How It WorksSecure.

security algorand

Security in Proof-of-Work

Blockchains based on proof of work assume that the miners have the majority of the computing power necessary to generate the next block. Proof of work, however, has concentrated power in a few mining pools. In Bitcoin, just three such pools control the blockchain. Such concentration of power, in entities that are not accountable to anyone, is unacceptable for a system that aspires to be decentralized, and is in fact potentially very dangerous.

Security in Delegated Proof of Stake

In a blockchain based on delegated proof of stake, the power to generate a block is given to a small and publicly known group of users for a long interval of time. This approach may be less costly than proof-of-work, but is admittedly quite centralized! Here, security relies on the honesty of the majority of this small group, but any small group of users is an obvious target to attackers.

Security in Bonded Proof of Stake

In a blockchain based on bonded proof of stake, every user could put at stake some of her money. Those who do so have the power, proportionally to their stakes, to choose a new block. In principle, they might lose their stakes, if they detectably misbehave (but this may not be much of a deterrent, if they stand to make much more money by misbehaving). An ordinary user, however, can afford to put at stake only but a small fraction of his money. As a result, the system may fall prey to rich dishonest individuals, who put at stake large amounts of money to control the blockchain.

Security in Algorand

Algorand is guaranteed to work securely if the majority of the money in the system is owned by honest users. Notice that we are not talking about the majority of the money owned by some special users, but about that owned by all users. Moreover, a user in Algorand does not need to put any fraction of his money at stake. A user’s money always remains in her hands, ready to be spent how she wishes.