What the chain is "Pure Proof-of-Stake"? #WCA

Welcome to our third blog of the segment Wayru Crypto Academy #WCA: the place where you’ll learn all about the amazing crypto world.

Do you remember “Proof of work”? A certain work a miner does to add a block to the blockchain. This work consists of finding a solution through solving a cryptographic puzzle to validate a hash from a block and has to be approved by other people. As a reward, miners get some coins for adding a block correctly. It’s almost impossible for one person to make up blocks on purpose because a lot of people are validating other blocks way faster at the same time. The longest blockchain is always the valid one. But, what if the proof of work stays on a few hands? That’s a real problem that will cause the centralization of the blockchain… such a shame. Fortunately, some people have found a solution. One of them is the Algorand developer, who created the “Pure Proof-of-Stake” mechanism.

Before explaining the solution, let’s get deep into the problem. A blockchain is meant to have three elements: security, scalability, and decentralization. With the proof of work, just a group of people may be miners, so the control over the blocks’ registration is not properly distributed; plus, the efficiency depends on specialized computers to solve the puzzles, so a lot of electricity is being used to maintain the system that is not fast enough; and finally, miners are in a risk of attack since knowing who they are is very easy for hackers. Solving this trilemma is hard, but Algorand made it with the method “Pure Proof-of-Stake”.

On Algorand there are two nodes: participant nodes, who create consensus; and relay nodes, who facilitate the communications between participant nodes. From participant nodes, 1000 are chosen randomly to produce a block, and then one of them is randomly selected to add a block to the blockchain. The probability to be selected is partially proportional to how much “Algo” the participant has staked. That means, participants have to deposit a certain amount of coins (minimum 1 algo) into the network as a stake and it can be lost if they approve fraudulent transactions, in other words: security problem solved.

"The fact that all online users have the opportunity to get picked by the system has several benefits on the distributed network. First of all, it boosts the decentralized quality of the blockchain and makes sure that the system is secure" Algorand

The selection process and blockchain data are managed and stored by relay nodes, which leads to mobile phones and basic computers participating on the Algorand blockchain. Since there is no need to be waiting for so many confirmations as in Proof of work, transactions are made faster. Algorand can manage more than a thousand contracts per second without sacrificing security or decentralization, so scalability is not a problem anymore. Plus, hackers can’t attack the system because of the random selection process, which also helps to keep the decentralization of the blockchain. "Conversely, the PPoS protocol doesn’t have a group of selected few, and the system chooses validators randomly irrespective of their stake. The fact that there is no special group of validators makes it difficult for attackers to compromise the system" (Algorand). Besides that, since participants need no special computers to add a block to the chain, the environmental impact disappears.

Sounds awesome, doesn’t it? But Algorand is not only useful for transactions, its ecosystem is used by a growing number of organizations, including Wayru. We will continue telling you more about Algorand and Wayru on our next blogs. Stay tuned to Wayru Crypto Academy!

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