There are more and more interesting projects in the world of cryptocurrencies. One of them is Elrond. If you don’t know what this project is about and you are interested in learning more about it, this article is for you. We tell you all about what Elrond is and how it works.
Elrond is a project in which the main goal is to achieve a blockchain so fast and scalable that it can be used for finance, business use, among others. The team will try to make this possible through its adaptive state fragmentation system. This system allows transactions to be handled quickly by multiple validators.
The blockchain of this project stands out for its speed, as while Bitcoin can only confirm a maximum of seven transactions per second, Elrond claims to be able to perform 15,000 transactions per second with a fee of just $0.001 per transaction with instant completion. To top it off, Elrond also claims to have the ability to scale to hundreds of thousands of transactions per second as demand grows.
The network’s high scalability and speed make it one of the first choice of decentralized finance developers. They use the blockchain to run their applications as well as other types of decentralized applications (dapps).
Integrantes de Elrond
Benjamin Mincu is the CEO of this project. Benjamin started his blockchain experience as part of NEM‘s core team for a year and a half. In addition, he was the main leader of the marketing, business and community building efforts to succeed in turning NEM into a global blockchain product.
Lucian Mincu, is the CIO of Elrond. Mincu is an engineer with 8 years of experience in designing complex network infrastructures and solutions for high-end customers such as the German government.
On the other hand we have Elrond’s COO, Lucian Todea who is a successful entrepreneur who has over 15 years of investment experience in fintech. He is currently active in both the startup and blockchain space.
How does Elrond work?
The operation of this project is mainly based on the use of sharding or fragmentation. This is a technique that fragments data into smaller parts and distributes them in various networks or block chains. Each of these parts contains a number of nodes that process each transaction.
This operation is not only employed by Elrond, as it is also applied by other projects such as Ethereum 2.0. However, Elrond differs from Ethereum due to the fact that it implements three types of fragmentation. These are states, transactions and network. In addition, it employs parallel processing to speed up transaction times and handle a larger number simultaneously.
Elrond uses a consensus protocol different from those we usually see as Proof of Work or Proof of Stake. The mechanism used by this network is known as Secure Proof of Stake Consensus (SPoS). This mechanism was developed to improve existing Proof of Stake solutions. Among the benefits of this system is a reduction in network latency by allowing any node in the shard to decide which members will be part of the consensus group at the beginning of each round.
This mechanism provides some randomness through the aggregated signature of the last block. Therefore, it is estimated that this process reduces the time required to choose a consensus group to less than 100 ms.
A weighting factor has also been introduced in the operation of this network, which has the main objective of promoting meritocracy among the nodes while taking into account the stakes. This blockchain introduces Bellare and Neven’s multi-signature scheme. This multi-signature scheme was designed to decrease the number of communication rounds required in the signature algorithm.
With this consensus mechanism, the project aims to ensure that the distribution of fragments is carried out fairly, thus increasing energy and computational demands as well as security.
Elements of Elron
All this operation depends on certain vital factors for everything to run smoothly. Below we will see what these factors are and what role they play in its operation.
- Validator: Validators are the nodes of the Elrond network in charge of processing transactions and securing the network through their participation in the consensus mechanism. For their work they get rewards from the protocol and from the fees charged per transaction. If a validator wants to be part of this network he must first provide collateral in the form of EGLD tokens. These tokens are staked to align the incentives between the validators and the objectives of the network. In case a validator acts in bad faith, as a punishment he will lose his contribution to the network.
- Observer: Observers are passive members of the network that act as a read and relay interface. They can be “Full“, which are observers that preserve the entire history of the blockchain, or they can be “Light“. The job of Light observers is to preserve two epochs of blockchain history. To be an observer of the Elrond network it is not necessary to stake EGLD tokens, however, they are not rewarded for their participation.
- Fisherman: These are nodes in charge of verifying the validity of blocks after they have been proposed. They do this by challenging invalid blocks resulting from adversarial malicious actors and, like the validator nodes, they are rewarded for their service to the network. This position in the network can be filled by validators who are not part of the current consensus round or by observers.
- Shards: Shards are smaller divisions of the Elrond network. Their job is to improve the speed and scalability of the network. Each shard is responsible for a part of the state which can be accounts, smart contracts, blockchain, among others in addition to transaction processing. Each shard can process only a fraction of the transactions in parallel with other shards.
- Metachain: The Metachain is the blockchain running in a special shard. In this blockchain the main purpose is no longer the processing of transactions but the notarization and finalization of the block headers of the processed shard blocks in addition to other tasks such as storing and maintaining a register of validators, facilitating communication between shards, triggering new epochs, processing fishermen challenges, rewarding, among others.
- eGLD tokens: The eGLD token plays a very important role in the network, as it is what powers the network. The eGLD token acts as the entry point for the network. It also provides the means to pay for transactions, the operation of dApps, storage in the network, the execution of smarts contracts and the rewards given to validators. The fees charged for transactions are split between the validators and the Elrond Community Fund.
The Elrond network offers interoperability between blockchains. The team in charge of developing the network seeks to offer total decentralization with the idea of decreasing the possibility of malicious users exploiting a single point of failure. In addition, it also seeks to dispense with exchanges as the main point of interoperability between blockchains. This network also has plans to achieve full communication between various external services. Among its plans is the implementation of the Elrond Virtual Machine (EVM).
Token EGLD
Elrond uses the eGld token (EGLD) in every space on the network. Before the launch of the mainnet in July 2020 brought EGLD to life, the Elrond network used the ERD token, which is currently not operational. At the launch of the new token, the Elrond network allowed its users to exchange 1000 ERD for 1 EGLD after the launch of the mainnet.
Following the launch, the development team decided to significantly reduce the total supply of ERD tokens from 20 billion to a figure of only 20 million. In addition to this large reduction, it was also announced that a maximum of 11,415,927 new tokens would be issued over the next ten years. As a result, the maximum total supply is currently 31,415,927 tokens. This was a significant improvement over the old model, as it is now capped. After ten years, no more tokens will be issued.
