July 7th, 2021
The Algorand blockchain claims to solve the trilemma of security, scalability, and decentralization. It includes several unique features that help to accomplish these while also providing high transaction rates (targeting over 1,000 transactions per second) and block rates (less than five seconds per block).
These unique features help Algorand achieve its vision, but they also have security implications. Some changes improve the Algorand protocol’s security, while others create security concerns.
Security is one of the three components of the “blockchain trilemma,” and Algorand has made an effort to include additional security features in its protocol. Some of the main security-focused functions include:
Most blockchain systems use rewards and penalties to incentivize good behavior. For example, most blockchains have rewards associated with block creation. If a block is valid and accepted by the rest of the blockchain network, then the creator is paid some cryptocurrency. This reward helps to incentivize good behavior because trying to cheat the system places the block creator at risk of losing their reward.
One of the biggest security concerns of the Algorand protocol is its elimination of several of the common incentives and rewards, including:
The lack of incentives and penalties does not necessarily make Algorand vulnerable to attack. However, these factors mean that a node that discovers a potential vulnerability has little or no incentive not to try to exploit it.
Algorand represents a unique take on blockchain with the goal of building a more decentralized and community-focused system. Algorand has made some moves to improve the security of their protocol, but, by eliminating most incentives and rewards, they are also potentially more vulnerable to attack.