One of the reasons why cryptocurrency has evolved so quickly is because of competition, and nowhere is this competition more intense than in the smart contract crypto niche. Algorand is one of the few smart contract cryptocurrencies that has continued to raise the bar, and its ALGO coin is gaining popularity among crypto users and institutional investors alike.
Today I’m going to give you a bit of background about Algorand, bring you up to speed on some of the project’s most important updates, and tell you why ALGO might have some long-term potential. And if you want to trade your ALGO now, then register at Jet-Bot copy trading platform. The platform is official broker of the Binance exchange. It supports both spot and futures crypto trading bots on Binance. You don’t need to transfer funds to the platform. You hold your crypto in your own personal Binance account. Every Jet-Bot account includes a free $100,000 virtual portfolio. Jet Bot got 100% rating at CoinPayments website according to 7000+ users feedbacks. Copy trading crypto is the best way for passive income on your crypto.
What is Algorand?
If you’re unfamiliar with Algorand here’s what you need to know. Algorand was founded by MIT professor Silvio Micali in 2017, and built by Algorand Inc. a software company based in the United States. Algorand’s development is coordinated by the Algorand Foundation a non-profit based in Singapore.
Algorand raised over $126 million across various token sales in 2018 and 2019. A substantial amount of this money was subsequently returned to ICO investors as part of a buy back program. Thankfully Algorand has since raised hundreds of millions of dollars more from various crypto VCs, more about that later.
Algorand’s mainnet went live in June 2019 and though the project is still in development all core features and functionalities have been completed. Under the hood the Algorand blockchain uses a novel proof-of-stake consensus mechanism called pure, which makes it possible to process around 11,000 transactions per second.
The Algorand blockchain is currently secured by around 120 validator nodes, which select one of Algorand’s many participation nodes to propose blocks pseudorandomly based on stake. It’s not clear how many participation nodes Algorand has as this information is not currently available but it is likely in the thousands as it is quite easy to become a participation node.
By contrast, becoming a relay node requires coordination with the Algorand Foundation as well as more advanced hardware. Note that only around 20 of Algorand’s relay nodes are run by entities not directly affiliated with the Algorand Foundation, but the Algorand Foundation is actively onboarding additional unaffiliated relay nodes and around 20 more are scheduled to spin up any day now.
ALGO is the native cryptocurrency coin of the Algorand blockchain. It’s used for staking, governance, and to pay for transaction fees. Participation nodes must take a minimum of one ALGO to participate in consensus and there is no lock up or unlock period nor any slashing risks.
Note that relay nodes do not stake any ALGO. According to the ALGO explorer ALGO’s taking rewards are currently just 0.06% per year though ALGO’s taking rewards increased to around 7% with active governance participation according to the ALGO rewards calculator. Algorand’s governance mechanism is outside the scope of this article, but I will note that tens of thousands of Algorand users are participating in its governance process.
Transaction fees on Algorand cost a fraction of a cent, but because relay nodes do not earn these transaction fees this makes it possible to use these fees for other purposes, and Algorand is currently exploring using a portion of all transaction fees to purchase carbon credits, more on that in a moment.Algorand’s ecosystem can be accessed using the Pera Algo Mobile Wallet, the my ALGO wallet or the AlgoSigner browser extension wallet.
According to the Algorand ecosystem website there are about 300 projects built on Algorand. Around 10 of these dApps are DeFi protocols, which currently hold around 150 million dollars in total value locked according to DeFi Lama.
Updates Part 1
It’s been almost eight months since I last covered Algorand, and it’s safe to say that this article would have been a very long one if I’d waited any longer, because Algorand has been very busy.
Shortly after my last update went out Algorand announced the release of the Algorand virtual machine opening the door to the next generation of dApps and DeFi protocols.
In October the Algorand Foundation announced that accelerated vesting for ALGO had completed for those who don’t know accelerated vesting made it possible for early investors to sell lots of ALGO whenever it’s price pumped. So, the end of this program was obviously very good news for ALGO holders.
In November the Algorand Foundation announced the first relay node running program featuring 20 new relay node candidates that are unaffiliated with the entities behind Algorand. An Algorand project called Algomint also created a bridge between the Bitcoin and Ethereum blockchains bridging BTC and ETH to algorithms ecosystem.
Shortly afterwards a former Citibank executive established a 1.5 billion crypto fund with Algorand as its first partner foreshadowing some serious cash flow into Algorand’s ecosystem.
During Algorand’s decipher conference in Miami at the end of November Algorand saw some big announcements such as a partnership with the City of Miami to monitor air quality. Algorand’s head of engineering also did a keynote about Algorand’s upcoming quantum security via state proofs. The federal reserve was planning on testing quantum resistance for its digital dollar this year, coincidence I suppose we’ll see.
In early December, Borderless Capital announced that it would be pouring an additional $500 million dollars into Algorand’s ecosystem. That is another level of bullishness. The Algorand Foundation also announced that it would be expanding its relay node program to the Algorand community.
In mid-December the Algorand Foundation announced a liquidity mining program for Algorand’s DeFi protocols as part of its $300 million Viridis fund.
A few days later a highly anticipated Algorand project called AlgoFi finally launched and it has since become Algorand’s top DeFi protocol with over $90 million in total value locked.
Updates Part 2
In January, the Algorand Foundation confirmed the issuance of the first round of governance tokens to Algorand’s governors. A Drone Racing company also partnered with al grand to create an up-and-coming play-to-earn game on the Algorand blockchain. As a cherry on top Grayscale revealed that it was considering the creation of an Algorand Trust, which would make ALGO more accessible to institutional investors.
In early February the Algorand Foundation announced a proposal to establish an exclusive group of Algorand governors called xGov governors, who would table proposals. The Algorand Foundation also announced that it had selected Staci Warden a former JP Morgan executive to be its CEO.
At the ETH Denver Conference Staci announced that the Algorand Foundation would be allocating $10 million to algorithms Ethereum compatibility. The Algorand wallet also announced it had rebranded to the Pera Wallet and released a roadmap that includes stuff like NFT support, a fiat on an off-ramp, DeFi protocol integrations, and access to Algorand’s governance interface.In early March, Algorand underwent an upgrade that expanded its smart contract functionality making it possible to create more complex dApps and setting the stage for Algorand’s post-quantum features.
In mid-March a famous former peer-to-peer music platform called LimeWire also announced it would be relaunching as an NFT marketplace on Algorand. The Algorand Foundation also announced it would be phasing out its ALGO Grants Program and replacing it with various ecosystem funding programs going forward.
Two days later the Algorand Foundation announced it issued a grant to an Algorand project called “The Algorand Name Service”, which will make it possible to create human readable NFTs that can double as wallet addresses.
The day after that the Algorand Foundation announced it had issued a grant to an outgrown project called Algo Launch an initial DEX offering launch pad for other up-and-coming Algorand projects.
At the end of March, Grayscale announced the launch of its smart contract platform xEthereum fund, which includes Algorand, though ALGO only accounts for about 4.4% of the fund’s current allocation of $2.6 million.
Updates Part 3
In mid-April, the Algorand Foundation bought up almost all the billboards in New York City’s Times Square for earth day to send the message that cryptocurrency can be environmentally friendly.
As I mentioned earlier the Algorand Foundation also announced that a special smart contract would be created that will see a portion of all fees on the Algorand blockchain redirected to the purchase of carbon credits as part of the project’s 2021 pledge to be carbon neutral.
At the end of April Algorand partnered with Flare Network to build additional bridges to other cryptocurrency blockchains. This is interesting because Flare network is a crypto project that’s part of XRP’s ecosystem.
Another thing Algorand announced at the end of April was another proposal to further modify Algorand’s governance process by introducing extra “governance seats that would be filled by active participants in Algorand’s ecosystem including select users, developers, and relay node runners.”
Earlier this month Algorand announced that it would be sponsoring the upcoming FIFA World Cup in Qatar for an undisclosed amount, but I imagine it’s a lot the sponsorship announcement included a long-term partnership between Algorand and FIFA, which of course includes the issuance of FIFA NFTs on the Algorand blockchain at some point in the future.
More recently Algorand announced that it had purchased another famous former peer-to-peer music platform called Napster with the help of hive mind capital. This makes me wonder, if decentralized music streaming services will lead the next wave of crypto adoption.
ALGO Price Analysis
As amazing as all algorithms announcements updates, developments, and upgrades have been ALGO is more than 50% below what it was when I last covered the project. This is for a few reasons.
For starters, the crypto market has been taking a beating since November and as many of you will know this is because of the Federal Reserve’s ongoing fight against inflation, which involves aggressively raising interest rates. Of course as I record this the markets are in free fall following the Terra LUNA and UST debacle it sure is chilly out there.
Unfortunately, there are additional factors specific to Algorand that are holding down the price of ALGO2. As you might have gathered from my earlier comments accelerated vesting has historically suppressed the price of ALGO, because it allowed early investors to sell large amounts of it whenever it pumped. This is why ALGO only briefly surpassed its ICO price of $2.40 before being beaten down.
Although accelerated vesting ended in early October last year structured selling from the Algorand Foundation seems to have continued, and I suspect that Algorand Inc. has been offloading some of its ALGO as well.
I wanted to find out exactly how much ALGO the Algorand Foundation has sold since September, but it looks like it hasn’t published any transparency reports since that time. What I did find however is that ALGO’s circulating supply has increased by more than 1.1 billion since September according to Coinmarketcap’s historical data, and by more than 900 million according to Coingecko’s historical data. So, if we take the middle amount of one billion and assume an average price of around one dollar per ALGO during that time it’s possible that around one billion dollars of ALGO has been sold since September.
While it’s unlikely that all this ALGO was actually sold it seems more likely than not, especially with all the money the Algorand Foundation has been spending on expanding Algorand’s ecosystem.
Case in point the $300 million in the Viridis Fund is actually made up of 150 million ALGO that must be sold for fiat. I don’t imagine that the FIFA sponsorship and partnership or the Napster acquisition were particularly cheap either.
As basic economics dictates all this ALGO selling wouldn’t be a problem if there was sufficient demand for ALGO coming from elsewhere, but the problem is that the demand for ALGO seems to be lacking. For example, the AlgoSigner browser extension has just 20,000 downloads to be fair this is a 3x increase since my Algorand tutorial in October last year, which is not too shabby at all.
However, the Pera Algo wallet is still sitting at 100K downloads since October and this suggests that the algorithm blockchain has fewer than 100,000 active users.
According to Dappradar, Algorand’s top dApps have only seen around 50,000 users over the last month. This is actually consistent with the number of ALGO holders, who are actively participating in Algorand’s governance and I reckon there’s quite a bit of overlap here.The last demand indicator I want to discuss is total value locked, which is again sitting at around 150 million. I find it hard to believe that all this money is coming from the few thousand users of Algorands DeFi protocols.
I suspect much of this money is coming from the Algorand Foundation’s liquidity incentive fund, which has allocated 200 million dollars worth of ALGO to attracting TVL. As such it’s possible that most of the TVL in Algorand’s DeFi protocols is just there to passively collect ALGO rewards. I will stress that this is just speculation on my part and if the IMF’s recent crypto report is anything to go by it is quite possible that all this TVL on Algorand is actually coming from just a handful of whales.
Roadmap
Whether ALGO can reclaim its all-time highs and head to new ones ultimately depends on Algorand’s upcoming milestones. The timeline here is obviously going to be a lot longer now that the bear market has set in.
The introduction of Algorand’s governance structure last autumn means it doesn’t technically have a roadmap, but upcoming milestones can be found in interviews with and presentations by members of the Algorand team, notably Algorand founder Silvio Micali.
In October last year Algorand’s Chief Operating Officer (COO) Sean Ford mentioned that it is in talks with central banks around the world to provide the infrastructure for their central bank digital currencies, though he didn’t specify which ones nor when these announcements will be officially made.
Sean also mentioned that Algorand will soon be scaling to 10,000 transactions per second thanks to next generation scaling technologies.
In December last year Algorand’s head of ecosystem Adi Wagenekt mentioned that the goal is to get the total value locked in Algorand’s DeFi protocols to at least $200 million, and that the Algorand Foundation is planning on spending $500 million to expand Algorand’s ecosystem.I managed to find an additional milestone in the Algorand Foundation’s FAQ section, and that’s that participation rewards for Algorand governors will be removed in just a few days time, possibly before this article. It’s not entirely clear how much this will affect ALGO’s additional staking rewards.
I also went looking for any upcoming proposals in Algorand’s governance for additional milestones, but according to Algorand’s governance forum there currently aren’t any measures that will be voted on in Algorand’s next voting session. So, this brings me to some of the challenges I foresee for Algorand.
Challenges
The first one is Algorand’s apparent lack of user adoption. Almost every smart contract cryptocurrency I’ve covered recently has seen exponential growth in its user base over the last few months alone, but this exponential growth isn’t as apparent on Algorand. I reckon that this can be chalked up to the fact that the Algorand wallets used to interact with its dApps aren’t nearly as familiar or as user-friendly as other browser extension wallets like Metamask.
It also doesn’t help that ALGO’s price has consistently underperformed and that ties into the second challenge. Algorand’s tokenomics still aren’t all that terrific, and it seems that the end of accelerated vesting for ALGO’s early investors hasn’t helped with ALGO’s price action at all.To make things worse supply continues to hit the market. In fact in a January presentation the Algorand Foundation’s former CEO Sean Lee actually celebrated the fact that ALGO’s supply had increased from 1.4 billion to over 6.3 billion in 2021 alone I honestly couldn’t believe my ears.
Again all of this selling wouldn’t be an issue if there was sufficient demand for ALGO, and if you ask me the main reason why there isn’t much demand for ALGO is that Algorand has focused its attention on catering to institutions and institutional investors instead of retail users and investors.
As far as I can tell Algorand has been trying to increase its institutional catering to Michelin Star levels with its overtly aggressive push to be green. I say overtly aggressive, because the Algorand team has pulled no punches criticizing Bitcoin copy trading over its proof-of-work consensus, even though Bitcoin’s energy use and emissions amount to a rounding error on the global scale.
In sum therefore Algorand has quite a few things to work on, but if its focus on institutional adoption proves to be fruitful it could create the demand ALGO needs to definitively surpass its previous all-time highs. Rest assured that I’ll be keeping a close eye on Algorand’s development, because there’s no denying that it has cutting-edge tech and I will never forgive myself if I don’t get my hands on some ALGO before it starts to fly.
[This article is a transcription of a video made by Coin Bureau]
[Original video: https://youtu.be/hBcLXgt13I4]
