221
If you want more cryptocurrency analysis including full-length research reports, trading signals, and social media sentiment analysis, use the code "Publish0x" when subscribing to CryptoEQ.io to make your first month of CryptoEQ just $10!
The process in which Algorand launched has promoted avenues of centralization over time. This comes in the form of early investors, commercial institutions, and nonprofit entities like universities. Early adopters of Algorand not only got the incentives of a large share of rewards, but were also granted the rights to run the existing relay nodes on Algorand. The Algorand network is built upon two different types of nodes: participation nodes that are easy to set up and have basic requirements, and relay nodes which are required to be approved by the Algorand Foundation and require significantly more computing power and capital. Per the Algorand Foundation , relay nodes should consist (at a minimum) of the following:
- 16GB RAM
- 1TB high performance disk
- At least 5TB monthly egress traffic allowance
100 entities were pre-selected to run these relay nodes—an award that grants these holders the potential to acquire a large percentage of the outstanding market share should they choose never to sell. A pilot program, beginning in 2021, allowed new entities the opportunity to volunteer to run a relay node. 20 new companies were pre-selected by the foundation and are currently operating relay nodes.
With PPoS utilizing a one-ALGO-to-one-vote system, the proportional chance that these 100 entities will be selected to the voting committee each time is high, though, it’s not even close to dominating the block validation committee each time as there are thousands of other selectees.
With Algorand’s newly-launched governance process, it was the hope that this would help decentralize the project’s governance, but as noted in the previous section, the overwhelming majority of governance votes still rests in the hands of the foundation and early, private investors.
It’s important to note that from an idealist cryptocurrency advocate, Algorand falls short in many respects including:
- Permissioned, relay nodes controlled by the Foundation
- Earmarking 200 million ALGO for early backer/relay node incentives (again, only entities close to and approved by the Foundation can run a relay node to get these rewards)
- Having a for-profit company (Algorand, Inc.) behind the project equipped with its own governing officers
- Having >50% of the token supply controlled by founders and private insiders
- Stating on record that the foundation built the project to include the abilities to execute “account freezing” and “clawbacks”
- Suffering from "state bloat" (~800 GB for relay node as of Q4 2021) despite being quite new and underutilized
- Having a formal document in place (created by and voted through by early investors) that outlines how early investors can/will sell ALGO at a profit (EIP-11252019AF: Conditional Accelerated Vesting
- To quote the document, “The proposal also incorporates accelerated vesting under positive market conditions” An example from September 2021
