Algorand (ALGO): The Sustainable Solution to Blockchain's Trilemma

During​‍​‌‍​‍‌ the last five years, I've been involved in blockchain developments, and I've observed that, while many projects promise revolutionary technology, their users end up suffering from high fees and outages. However, Algorand, in my opinion, is very different from other projects in its own outstanding ways.

While Bitcoin is using more electricity than entire countries, and Ethereum users have to pay $50 for transactions (some even more - I myself, have paid $87 for a failed transaction during the NFT craze), Algorand is able to complete more than one thousand transactions per second at a cost of less than one cent each.

The Technical Foundation: Fixing the Blockchain Trilemma

The main technical issue that sets Algorand's solution apart from the rest is that it goes beyond the basic blockchain development has been struggling with the problem of the blockchain trilemma since its origin.

How Algorand breaks the classic blockchain trade-off

The Problem Every Blockchain ​‍​‌‍​‍‌Faces

Every blockchain developer has to deal with the scalability trilemma. The question is: Can you have security, decentralization, and speed at the same time? Or only two of the three?

The designers of Bitcoin went for security and decentralization. That left the way open for seven transactions per second.

Ethereum decided similarly. A couple of years ago, gas fees jumped to $100+ during network peak usage and could hardly be called a saving grace for users.

Solana chose speed and security. Unfortunately, its network has experienced several halts during which users couldn't access their services. I was there when the 17-hour outage happened in September 2021 - during a market correction, I was unable to withdraw funds. Inconvenient, to say the least.

By using Pure Proof-of-Stake as its consensus mechanism, Algorand manages to get around these limitations. Their system operates in the following way:

Cryptographic Sortition in Action

Whilst other cryptocurrencies make validators compete or stake amounts, Algorand instead employs Verifiable Random Function (VRF). Just think of it as a lottery where all ALGO owners get their "tickets" according to the number of coins they own.

By using this lottery system, the network selects committee members for each block. No one can find out who is chosen until that person shows their face by taking part in it. Thus the biggest attack vector faced by other blockchains is solved - one cannot target validators whom he cannot identify beforehand.

So, what is the outcome? Sub-3 second finality with instant, permanent confirmation.

If your transaction goes through on Algorand, then it is a done deal. Forever. There is no need to wait for additional confirmations such as in Bitcoin. Theoretically, rollbacks are impossible on Algorand unlike other networks.

Security: The Blockchain's ​‍​‌‍​‍‌Foundation

Alogrand​‍​‌‍​‍‌ has been one of the most reliable networks in the landscape of blockchains. While other networks are famous for outages and hacks, Algorand has not gone down once in its entire history since 2019. 

A fact that most people aren’t aware of is that Algorand is actively working on the security of its chain against quantum computing threats. To give you an idea, Algorand State Proofs is secured via FALCON signatures - a post-quantum cryptographic algorithm certified by NIST.

After a quantum computer becomes capable of breaking current cryptography (which is estimated to happen in 15-30 years), most blockchains will find themselves in a situation where they have no choice but to look for solutions. Algorand is coming up with solutions now.

Performance & Economics: Numbers That Matter

Let's look at the real performance data from AlgoExplorer and Messari Research as hard evidence of Algorand's powerhouse technical performance:

A snapshot of Algorand’s high-performance stats

Speed: Over 1000 transactions per second are already achieved, with a theoretical max of around 10,000 TPS (the respective numbers for Bitcoin are 7 TPS and ~15-30 TPS for Ethereum )

Cost: $0.001 per transaction (vs. Ethereum $1-50+ during congestion)

Finality: 3.8 seconds on average (vs. Bitcoin's 60+ minutes for security)

Uptime: 100% from mainnet launch in June 2019 (according to Algorand Status page)

These don't represent theoretical maximums. These live network stats are something anyone can personally verify via block explorers.

I am equally motivated to emphasize that while Algorand showcases 6,000 TPS as a marketing point, in fact, it is executing far fewer transactions. Still great compared to competitors, but I like to recognize the difference between potential and current reality.

Token Economics That ​‍​‌‍​‍‌Work

ALGO is capped at 10 billion tokens. Most cryptocurrencies are plagued with the issue of unpredictable inflation. New tokens come into existence every time validators are rewarded or foundations request funding. Algorand resolved this problem of uncertainty by setting a fixed cap.

As per CoinMarketCap, the number of ALGO tokens in circulation is about 8.8 billion (88% of the total supply). To give you the idea, that's approximately 0.2% of the Ethereum market cap. Many analysts, including our team at CoinMinutes who regularly cover Algorand developments, consider fixed supply as a major factor when looking at 2025 price predictions. If Algorand captures even a small fraction of Ethereum's market share, the math would become quite exciting. But I am more interested in the projects than in price speculation.

The remaining tokens are scheduled for predictable releases, which have been sped up a couple of times (and I wasn't particularly happy with that), with the foundation unlocking them ​‍​‌‍​‍‌daily.

Building On Algorand: Development Experience & Applications

What makes Algorand different from a builder's perspective becomes clear through actual development experiences and why it's becoming a compelling alternative for projects.

A Developer-Friendly Ecosystem

In​‍​‌‍​‍‌ the beginning of 2022, I made an attempt to deploy a lending protocol based on Compound's architecture on the Ethereum mainnet. The gas fees? The main contract was approximately $320, and the peripherals cost around $170, making it over $500 in total to just set up the platform that users would have to pay $40+ to interact with. It was absolutely insane.

Dual-language flexibility for Algorand devs

With Algorand, you can utilize Python via PyTeal and JavaScript/TypeScript via the AlgoKit SDK - however, I have noticed that the PyTeal documentation is somewhat lacking when it comes to providing complex examples for certain use cases. Most developers can now build blockchain apps in which they use the same languages they are already proficient in.

If you perform one transaction, it will only cost you 0.001 ALGO. There will be no bidding wars, no surprise fees. If you have an app, then you can budget its entire operating costs down to the very last penny. This is very significant for fintech applications. For example, when I was deploying a payment splitting application on Ethereum, I was hardly able to predict the end-user costs. On Algorand? Fee estimations are always accurate.

By using atomic transactions, the platform allows you to perform several actions either all together successfully, or all together failing. This feature helps the platform to get rid of bugs that have existed in other platforms for a long time. Partial transaction execution will no longer be able to cause users to lose money.

Adoption That Matters

Algorand​‍​‌‍​‍‌ has clarified its value in real-world business operations.

Archax - a regulated UK digital securities exchange on Algorand, tokenized abrdn's money market fund (value approximately $3.5-4 billion). It wasn't a pilot program or a proof-of-concept. Institutional money is flowing through Algorand. The traditional finance integration is more essential than DeFi speculation for the long-term blockchain adoption that I am tracking.

Through Lofty.ai individuals can co-own real estate with a little amount of money, starting at $50 through Algorand Standard Assets. Based on the data on their website, they have brought in more than 12,000 investors who have invested over $35 million in real estate. People are buying property and not just trading tokens. I've bought shares in three rental properties through Lofty - the experience has been okay but their KYC process is pretty slow and inefficient.

Impact on Different Groups

Developers​‍​‌‍​‍‌ could find Algorand very useful: Besides many programming languages, fixed costs, and atomic transactions; Algorand grants one more benefit of a smaller community - that means less help from the community but also a lower number of rivals. In my opinion, here it is more feasible to get support from the foundation for your work or projects than in larger ecosystems.

What about institutions? Features that comply with regulations such as the ability to freeze an asset and do clawback operations, when combined with openly regulated conditions and partnerships with the enterprise, create a lot of advantages for the regulated use cases. However, the modest market cap of ALGO might be a challenge for institutions seeking investment opportunities with a relatively high minimum ​‍​‌‍​‍‌threshold.

Investors perspective: To investors and market community, Algorand is a very promising technology project that requires patience. The limit on tokens and enterprise-style marketing may become the main factors for the value to rise if the usage of the ecosystem is fast. Most of the prediction models for Algorand price prediction between 2025 and 2030 point to these factors as the main reasons for growth. Nevertheless, the Layer-2 alternatives competition and network effects leading to bigger platforms creating scenarios where the value goes down, are some of the risks that exist on the other ​‍​‌‍​‍‌side.

The​‍​‌‍​‍‌ Sustainability Advantage: Far Beyond Marketing

Algorand's approach to global warming is seen as a competitive advantage that can be converted into opportunities for the uptake of the technology.

• Algorand: ~265 tCO2 annually (according to CCRI audit)

• Ethereum​‍​‌‍​‍‌ (we're talking post-merge figures): ~1,800 tCO2 annually

• Bitcoin: ~79 million tCO2/year based on estimates by Cambridge ​‍​‌‍​‍‌University

These differences matter a lot to institutional investors who are obliged to follow ESG (Environmental, Social, Governance) criteria. Some funds are not allowed to invest in those that consume a lot of energy. To neutralize their small carbon footprint, the Algorand Foundation is also purchasing verifiable on-chain carbon credits.

Challenges, Roadmap & Assessment

If a fair review of Algorand was done, its main challenges would be addressed. 

The Adoption Challenge

The adoption loop holding back ecosystem growth

Technology-wise,​‍​‌‍​‍‌ Algorand is a wonderful cryptocurrency. But the question of its popularity? That's somewhat of a mystery.

According to DefiLlama, the total value locked in the DeFi sector on Ethereum is over $100 billion. My recent check indicates that Algorand's total value locked is only around $100-120 million. Developers will choose the platform where the money is. Users will go where the apps are. Therefore a cycle is formed which is very difficult to escape.

I couldn't convince two of my client projects to shift their operations to Algorand even though it's technically better. The discussion ends with the statement: "But where are the ​‍​‌‍​‍‌users?"

However,​‍​‌‍​‍‌ despite having all the instruments to work with, the developer community of Algorand is not as big as that of Ethereum or Solana. There are less code examples. There are less tutorials. There are less developers with the right skills for the job. This transition becomes a business risk for those companies which are thinking about Algorand as their next step. What if you need assistance and the talent pool is not sufficient?

When Algorand appeared, the main reason for its differentiation was Ethereum's problem with high fees and slow speeds. What about now? Arbitrum, Optimism, and Base are capable of delivering the same performance as Algorand and, at the same time, they can provide access to the Ethereum ecosystem. If one can have all the technological advantages plus Ethereum's liquidity and developer network by being on these other chains, then why would anyone still want to build on Algorand? It's a tougher question to answer than it was two years ​‍​‌‍​‍‌ago.

The Road ​‍​‌‍​‍‌Ahead

The focus of Algorand's roadmap is on the enhancements side rather than the theoretical breakthroughs, something I appreciate after being exposed to an excessive number of projects that prioritize novelty over utility.

By Block Pipelining and Parallel Execution, the number of transactions that the system can handle at a time can be increased without a compromise being made on the instant finality. There is a lot of potential in what I have seen as the early implementations.

The upgrade on Post-Quantum Security will change the transition of account signatures from the currently used algorithms to quantum-secure ones.

More governance control is being transferred from the Algorand Foundation to community stakeholders with the xGov Platform Expansion. I participated in voting during the last two governance periods and although I found the process complicated, it has gotten better.

The question here is not if these improvements will take place - Algorand's record is a strong indication that they will. The question is whether it will be fast enough to compete with alternatives that are constantly ​‍​‌‍​‍‌evolving?

My​‍​‌‍​‍‌ Take on Algorand's Future

Balancing Algorand’s tech and adoption gap

Algorand is addressing the technical issues on which other blockchains fail. Most people thought it was impossible but the Pure Proof-of-Stake consensus mechanism still manages to be fast, secure, and energy efficient.

The technology is effective. The team is performing. The enterprise partnerships are providing support. But they need to improve their marketing - they are technically brilliant but have difficulty communicating their story in a way that creates impact with people outside their community.

Technology merit alone does not guarantee market success. Larger and more established platforms benefit from network effects, developer mindshare, and institutional momentum. Algorand is struggling with adoption dynamics that are beyond the control of any team, not because of technical limitations, but because of adoption dynamics beyond any team's control.

If you believe in technology to win over the network effects, then Algorand is a convincing case. If you focus on the maturity of the ecosystem and established adoption, then bigger platforms would be your safer option.

The​‍​‌‍​‍‌ blockchain industry is like an iceberg that cannot survive without the diverse continued streams of different platforms optimized for various use cases.

Algorand's pledge to institutional compliance, energy efficiency, and developer accessibility are what the markets that are not limited by the complexity of Ethereum or the constraints of Bitcoin look like.

Will that be enough to create a competitive advantage? Only time will tell.

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