Projects like Algorand arguably represent the next phase of the cryptocurrency market. As the technology behind tokens like Bitcoin becomes increasingly mainstream, more and more projects are emerging to marry blockchain with the worlds of traditional finance and commerce.
Algorand itself is intended to make the technology associated with cryptocurrency viable for real-world operations by solving the blockchain trilemma and delivering security, scalability, and decentralization.
Created in 2019 and featuring some of the most advanced innovations in the crypto space, Algorand claims to do what other cryptocurrency has failed to do by using a pure proof of stake consensus mechanism. This differs from many other projects in that Algorand only requires a two-thirds consensus, rather than 100%.
Of course, numerous DeFi and cryptocurrency projects claim they can solve existing issues with the technology - and whether they can or not remains to be seen. However, Algorand certainly has made a bold claim in purporting to have solved the blockchain dilemma - something that Ethereum’s Vitalk Buterin said could not be done.
So does this mean Algorand is a solid investment for 2022? In the following article, we’ll give you five reasons why you might want to consider adding ALGO to your portfolio.
1. Algorand Claims It Can Solve The Blockchain Trilemma
The first thing you’re likely to have heard about Algorand is that it claims to solve the blockchain trilemma. This term, which was actually coined by Vitalik Buterin, refers to the three essential qualities of a blockchain:
Decentralisation - A central tenet of blockchain technology is that transactions are not authorised or monitored by a central authority, such as a government or bank.
Scalability - blockchains, if they are to be successful, need to eventually be capable of supporting a huge and ever-increasing number of transactions without losing efficiency.
Security - given the nature of cryptocurrency, security is absolutely essential and blockchains must be protected from attack and/or corruption for them to have any hope of longevity.
If you’re an experienced cryptocurrency investor, then these factors should be fairly familiar to you. The problem is that it is hard to improve upon one without it in some way affecting another. Realistically, it’s hard to scale a project without sacrificing on one of the other two factors. Similarly, the more secure a blockchain is the harder it will be for it to process thousands of transactions a second, as is the requirement.
The issue comes down to consensus protocols. In the cryptocurrency world, there are two main approaches: proof of work and proof of stake. The issue with proof of work has been laid bare in recent years. Ethereum is a great example. As the usage of the network increased with the emergence of DeFi, PoW simply became far too resource-intensive and Ethereum experienced major congestion.
Previous attempts to improve scalability include delegated proof of stake. The problem here is that delegating nodes to verify transactions is effectively a kind of centralisation. These systems are also more vulnerable to security breaches.
Algorand claims to have solved these issues with its pure proof of stake consensus mechanism. The approach involves a random choice of nodes to verify transactions - irrespective of how much ALGO they have. Those chosen to verify blocks are done so via a cryptographic algorithm and a consensus of a two-third majority is required to verify a new block.
It should be fairly obvious to potential investors that, if Algorand really has solved the blockchain dilemma, it could very well start to rival projects like Cardano and Ethereum, which are yet to come up with a similar solution.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
2. Algorand Has Serious Investor Backing
Algorand generated a lot of attention early on and this was reflected in the substantial investment that the organisation behind the project received. Investment vehicles from the worlds of banking, cryptocurrency and venture capital pumped $62 million into the project during its development stage to help it hit the ground running.
Of course, investor backing in the early stages represents a huge vote of confidence, but it is by its nature somewhat speculative. What’s more interesting is that Algorand has continued to attract large scale investment - with Arrington Capital launching a $100m fund to invest in Algorand as recently as June 2021.
In addition to this, Borderless Capital also announced in June that it had set up a $25 million pot to support Miami-based blockchain projects that sought to build digital payment solutions on the Algorand network.
It isn’t just investors who are keen to get involved with Algorand either. A partnership with Curate demonstrates Algorand’s commitment to the NFT sector, with the release a Curvegrid allowing organisations to easily integrate NFT and blockchain technology into their business and consumer mobile applications via the Algorand network.
Algorand also has partnerships with the Bermuda-based MAPay healthcare payment solution, which intends to migrate onto the Algorand blockchain as well as India’s Eros Now - a subscription service that currently boasts over 224 million users.
3. Algorand Could Bring Traditional Finance And Blockchain Together
Algorand was set up to address the flaws in both decentralised finance and traditional banking. There have, of course, been many cryptocurrencies that claim to bridge the gap between blockchain and mainstream banking, but most have lacked the key features mentioned above - in particular, the scalability to support transactions in the kind of volumes banks would require.
Algorand’s pure Proof-of-Stake protocol (PPoS) ensures that the system can reach consensus without requiring a central authority, meaning it has all the advantages and appeal of DeFi. However, it also has tight enough security to make it a viable option for banks and traditional financial institutions.
But it is Algorand’s scalability that can really bring the worlds of blockchain and traditional finance. The network can finalise blocks in seconds, which means Algorand processes a huge amount of transactions per second - making it the perfect network to support international banking operations.
The subject of blockchain and the future of traditional banking is a complex one and far beyond the scope of this article, but needless to say that there are myriad applications for cryptocurrency as a means of currency exchange - particularly in developing nations. If Algorand can corner this market, it could have a very positive effect on the price of ALGO.
4. Algorand Has A Strong Development Team
Algorand boasts a pretty impressive development team - even by cryptocurrency standards. The project was set up by Turing award winner and MIT professor, Silvio Micali, himself a cryptography pioneer with a background reaching back before cryptocurrency came into existence.
Micali built a team of experts from MIT and other leading institutions that included mathematicians, cryptographers, analysts and economists to ensure the Algorand project had all the expertise it would require, right from the outset.
A strong development team is a key asset for any cryptocurrency or blockchain project as it means that the expertise is always there to allow continual adaptation as the industry poses new challenges. Being a relatively new project, the development credentials also mean that Algorand was built from the ground up based on the modern blockchain industry.
In addition to its talented development team, Algorand’s executive team also includes renowned figures from the industry, including Steve Kokinos, co-founder and Chairman at Fuze, and W. Sean Ford, co-founder of uPromise and former CMO of LogMeIn, who are CEO and COO, respectively.
Read Also: Could Algorand Be a Millionaire Maker Coin?
5. Algorand Has Huge Potential In The Cryptocurrency Space
As blockchain continues to evolve beyond Distributed Ledger Technology that simply offers a means of value exchange, dApps, DeFi and NFTs are becoming increasingly more important. Whilst the simpler projects like Bitcoin and Dogecoin continue to perform well in terms of price, from a technical perspective they are being left behind by more advanced platforms like Cardano, Ethereum and Algorand.
When it comes to supporting DeFi and dApps, it is becoming ever more important for different blockchains to be able to exchange information and move digital assets from one network to another without compromising it in any way.
Put simply, it needs to be feasible for data and assets on one blockchain to be transferred to another, and vice versa. For a non-blockchain example, think about creating a text file. The same file can be transferred seamlessly across MS Word, Pages and Google Docs without having to be re-typed every time you transfer it.
Algorand was built with interoperability in mind. Network users can issue smart contracts, dApps and NFTs through Algorand Standard Asset (ASA) framework, which features universal interoperability across all tokens developed on Layer-1.
Since its launch, developers using Algorand have also made great strides in improving the network’s ability to interact with other networks. Fir example, the DeFi platform Yieldly, which is built on Algorand, features a mechanism that links the ecosystem and major chains, including Ethereum, Binance and BinPolkadot.
All this only contributes to Algorand’s versatility and suitability for both DeFi and CeFi projects. If uptake continues to grow, then naturally, so will ALGO’s price.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Conclusion - Is Algorand A Good Investment In 2022?
Algorand is certainly a very promising project and has the potential to be a top ten cryptocurrency in the very near future. Historically, the most technically advanced blockchains may not have equated to the best price performance, but this is something that could be changing.
DeFi and NFT-related projects are only getting bigger, with more and more ‘regular’ investors turning to cryptocurrency and beginning to understand the potential of blockchain technology. It, therefore, stands to reason that a project that promises to be scalable and secure whilst remaining decentralised has substantial appeal.
It seems the potential of Algorand hasn’t escaped the notice of leading crypto analysts either. DigitalCoinPrice, for example, sees ALGO rising from its current price of $1.11 - as of the time of writing - to $1.56 before the end of 2022. Meanwhile, TradingBeasts has it growing by almost 46.85% by December.
Of course, these predictions are far from guaranteed, but it’s fair to say that the future looks bright for Algorand and given that ALGO is only like to increase in value in the months ahead, now could be a good time to consider adding it to your portfolio.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
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FAQs
Can Algorand topple Ethereum?
Algorand is yet another third-generation blockchain that has been touted as a potential rival to Ethereum. However, if the project really has solved the blockchain trilemma, then there’s every reason to believe it could become the go-to smart chain for DeFi and NFT-related projects.
Will Algorand double my money in 2022?
Algorand is expected to perform well in the coming months. Whilst it may not double your money in 2022, it is expected to grow by a respectable 50% or so before the year is out. Realistically, if things continue to go well for Algorand, it could double your money as early as 2023.
How do I invest in Algorand?
You can invest in Algorand by going through a broker or exchange that lists the token. We usually recommend eToro, as it is one of the most accessible platforms out there. It also has plenty of articles and guides to help you learn more about the cryptocurrency market.
Is Algorand better than Cardano?
Algorand and Cardano are both third-generation cryptocurrencies that come with some pretty impressive academic and development credentials. Whilst Cardano is currently closest to toppling Ethereum, Algorand's combined scalability, security and decentralisation could see the playing field open out in future.