Algorand Has Serious Plans to Transform the DeFi Sector

What if investors interested in the cryptocurrency market knew about “possibly one of the most important, native tokens (coins) in the world of cryptocurrencies today?” This is not a clickbait marketing question, but it is what Algorand (CCC:ALGO-USD) is described as by its Singapore-based Algorand Foundation.

A logo for Algorand (ALGO) on a patterned background

Source: Shutterstock

The foundation was started to advance the technology of the platform’s ecosystem and Algo, the native token of the Algorand blockchain. It claims to be super-fast, scalable and secure.

Algorand blockchain is designed to help developers create applications based on the Algo coin, which has a price of approximately 95 cents as of Jan 27.

ALGO is ranked number 25 on CoinMarketCap based on its market capitalization of $6 billion and fully diluted market cap of $9.2 billion. It has a maximum supply of 10 billion coins with about 65% currently circulating.

Year-to-date, the crypto is down a little more than 44%. At some point during September 2021, Algorand was trading near $2.38. It followed the general cryptocurrency market collapse during late 2021 and early 2022, which is unsurprising. There is a strong correlation between coins and sour investing moods or a loss of momentum for risky assets.

Here are some key facts about Algorand to help you decide if it has a compelling investment story.

Key Information About Algorand

For many tokens and coins, we know almost nothing about their founders and their history. But that’s not the case with Algorand’s founder, Silvio Micali, who happens to be a professor of computer science at the Massachusetts Institute of Technology. CoinMarketCap elaborates on his experience:

“He is a recipient of the Turing Award (in 2012) for his fundamental contributions to the theory and practice of secure two-party computation, electronic cash, cryptocurrencies and blockchain protocols. This makes him one of the foremost creators of crypto in the world.”

The Algo has several interesting and important key features. First, it is very fast, as the average time to complete a transaction with Algo is about four seconds. Second, it is highly scalable with no restrictions on the number of transactions. The coin has no delays or compromises to affect its transaction speed.

Third, it is very secure. The Algorand blockchain is powered by a pure proof-of-stake (PoS) consensus. What this means is that the consensus protocol randomly selects validators weighted by their staked ALGO coin.

Fourth, the cost of using Algo is very cheap, unlike other blockchains. It also has very high transparency; at any time, there are available real-time metrics that can help anyone easily monitor circulating and liquid supply.

Algorand Solves the Blockchain Trilemma

Have you ever heard of the blockchain trilemma? If not, it is a very important puzzle that Algorand is addressing. The blockchain trilemma is the difficulty of achieving all three core features of security, scalability and decentralization in a platform.

Algorand is providing a solution to this trilemma with randomness. It selects validators randomly from all token holders, a highly effective approach that supports both security and decentralization.

The platform has smart contract capabilities, but its technology is aimed mainly at financial services and decentralized finance (DeFi) applications. For example, the Algorand Foundation “announced the 150M Algo Viridis Fund to support and incentivize the creation of the world’s most efficient, scalable, and micro-fee DeFi ecosystem.” This is very important news and a strong step toward ALGO becoming a key player in the DeFi sector.

Some interesting applications of Algorand include yield farming, DeFi lending, non-fungible token (NFT) marketplaces and synthetic assets. Its foundation has created a $200 million liquidity fund for its DeFi ecosystem, which will be especially helpful in its early stages.

Where to Buy ALGO

You can buy ALGO at several major cryptocurrency exchanges, including Coinbase (NASDAQ:COIN), Binance, Kraken and Huobi.

Algorand has interesting features and serious plans to transform the DeFi sector. In the end, it is expected to move based on the risk-on, risk-off investment sentiment in 2022 and beyond.

Further due diligence is required should you find ALGO’s story promising. Personally, I like the special feature of randomness to choose validators for the ecosystem. Still, wider adoption of the coin has yet to be seen and will be a catalyst for Algorand’s price.

On the date of publication, Stavros Georgiadis, CFA  did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn


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