The world of cryptocurrency can be as confusing as it is exciting. New coins and projects, protocols and networks, pop up seemingly everyday, with wild price movements to match.
One of the newfangled projects to catch the attention of crypto observers is Algorand and its accompanying cryptocurrency, Algo. Here’s a closer look at the ALGO market.
What is Algorand (ALGO)?
Algorand is a decentralized blockchain technology network, with its native currency being known as ALGO.
The idea behind Algorand was to combine features of mainstream, well-established cryptocurrencies–such as decentralization, transactions without a central authority, easy-to-divide tokens–but with added speed and less computing power necessary to run the system.
According to CoinMarketCap, Algorand is the 34th largest cryptocurrency in terms of market cap, the total value of all the coins or tokens on the network. On July 19, 2021, the market cap was $2.38 billion.
Right now, Algo is priced at around 76 cents. It’s been valued at as high as $2.16 and its highest price in 2021 was $1.71. Its lowest historical price is around 14 cents.
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History of the ALGO Token
The token Algo launched in 2019. Its development was overseen by Massachusetts Institute of Technology professor Silvio Micali with theoretical work starting in 2017. Micali is an esteemed cryptographer and computer scientist who has won the Turing Prize.
In the original Algorand white paper, co-authored by Micali, Algorand was envisioned not just as a cryptocurrency, but as something that could track things like titles to property and their sale, as well as a platform for smart contracts.
But there are many white papers, a cryptocurrency doesn’t become real until there are actually people holding and transacting the tokens and doing projects with them. That happened in 2019 when $60 million was raised through a token sale.
How Does Algorand Work?
One thing that makes Algorand distinctive is its use of “pure-proof-of-stake”. This is distinct from “proof of work,” where the blockchain is maintained through computers solving complicated math problems in order to generate new blocks and confirm transactions. This is roughly how Bitcoin mining works.
While cryptographically quite secure, this method requires a lot of computing power and energy use to work properly, according to environmentalists and proponents of alternative set-ups. The distinction between proof of work and proof of stake is one of the main dividing lines between cryptocurrency types.
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With pure-proof-stake, transactions and new blocks can happen faster and more efficiently. Algo holders are randomly selected who then “validate and approve” each subsequent block in the chain. This group of users is randomly selected every time there’s a new block.
This process allows the Algorand blockchain to be global, decentralized, and secure, according to the network’s developers. The more Algo a user holds, the more likely they are to be selected to verify and validate new blocks and transactions. This process allows Algorand to approve and process transactions in seconds, as opposed to minutes with Bitcoin.
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Algorand (ALGO) Price
As an asset, the price of Algorand has been incredibly volatile, swinging to above $2 to only a little over 10 cents. At this point, purchasing Algo is a bet that the ecosystem will develop because of unique features of the blockchain technology it uses.
As of the writing of this article, it’s the 34th most valuable coin tracked by CoinMarketCap, so that’s better than most coins that emerge and then quickly disappear, but the ranking also shows the distance Algorand has to anything like mainstream acceptance.
There’s also the matter of how much Algo is circulating. There are just over 3 billion tokens circulating right now with a maximum supply of 10 billion. About 30% of that will be used as “rewards” for those users and holders who are participating in various aspects of developing, maintaining and improving the network.
As always, when considering investing in any cryptocurrency, taxes and other rules are an important consideration.
Recommended: Crypto Tax Guide (2022)
What Can You Use Algorand For?
Like other altcoins, Algorand has tried to build up an ecosystem of applications that the tokens can be used for. Of course, many holders are buying and selling Algo speculatively, but there are other uses for it.
Algorand developers hope to host smart contracts that can govern the exchange of digital property or digital representations of real world assets.
Recommended: What Are Smart Contracts? How Do They Work?
One example is ANote Music, which will let investors and music publishers buy and sell royalties and rights on the Algorand blockchain. The investment platform Republic uses the Algorand blockchain for distributing dividends to investors. It was even used to host chess rankings.
One major area of development for Algorand is “defi” or decentralized finance, with its support for smart contracts and digital assets. Algorand developers envision using its blockchain for a range of digital and “real-world” assets, like points in a game or escrow payments for mortgages.
Recommended: 9 Blockchain Uses and Applications in 2021
Algorand vs. Ethereum
Algorand has been cited as a token that may challenge Ethereum’s status as one of the biggest and most significant altcoin. Here are some differences.
Rising fees on Ethereum had led DeFi developers to look to Algorand to develop applications. Transaction fees on Algorand tend to be lower than on the Ethereum network.
Both Algorand and Ethereum 2.0 use a proof-of-stake method to generate new coins. However, participants only need 1 ALGO coin to participate in the Algorand network. Meanwhile, Ethereum 2.0 requires 32 ether–a much higher barrier to entry.
Benefits of ALGO
While Algo is still in a somewhat nascent period, the benefits include a brand-name and esteemed development team led by a world-leading cryptographer. Some claim that Algorand is faster and more efficient than alternatives. For instance, the transaction speed of Algorand is about 5 seconds. Meanwhile, Litecoin’s transaction speed is 2.5 minutes, while Bitcoin’s has hovered around 9 minutes.
Algorand developers claim that its speed, efficiency, architecture, and governance make it superior as a foundation for a blockchain ecosystem. But as with all things cryptocurrency, the proof is in the pudding.
It is not the only non-Bitcoin cryptocurrency that’s trying to be the framework for all sorts of financial transactions and programs, there’s already Ethereum, the second most valuable cryptocurrency, as well as a number of other competitors.
Disadvantages of ALGO
The major disadvantage of Algo or Algorand is its low level of adoption. There are many cryptocurrencies that offer the ability to build apps or financial products on top of them, and Algo is just one of them.
As for Algo as an investment, it is yet to hit the price it hit when it was initially sold raising, stoking questions about its viability or potential future gains. Like any cryptocurrency, Algo is at the mercy of cryptocurrency regulations, which are always liable to change.
How to Buy ALGO Cryptocurrency
1. Set up an account at a cryptocurrency exchange or trading platform that supports Algo like Coinbase, Binance, Kraken or SoFi.
2. Some cryptocurrency exchanges may require an individual to download a hot wallet or cold wallet to store the Algo and other cryptocurrencies. Meanwhile, other trading platforms may handle the storing of cryptocurrencies for investors in other ways.
3. Have sufficient dollars for the amount of Algo you want.
4. Buy the number of coins you want.
The Takeaway
Before investing in any cryptocurrency, it’s important to have a sense of the basics. This means learning about cryptocurrencies like Bitcoin or Ethereum that are the foundation for the market, as well as newer coins and tokens like ALGO.
SoFi offers cryptocurrency trading in 30 different cryptocurrencies, as well as more traditional investment products like stocks and ETFs. Investment plans can be automated and automatically adjusted to your level of risk and financial situation.
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