Algorand is a smart contract-compatible, sustainable, layer-one blockchain. The native ALGO token plays a crucial role in securing the Algorand network via its pure proof-of-stake (PPoS) consensus mechanism, which helps to promote decentralization without compromising on security or scalability. Unlike some regular proof-of-stake chains, Algorand has a low barrier to entry for participating in consensus, making it easy for ALGO holders to make a passive income by supporting the network. 

In this article, we’re going to dive deep into the Algorand ecosystem. We’ll explore the ALGO token and its use cases. Plus, we’ll discuss the pure proof-of-stake (PPoS) consensus mechanism and how it differs from other types of consensus. We’ll also take a look at some of the top projects in the Algorand ecosystem, the underlying architecture of the network, and discuss founder Silvio Micali.

What is Algorand?

Algorand is a secure, sustainable, institution-grade blockchain founded by esteemed cryptographer and MIT professor Silvio Micali. Silvio Micali is one of the most influential figures in modern cryptography. The Algorand layer-1 blockchain is smart contract-compatible and home to an ecosystem of projects. The native Algrorand cryptocurrency (ALGO) plays an essential role in decentralized governance and in the pure proof-of-stake PPoS) consensus mechanism. Algorand achieves high transaction throughput with minimal fees, making it a highly scalable platform. Also, the network has a low environmental footprint compared with many legacy blockchains.

Algorand aims to solve the “blockchain trilemma” of achieving decentralization and scalability without compromising on security. The network is home to an array of decentralized applications (dapps) and offers a developer-friendly environment for building and deploying smart contracts. The diverse community built around Algroand consists of various projects involving Web3 gaming applications, decentralized finance (DeFi) protocols, non-fungible tokens (NFTs), metaverse platforms, and much more.

In September 2022, Algorand implemented State Proofs, a new interoperability standard that facilitates secure cross-chain swaps. State Proofs promote cross-chain communication and provide a secure alternative to cross-chain bridges. They also enable Agorand to become the first blockchain network with resistance to quantum attacks, something that founder Silvio Micali believes could be a significant threat to blockchains in the near future.

At the time of writing, ALGO is trading at around $0.22, with a market cap of 1.6 billion, according to CoinGecko. It has a circulating supply of 7.1 billion tokens out of a maximum supply of 10 billion.

What is Algorand’s Consensus Mechanism?

Now that we’ve addressed the question, “what is Algorand?” let’s explore the novel consensus mechanism that secures the network. Algorand uses a pure proof-of-stake (PPoS) consensus mechanism. Algorand’s PPoS protocol uses Verifiable Randomness Functions to select stakers for proposing new blocks. Each network participant can propose blocks and vote on block proposals. The number of ALGO tokens staked determines the influence a staker has on the network, their chances of being selected for block proposals, and the weight of their votes. This mechanism incentivizes larger stakes, which increases network security and reduces the circulation supply of ALGO. Plus, it promotes decentralization by lowering the barrier to entry for participation.

Furthermore, Algorand’s PPoS protocol aims to be carbon-neutral. Proof-of-Work (PoW) blockchains like Bitcoin are extremely energy-intensive. Bitcoin miners compete against each other to solve cryptographic puzzles and earn the right to append a block to the blockchain. Bitcoin mining requires specialized hardware and access to cheap electricity, making it an expensive endeavor. Also, because there can only be one winner, most of the electricity spent in these competitions is wasted. Such fierce competition among Bitcoin miners means that the Bitcoin network uses the same amount of electricity annually as a country like Sweden or Argentina. 

Bitcoin’s PoW mechanism can result in a concentration of power among small groups of miners. On the other hand, Algorand’s PPoS consensus requires little electricity and creates an equitable alternative to PoW, because anyone can participate. Also, because Algorand’s consensus mechanism requires little electricity, it’s easier to scale than PoW blockchains like Bitcoin. Plus, PPoS prevents forks, as two blocks can never be appended to the blockchain simultaneously.

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Beyond its advantages over PoW consensus mechanisms, PPoS has several features that make it stand out against other PoS models. For example, some delegated proof-of-stake (DPoS) models prioritize scalability over decentralization. In many cases, PoS validators are limited to a predetermined number of entities, making it difficult for smaller holders to participate in consensus. However, PPoS allows every network participant to propose new blocks and vote on validator nodes. 

This reduces the single points of failure associated with centralization. Furthermore, PPoS allows users to withdraw and spend their stake at any time. Plus, PPoS gives the Algorand network a larger attack surface than traditional PoS chains. This reduces the likelihood of attacks by making them more expensive and less profitable.

How Much Does it Cost to Send a Transaction with Algorand?

Transaction fees on Algorand are around 0.001 ALGO, making them a fraction of the cost of transactions on Ethereum, the leading smart contract blockchain. During periods of network congestion, the Ethereum blockchain can slow down significantly. When this happens, gas fees soar, creating an unstable environment for developers and investors. Although the Ethereum 2.0 upgrade addresses these issues, transactions on Algorand are significantly faster and cheaper.

How Fast is an Algorand Block?

Validators on the Algorand network produce a new block every 3.9 seconds. The network has a throughput of up to 6,000 transactions per second (TPS), with an average of around 1,300 TPS and transaction finality of around four seconds. Though this is much faster than the Ethereum and Bitcoin networks, it’s not the fastest. Nonetheless, Algorand is fast enough to scale without friction and meet the demands of the modern Web3 user. Accordingly, Algorand is an attractive alternative for Ethereum developers, who are often troubled by high gas fees and network congestion.

What is the Minimum Stake Needed to Run a Validator Node for Algorand’s PPOS Consensus Mechanism?

A decentralized network of validator nodes secures the Algorand blockchain and verifies transactions throughout the network. The minimum stake required to run a validator node is 0.01 ALGO. By contrast, Ethereum validators must stake a minimum of 32 ETH to participate in consensus and earn staking rewards. Such a low requirement makes the Algorand blockchain more accessible for token holders with smaller holdings and provides an opportunity to reduce the concentration of power among validators.

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Algorand is committed to reducing the environmental impact of the blockchain industry. The PPoS consensus mechanism significantly reduces the amount of electricity required for verifying transactions. However, Algorand’s commitment to sustainability extends beyond the underlying protocols. Algorand is working in collaboration with ClimateTrade, a marketplace that allows organizations to offset their carbon footprint.

Furthermore, Algorand takes a sustainable approach to the growing demand for NFTs. NFTs are one of the biggest drivers of Web3 adoption. However, minting them can be expensive during times of network congestion. The Algorand team believes that low electricity consumption and minimal fees are essential for the healthy growth of the NFT market. As such, the highly-scalable network is prepared to embrace the rising popularity of metaverse gaming applications and NFTs. 

While NFT creation has a relatively low carbon footprint, minting and transacting with them can use a lot of electricity. Algorand has minted 4.5 million NFTs for Società Italiana degli Autori ed Editori (SIAE), the largest copyright firm in Italy. SIAE saved a significant amount on fees by using Algorand and showcased the network’s potential to mint NFTs at scale without destroying the planet. Moreover, Algorand offsets its carbon footprint using carbon credits, which could be an attractive bonus for future NFT consumers.

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The Algorand Ecosystem

Algorand is home to a thriving developer community and a variety of innovative projects. Because the network has such low fees and fast transaction confirmations, it’s an ideal environment for launching dapps. Below, we take a look at the top projects built on Algorand according to the total value locked (TVL) and market capitalizations.

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Algofi is the leading decentralized exchange (DEX) on Algorand with $67.8 million in TVL. The platform allows users to swap tokens and earn interest on tokens via borrowing and lending. Also, the STBL algorithmic stablecoin plays a crucial role in maximizing yields and incentivizing borrowing and lending across the platform.

Folks Finance

Folks Finance is the protocol with the second-highest TVL on Algorand. The platform provides a suite of tools for managing DeFi portfolios. Users can swap tokens, earn a yield by providing liquidity, or take out uncollateralized loans. Plus, users can participate in ALGO liquid governance via Folks Finance and maximize their profits using the gALGO token, which allows ALGO token holders to earn interest on staked ALGO tokens throughout the Algorand ecosystem.


Opulous is a decentralized social media and entertainmet project on Algorand built for artists and creators. It allows creators to launch music-fungible tokens (MFTs) on the Algorand blockchain. MFTs are part of a novel investment framework that allows artists to tokenize the rights to their music and sell it on-chain via the Opulous Exchange. Also, users can stake the native Opulous (OPUL) token to earn up to 20% interest in staking rewards. After Algorand’s native ALGO token, the OPUL token is the cryptocurrency within the Algorand ecosystem with the second-largest market cap, according to CoinGecko.

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Lofty is a fractionalized real estate platform on Algorand that allows users to invest in real estate for as little as $50. The project aims to lower the barrier to entry for real estate investment and create new inclusive markets that cater to new demographics. Plus, Lofty is backed by some of the biggest names in finance and technology, including Amazon, Microsoft, Blackstone, Barclays, and J.P. Morgan.

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Algorand Full Guide – What is Algorand and the ALGO Token? Summary 

Algorand allows practically any ALGO token holder to participate in consensus, regardless of the size of their stake. Because of this, the Algorand blockchain is inherently decentralized. The recent State Proofs update facilitates decentralized cross-chain communication without intermediaries. Also, Algorand’s sustainable architecture facilitates fast transactions, low fees, and a high throughput, making it easy for developers to scale their decentralized applications (dapps).

Founder Silvio Micali is a leading cryptographer and has been a member of the faculty of the Electrical Engineering and Computer Science department at MIT since 1983. He is the co-inventor of many prominent cryptographic technologies, including probabilistic encryption, Zero-Knowledge Proofs, and Verifiable Random Functions. His contribution to the field of cryptography earned him several prizes and awards, including the Turing Award for computer science.

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