Introduction to Elrond
Aug 07, 2021
Elrond is an easy to integrate blockchain with unprecedented scalability, high speed, and low transaction cost. Elrond is a blockchain protocol that seeks to offer breakneck transaction speeds by using sharding. The project describes itself as a technology ecosystem for the new internet, including fintech, decentralized finance, and the ‘Internet of Things. Its smart contracts execution platform is reportedly capable of 15,000 transactions per second, six-second latency, and a $0.001 transaction cost. It is a direct competitor to blockchain platforms like Polkadot, Soldano, and Ethereum.
Elrond was founded in 2017 by Beniamin Mincu, Lucian Todea, Lucian Mincu as a solution to some problems faced by blockchain platforms. Elrond claims to solve the scalability trilemma (The scalability trilemma is a phrase coined by Vitalik Buterin (founder of Ethereum) to describe that it is impossible to maximize the three desirable attributes equally; that are decentralization, scalability, and security.) with a 1000x improvement in blockchain speed, scale, cost, and user experience.
In their whitepaper released in 2018, they aimed to solve these challenges through:
Complete decentralization: Eliminating the need for any trusted third party, hence removing any single point of failure;
Robust security: Allowing secure transactions and preventing any attacks based on known attack vectors;
High scalability: Enabling the network to achieve a performance at least equal to the centralized counterpart, as measured in TPS (transaction per second);
Efficiency: Performing all network services with minimal energy and computational requirements;
Bootstrapping and storage enhancement: Ensuring a competitive cost for data storage and synchronization;
Cross-chain interoperability: Enforced by design, permitting unlimited communication with external services
A genuine State Sharding approach: effectively partitioning the blockchain and account state into multiple shards, handled in parallel by different participating validators;
Secure Proof of Stake consensus mechanism: an improved variation of Proof of Stake (PoS) that ensures long-term security and distributed fairness while eliminating the need for energy-intensive PoW algorithms.
Its main selling point is its high scalability, stating that it is the first blockchain network in which state, network, and transaction sharding have all been implemented. The strength of Elrond is the fact that it solved the issues faced by other blockchains by picking the best features from existing blockchains and improving on them. For instance, Elrond picks sharding from Zilliqa but makes it 'adaptive.' Elrond says in its whitepaper that "Elrond was designed upon and inspired by the ideas from Ethereum, Zilliqa, Algorand, and ChainSpace.”
Elrond’s network is capable of processing up to 15,000 transactions per second, making it one of the highest performing blockchains. Transactions at Elrond are confirmed almost instantly. For comparison, Ethereum can process up to 15 transactions per second, and Tron up to 1000 transactions per second. The speed of the Elrond blockchain is due to the adaptive sharding mechanism used by Elrond.
The first blockchain consensus algorithm based on Proof of Work (PoW) is used in Bitcoin, Ethereum, and other blockchain platforms. In Proof of Work, each node is required to solve a mathematical puzzle (complicated to calculate but easy to verify). And the first node that finishes the puzzle will collect the reward. Proof of Work mechanisms successfully prevents double-spending, DDoS, and Sybil attacks at the cost of high energy consumption. Proof of Stake (PoS) is a novel and more efficient consensus mechanism proposed as an alternative to the intensive energy and computational use in Proof of Work consensus mechanisms. PoS can be found in many new architectures like Cardano and Algorand or can be used in the next version of Ethereum. In PoS the node that proposes the next block is selected by a combination of stake (wealth), randomness, or age. It mitigates the PoW energy problem but also puts two important issues on the table: the Nothing at Stake attack and a higher centralization risk. The Elrond platform uses a modified consensus algorithm called Secure Proof-of-Stake (SPoS).
Elrond nodes form a consensus group rating, based on which the chances of becoming a validator for the next block are determined. Validators are shuffled randomly and can be reassigned to another segment. This maintains a high level of network security. Unlike classical PoS, the improved mechanism selects node operators in a truly random and unbiased manner. The new source is determined by signing the previous random source generated by the validator. For successful block additions, validators receive Elrond tokens (EGLD).
Validators are node operators. Their task is to check the blocks added to the network for validity, thereby ensuring the continuous operation of the blockchain. Validators are rewarded for this. Validators need to reserve a certain amount of eGLD tokens in order to vote for added blocks. Validators have to stake at least a sum of 2500 EGLD to enable your node and stand a chance of being designated as a validator. The more coins a node has staked, the higher its chances of becoming the validator of a new block will be. But on the condition that the node works almost flawlessly.
The Elrond blockchain has a native token known as eGold or EGLD that is used for paying network fees, staking, and rewarding validators.
Elrond offers very impressive returns on staking; this means there is a probability that many tokens will be locked out of circulation, which could boost the price.
EGLD also acts as the native token to pay for transactions on the blockchain; the more transactions that take place on the network, the more the token will gain demand.
EGLD acts as the utility token on the DApps deployed on the network.
EGLD is also used to reward validators for their work.
Elronds tokens were first issued on Binance Chain under the name ERD with a total supply of 20 billion. In November 2019, the company burned minted 500 million tokens on the Ethereum blockchain as ERC-20 tokens, and they were the new native token of the Elrond blockchain known as eGold or EGLD. In September 2020, the company held a token swap event for Elrond token holders to swap their ERD tokens for EGLD tokens. During the process, the total token supply was reduced from 20 billion to 20 million by setting the swap ratio at 1000 ERD for 1EGLD.
The token had an ICO that raised about $3,250,000 on the Binance SmartChain in July 2019.
EGLD tokens are stored in cryptocurrency wallets. EGLD is compatible with the following wallets.
Maiar web wallet: it is directly powered by the Elrond blockchain technology. It has been released on android and iOS app stores racking up over 200.000 users.
The platform creates a global digital economy by enabling blockchain interoperability.
It solves the scalability trilemma faced by most blockchain services.
It is capable of processing up to 15,000 transactions per second, making it one of the highest-performing blockchains.
The maiar wallet is user-friendly for non-tech-savvy users, and the registration process is easier than most blockchain-related services.
Despite Elronds unique features, sizeable community, and reach, the project has had little to no exposure in the crypto media compared to its competitors.
The distribution of its EGLD token is strange, as most of the EGLD in circulation is held only by a dozen wallets.
The Maiar wallet shares user data with centralized bodies such as government agencies.
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