Staking on Algorand Explained:
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Process involved in staking on Algorand via pure proof of stake on Algorand Blockchain.
The pure proof of stake was developed to solve the challenges faced then by the proof of work protocol.
These challenges include;
- Susceptibility to an attack,
- Slowness of the system,
- The tendency of forking,
- Its expensive nature among others.
The proof of stake distributes the power to validate in relation to the proportion of coins possessed by a validator, hence validating power is restricted to the percentage of transactions allowed by the proportion of coins the user owns when staking on Algorand.
Following some problems faced by the proof of stake system, different types were developed.
The most common of the lot include;
- Bonded proof of stake (BPOS).
- Delegated proof of stake (DPOS).
- Bonded proof of stake (BPOS);
Here, some set of users use a part of their token to influence block generation. The voting power is relative to the amount of tokens users are willing to lock up.
Once locked, they cannot be removed until a specified time has passed. The tokens serve as a security deposit and in exchange, users get to select the next block relative to their stakes.
Also, as a way of ensuring the absence of foul play, users could be relieved of their deposit if they are found to be of indecent and fraudulent acts.
- Delegated proof of stake (DPOS);
As the name implies, a fixed number of people who must have been voted into power by the users of the network are chosen as delegates.
It’s like the users transfer their right to vote completely to them. This system is more effective and efficient compared to proof of work in the sense that only a certain number of people are block producers.
However, it is insecure, gives room to dis-honesty and fraudulent acts and still faces the inadequacy of centralisation.
In a bid to solve the problems that emanated from the two systems, Silvio Micali and his team of seasoned developers developed pure proof of stake for the Algorand blockchain.
Read Also: Algorand Blockchain Framework: The Native Token and Its Use Cases.
Till today, one of the unique features that makes Algorand stand out among several open-source software companies is its mode of staking which is Pure Proof of Stake PPoS.
Algorand prioritises security and places it in the hands of the majority as opposed to a small fraction of the community. PPoS is built on Byzantine agreement protocol.
Every user has the right to propose and vote however each user’s influence on the choice of a new block is proportional to his number of tokens in the system.
Also, anyone wanting to participate can signal by flagging his account. The likelihood of a user being selected and his proposals and votes considered is based on his stake i.e the amount of algos he has compared to all other accounts who have also signified their intent to participate.
Advantages of Algorand as opposed to proof of work.
Proof of work is the original consensus algorithm whereby users get rewarded for solving complex cryptographic problems in the Blockchain network. Below are the edges PPos have over POW.
- De facto centralisation of power;
As a result of users pooling their resources, power becomes concentrated in a fraction and can be used as they wish.
For example, they can change the number of blocks or erase blocks if they wish, thus making it extremely easy for a mining pool or two influence decisions to suit their selfish reasons.
However, with Algorand’s PPos on the other hand, a user can only increase their influence by increasing their stake. Splitting stakes holds little or no significance here.
- Expensive nature of POW;
Due to the types of equipment required to mine, the amount of resources consumer and other factors, POW is expensive and as such only accessible to users that have a great deal of capital making participation kind of restricted too.
Also, as it is only the user that successfully generates that would be rewarded, the efforts and resources of others users are consequently put to waste.
However, Using Algorand’s PPos, any user who is available and owns a stake is eligible to participate in the consensus protocol; selection is done randomly though.
Also, the cost of participating is relatively low to POW thereby ensuring a franchise generally.
- The problem of forking;
When two users solve for a valid block at the same time,. forking occurs.
This is because different fractions of users see different potential candidates for the next block. A fork when it occurs, causes delay. As opposed to this, the Algorand system never forks.
How to stake Algo : Follow the short simple ways below;
- Download a wallet; preferably Algorand official wallet or Exodus wallet.
- Enable Algo in the settings.
- Send Algo to your wallet. (You could earn, win or exchange coins for Algo too).
- Check your wallet from time to time to claim your free Algo!
Using Algorand’s PPoS system, staking becomes free, fair and super efficient!
Written By Muhammad Yusuf—Algorand Ambassador.