- Algorand (ALGO-USD) is a popular decentralized finance (DeFi) crypto and one of a few eco-friendly cryptocurrencies.
- Algorand’s proof-of-stake (PoS) validation system does not use much energy compared to proof-of-work (mining) validation systems.
- Algorand’s founder Silvio Micali believes ALGO crypto’s unique features can democratize finance.
Algorand’s (ALGO-USD) main purpose is to speed up transactions and improve the efficiency of blockchain validation transactions. Having lower transactions fees vs. traditional mining platforms is another focus of ALGO crypto. This also applies to Ethereum (ETH-USD), which is scheduled to move to a PoS system sometime in the first half of 2022.
But that could bring a lot of competition to Algorand. In fact, in a recent interview with CoinTelegraph, Silvio Micali, the founder of Algorand, acknowledged that Ethereum will become a major competitor once it transitions. The move to a proof-of-stake system by Ethereum will undoubtedly speed up its transactions processing.
Algorand’s Founder Speaks Up
During the interview, Micali also said that he expects to see that there will be more use cases to appear for cryptocurrencies in the near future. “Speculation will disappear, and real-world use cases of the blockchain will start.”
Micali, who is a professor of computer science at the Massachusetts Institute of Technology (MIT), designed Alogrand to combine encryption with economic models to create an efficient and secure Defi blockchain system. The blockchain allows smart contracts and financial ledger technology to provide economic returns to users through Algorand-based decentralized application (dApp) software.
Micali believes blockchain technology can democratize finance. It can level the playing field so that the common man can have access to financial tools. He believes Algorand will level the playing field. Regular investors can have the tools that institutional investors have with ALGO crypto.
This, of course, will likely not be the case as long as firms and services charge for data, services and consulting. And typically institutions can pay the high fees for the research services that common investors can’t. A very good example of this is the high price that Bloomberg terminals cost, vs. what the average investor can afford. Hedge funds, almost as tradecraft, use Bloomberg terminals with all their access to data on multitudes of markets.
Where This Leaves Investors in ALGO Crypto
So far this year ALGO crypto has had a very rough time. This could potentially be because once Ethereum moves to a PoS system it will be a formidable competitor to Algorand. But there is also a general decline in crypto assets this year.
Since peaking at $2.38 on Sept. 11, 2021, ALGO crypto has fallen to 75.57 cents as of April 19. This is also close to its recent low of 68.25 cents on March 12. In other words, this cryptocurrency has endured a very long and deep decline. Investors can’t be blamed for being somewhat leery of its potential turnaround.
For example, just to move to the point where ALGO crypto is even with last year it will have to rise by 130% from 75.57 cents to $1.74, where it ended on Dec. 31.
That is going to take some major news at Algorand to turn around and make this huge leap by the crypto. That will especially be the case if Ethereum’s transaction fees and its transaction processing speeds speed up after its transition.
Nevertheless, Algorand has some advantages over Ethereum. In a revealing interview he gave to Forbes magazine last year, Professor Micali discussed the key feature of Algorand. He called it “cryptographic sortition,” and described this unique aspect of ALGO crypto as its “secret sauce.”
On the date of publication, Mark Hake did not hold (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.