Algorand Governance

Introduction

But, what’s Algorand, and what is this Governance? For several people, these terms may be completely unknown.

The history of Algorand begins in the year 2017, when the company was created by Silvio Micali, a well-known MIT professor, Turing award winner, and specialist in cryptography. Micali, who has been part of the crypto community since 1980, has significant work in asymmetric cryptography to his credit, and is a co-creator with Shafirira Goldwasser of zero-knowledge proofs (ZKP).

Micali, who has always been a researcher, knows about blockchain technology and Bitcoin in 2015, and is interested in it. At that point, Micali started working on his personal cryptocurrency project, he decided to improve the specifications of Bitcoin and Ethereum. This led him to associate with Nickolai Zeldavich, a colleague from MIT and who served as Head of Distributed Systems at this institution, and who participated in the Computer Science and Artificial Intelligence Laboratory (CSAIL).

It is how Algorand was created. Algorand's main objective is to become a platform dedicated to offering high-speed decentralized applications (DApps) and DeFi that are available to everyone. To achieve this, Algorand is a permissionless blockchain. In this way, anyone can be part of it, within a transparent system in which everyone can achieve success through decentralized projects and applications.

On the other hand, to deal with the Blockchain Trilemma, Algorand is based on a powerful and fast consensus protocol that can be used by any user with minimal computational power, who owns $ALGO and is online. All of these elements give you the right to be chosen to participate in Algorand's block consensus, which is a derivative of the Proof of Stake system.

But along with this, Algorand focuses its development on creating tools that facilitate the deployment of decentralized applications and all the infrastructure necessary for their operation.

How does Algorand work?

As we discussed a moment ago, Algorand is a permissionless blockchain and network. This first point is vital to eliminate any type of barrier in the use and evolution of the protocol. The main idea behind this principle is to guarantee a high level of decentralization, scalability and security.

Second, Algorand's operation is based on a consensus protocol derived from Proof of Stake (called Pure Proof of Stake - PPoS). This system is created in order to guarantee the full participation of those who are part of the network, providing protection and speed. The use of PPoS is framed in achieving block production speed measured in a few seconds, which would allow a high scalability of the network, thus serving thousands of users concurrently, with truly short waiting times and, above all, with very low commission costs.

In addition, the Algorand development team has devised new consensus algorithms, Byzantine fault-tolerant systems, and an entirely new hashing and digital signature system, with a focus on enabling the greatest possible scalability.

Pure Proof of Stake

The main pillar of Algorand's scalability and speed is its Pure Proof of Stake or Proof of Pure Participation (PPoS) protocol. This protocol is a derivative of the well-known Proof of Stake (PoS) of other cryptocurrencies such as the upcoming Ethereum Merge. The idea of this protocol in Algorand is to allow a sufficiently secure resistance to Byzantine faults, while providing great speed in the generation and validation of blocks within the network. At the same time, PoS is capable of supporting a large number of concurrent users and scales well as the network increases in number of validators.

The main dates for the third Governance period are included above

Algorand Governance

Before introducing the Governance period, we have described how Algorand works and the different benefits. Furthermore, the purpose of the organization is that everyone has a voice in the future plans of the network. The Algorand Governance first period started on 1 October 2021 and each of these periods last 3 months.

This is done with a term called “Governor.” Governors are responsible for the most important economic and political decisions. This is be done through regular public votes that the Algorand Foundation will responsibly execute for the benefit of the broader ecosystem, based on the decisions of these Governors.

It must be noted that Algorand holders are not automatically enrolled in the community governance. Algos holders need to go to the governance web portal and specify how many Algo tokens they are going to commit in each governance period. To participate, governors must sign a transaction representing the amount of tokens invested. The governance web portal can be used to generate a transaction in the correct format

For keeping your ALGO, you can use your Ledger, Pera Algo, AlgoSigner or My Algo wallet. It must be noted that in order to be eligible for the rewards paid at the end of the quarter, the following conditions must be fulfilled:

• The number of ALGO committed for the period cannot decrease
• You must vote in the voting session for the respective period

Conclusion

Via this mechanism, the main objectives of the Governance periods are the following:

On one hand, in this period the owners of ALGO who have committed can decide on the future steps of the Algorand network and any improvements that can be done via voting.

On another hand, by committing the ALGO tokens, the owners are rewarded. There are generally 70.5 Billion algos for rewards. These need to be distributed between all the committed ALGO. On average, in the recent periods the return rate is around 10% per year, which is around 2.5% per quarter.

The more total ALGOs are committed, the lower the APY will be. However, the main goal of this governance periods is also to make of the Algorand ecosystem the future of finance.

Furthermore, we can also see recent new projects such as AlgoFi that will also play a key role in the growth and adoption of Algorand.