totally decentralized:
- Translation cost is very affordable (negligible transaction fees 0.001 Algo)
- A true technology partner: An accessible team of experts are enabling developers across the world to build on Algorand
How does Algorand run consensus?
As a truly decentralized consensus, some of the Blockchain issues Algorand solves are issues associated with Bitcoin such as:
- Wastefulness – electricity usage
- The concentration of power – only 3 major pools
- Lack of privacy- mining power can be tracked and seen
- Scalability – Bitcoin is 7 tx/sec
- Ambiguity – forks/which is chain true
- Security – valuable networks will be targeted
- Users are randomly selected through the algorithm which proposes a new block.
- Multiple users selected, only the highest-ranked user’s block is kept
- Probability weighted on how much algo they have
- One thousand people are chosen with cryptographic sortition
- Digital sign and propagate the signature
- Only two-third majority need to be honest for a block to be approved
How the Committee is Selected through Cryptographic Sortition
After the cryptographic lottery is conducted,
- Users are to show evidence that they won by computation run on their private key
- Winning proof is then propagated and plays the Byzantine Agreement Protocol
- The chances of winning are dependent on the amount of money you have available and the total amount of money in the network
- A million algos in one key or a million keys with one in each are equal.
- The computation process is trivial
- It offers true decentralization
- Finality of payments – P[forks] < 10^-18. No Forking
- Scaling – 125x tx output of Bitcoin while having 50,000 users. Scaling is really good
- It is very secured
- It is cost-efficient
- Transactions are fast
- No incentives for choosing the next block
- Incentives invite exploitation
- Adversaries can control more than ⅓ of Algorand’s money supply
- Grow fast
- Separate committee for each step making it hard to know which users to target over the network
- Assumption of two-thirds of users must be honest
- Society would not exist otherwise
- Byzantine algorithms are notoriously very slow
- An expected handful of steps
- Single and short message per step
A look into Algorand and Permissionless, Pure Proof of Stake
Algorand identifies as PoS and it strongly practices pure PoS. This means there’s just one factor affecting the choice of the next block creator which is the number of Algorand tokens he/she holds. That helps speed up transactions and enhances decentralisation. This brings us to the question; how is this achieved?
Algorand is based on cryptographic constructions thanks to efforts from its founders. In Algorand lingo, it is called Sortition.
How Decentralized does the permissionless, pure proof of stake is make Algorand?
Blocks on Algorand are designed in two phases through a form of lotteries known as “cryptographic sortition”. This makes transactions faster without having to wait for numerous confirmation that amounts to hours just to prove that the transaction happened. Transactions undergo the following phases;
- Proposal phase: Here a single token is picked, and the owner of the token moves to the next blocks. However, we get to know the proposer during the propagation phase: by then it is impossible to interfere. In Pure PoS, every token has the same power in being selected.
- Voting round: 1,000 random tokens owners are assembled, approving the block proposed by the first user. Unlike the fixed committee system in many Proof-of-Work or Proof-of-Stake blockchains, the random selection of the committee members makes the protocol secure against attacks, they wouldn’t know who to target.
As already stated, Algorand utilizes a permissionless and pure PoS (PPoS) consensus protocol built on Byzantine agreement. What this means is that it doesn’t need a central authority to achieve consensus, it also doesn’t give room for malicious users since almost all the stake would be in the hands-on non-malicious users.
Every user can influence a new block, however, his influence is determined by the number of algos he possesses. All online users stand a good chance of getting selected and voting.
Algorand view of PoS requires lots of properties using the term “true.”
“True decentralization” means a kind of decentralization that doesn’t have anything to do with the number of wallets a token owner holds.
“True security” means no subset of tokens can endanger the system or create a fork, which is irrelevant to previous PoS implementations.
Algorand claims that it is the only project that meets this new definition. They also boast of being the first project to use “permissionless pure” PoS blockchain.
Pure proof-of-stake means that if you want to be part of the Algorand network, all you need to do is signal your intent by flagging an account with algos as a participant. Your chances of being selected will be determined by the amount of algos they have in your account.
What makes “pure” PoS different is the fact that users are free to come and go since their algo is not locked up for any period as common in other PoS, you can decide to call it a day without losing your stake.
Algorand stands for the permissionless, pure PoS approach.
As a consensus model, Proof of Stake has shown a glimpse of hope that it is going to be here for a long time. Although there have been variations of PoS, the permissionless, pure Proof of Stake consensus in its real form, continues to be adopted many years after it was first introduced.
Without doubt, blockchain programmers will continue to leverage on PPoS to achieve decentralisation
Blockchain has always promised it’s users decentralisation, however it was not until the introduction of PoS that blockchain truly had a truly decentralized structure.
Algorand stands for true decentralization, unlike other projects that pen down decentralisation on their whitepaper but offers something else. Turing Award winner, Silvio Micali solved the Blockchain Trilemma providing a protocol that is secure, scalable and decentralized.