Blockchain Explained

Before trying to wrap your head around blockchain technology, it is important to understand why it matters. From our perspective, blockchain is important because today’s increasingly centralized economies have significant flaws:

  • Lack of trust: While we are able to exchange and transfer information freely (thanks to the internet of today), we are unable to easily exchange and transfer value without going through a third party. The required intermediaries are losing trust: 92% of millenials (2.5 billion people) do not trust centralized financial institutions because the privacy of their data is being undermined or threatened by security breaches.
  • Billions of people are excluded: Many do not have access to basic financial services and cannot participate in the global economy.
  • Slow transaction processing speed: It can take days or weeks for value to move from one country to another or even from one financial institution to another within the same country.
  • Inefficiencies are abundant: Financial transactions costs represent 6% of global GDP, accounting for over $4 trillion of dollars in costs around the world.

That said, we believe that open source blockchain technology holds the key to building a global borderless economy that is secure, open and transparent.

What is a blockchain?

A blockchain is an immutable database of recorded transactions that is shared across a network of computers (called nodes). Transactions are propagated through the network, verified, and bundled together into blocks. Each block of transactions is verified by the decentralized network of participating nodes and appended to the previous blocks. Every block is assigned a unique code (called a hash) that users can reference in the future and prove to anyone that their transactions were indeed added into that block. Any user can freely read from and write to this immutable database.

Why hasn’t blockchain technology been widely adopted?

Existing blockchain solutions aspire to solve the above problems. However, they are either slow or permissioned. Slow blockchains cannot handle the amount of transactions that flow through the economy every day. Permissioned blockchains concentrate power in the hands of a few players, and cannot adapt to the arrival of new participants.

How does Algorand solve the above problems?

Algorand is the first blockchain that is scalable and permissionless. This allows for a number of benefits, in particular:

  • Trust. Trust is built from decentralization and cryptographic tools which ensure immutability of the shared ledger. Any user can contribute to the security of the decentralized network by participating in the consensus. Digital assets are not stored in a central place, but distributed across a global ledger using the highest level of cryptography.
  • Inclusion. Anyone can submit new transactions and read the entire history of transactions.
  • Speed. Users can transact with anyone across the globe almost instantaneously.
  • Minimal processing costs. Algorand minimizes the computational cost of blockchain participation. Accordingly, transaction costs can be minimal.

What is next?

We believe that Algorand has the technical innovation in a platform that delivers decentralization, scalability and security. Algorand’s first-of-its-kind, permissionless, pure proof-of-stake protocol supports the scale, open participation, and transaction finality needed by users to build opportunity and fulfill the promise of blockchain technology.

We are defining the standard for blockchain technology and making possible a new borderless economy. To understand how Algorand works and what our technology does, click here.