Elrond Blockchain I Lord of the Rings plays a role?

Gepubliceerd op 20 augustus 2023 om 09:30

The Elrond crypto (and blockchain) became an incredibly popular blockchain in 2021 and 2022. This was also reflected in the price of the eGLD token, which skyrocketed in 2021. As a result, more and more people got to hear about Elrond. Read more about the Elrond blockchain here!

What is Elrond?
Elrond's blockchain is different from most blockchains. It is distinguished by the high speed at which transactions can be processed. Elrond managed to address the scalability problem very well.

In fact, many blockchains have trouble scaling up. This means that the blockchain is limited in the number of transactions the blockchain can process per second. As blockchains are becoming more widely used, partly because of the rise in popularity regarding cryptocurrencies and other things that can be done with blockchain, more and more transactions are being performed on the blockchain. At the same time, the blockchain always has a maximum number of transactions they can process per second (TPS). With Bitcoin's blockchain (BTC), the TPS is at about 7, while Ethereum (ETH) is at about 14 TPS.

Elrond increases scalability through sharding and a modified version of the Proof of Stake (PoS) algorithm.

In addition, Elrond's token eGold (eGLD) can be staked. By staking eGLD, users secure the network better and can they also earn money from their staking.

By the way, Elrond is named for a character in Lord of the Rings. I have to say that the blockchain technology would come very handy in fighting orcs in Middle-Earth. 

Elrond's blockchain?

One of the key features of Elrond is that it uses sharding (read more about sharding here!).

Traditionally, it was used to optimize databases so that those databases worked faster and more efficiently. This technique was then also used for blockchains because they faced the same problem as traditional databases.

The moment a transaction is made on the network, each node must verify it. Then the data of all transactions must be stored on the node's machine. After all, each participant has a copy of the blockchain in order to verify that transactions are valid to be executed.

The older the blockchain is, and the more transactions are performed, the more data is stored on the node's machine. And that reduces the space available to process transactions faster. So nodes will have to have better and better hardware to still handle transactions quickly.

Sharding ensures that not all nodes have to do the same work. The work is distributed fairly and randomly among the nodes (horizontal partitioning). This saves a lot of memory, as well as energy costs. Therefore, sharding also helps make blockchains more sustainable. Multiple roads are created, so to speak, allowing work to be distributed throughout the network. 

Horizontal partitioning is one of the ways sharding can be implemented. In addition, state sharding, network sharding and transaction sharding are also common ways of sharding for blockchains. Elrond does not use these ways, and has developed its own way of sharding: Adaptive State Sharding.

Adaptive State Sharding
Elrond uses Adaptive State Sharding, which is a combination between state sharding, network sharding and transaction sharding. This allows the network to adapt to network users and demand. This method of sharding makes Elrond even more scalable and faster than blockchains that use a normal method of sharding.

You often see custom models and protocols solve a problem, but at the same time create a new problem. For example, something is made faster, but security is compromised (aka the blockchain trilemma).

This is not the case with Adaptive State Sharding. In fact, this type of sharding does not make security worse or less decentralized. A super solution!

For Adaptive State Sharding to work successfully, there are about 2,500 validator nodes running in Elrond's network. These nodes are divided into two shards:

  • Execution shards (which can process 5,400 transactions per second)
  • Coordination shards (the metachain).
    Elrond's team has already done several tests, where 263,000 transactions could be performed per second. As a result, 1,500 nodes in 50 shards were used.

Blockchain development

What's great about the Elrond blockchain is that developers are using the concept of sharding to make it even better. Developers saw in the sharding technique that it could become even better and more efficient. Elrond developers have turned the basic ideas of sharding into a newer and improved version. Thus, the development of blockchain gets a boost. By solving the blockchain and its problems, the blockchain is getting better and better. The opportunity for mass adoption is thus getting closer and closer. It will take many years anyway before the blockchain can be used everywhere, but through these techniques from Elrond, the chances of it actually happening are increasing!

Secure Proof of Stake (SPoS).
Within Elrond's blockchain network, the consensus algorithm Secure Proof of Stake (SPoS) is used. This is a variant of the well-known Proof of Stake (PoS) algorithm, which is also used by blockchains such as NEO and Ethereum.

The Proof of Stake algorithm is not about the computing power you provide (Proof of Work), but the number of tokens you 'stake' in a staking wallet. This is called staking, and you can compare it to paying a deposit. You get the number of tokens you stake back when you stop participating in the network, provided you did your job according to the rules. When the other nodes find out that this is not the case, they can choose to take away your stake.

The higher the number of tokens you stake, the greater the chance that you will be chosen to add the next block to the blockchain. Therefore, becoming a validator node is not for everyone, as you often need to be able to stake a lot of capital. However, it is possible to stake through another node. You then deposit tokens at a validator node, which uses them to be able to stake. Then you also get a share of the reward that a validator node receives when it has added a block to the blockchain. You can always see when the rewards are paid out. It also says what the APY is. Always check the validator node beforehand before having your crypto staked by a validator node! Because often your money is stuck for a few weeks and you can't get this out. Also, you pay fees if you want to get the money out.

Secure Proof of Stake works slightly differently than the traditional PoS algorithm. This is because validators are chosen not only based on the height of the stake, but also on the results they have delivered in the past. Combining this with the staking amount makes the network even more secure (and at a certain level more fair).

The nodes vote by looking at the past performance of the validators. The better the performance, the higher the assessment score will be.

The moment the assessment score is too low, the validator will have to pay a penalty. This is paid with the tokens the validator has deployed (staked crypto). If necessary, the network can also choose to remove the validator from the network. This is called slashing. This happens only if you approve malicious transactions or by being offline too often and not participating in the network.

Therefore, it is also important to properly research the validator where you want to stake eGLD tokens. If such a validator does not do its job properly, you can lose your tokens. Staking therefore never guarantees that you will actually earn money with your stake.

The beauty of this Secure PoS is that it further develops the original PoS. Instead of just choosing who has placed the most capital in a staking wallet, it also looks at how you function in the network. In doing so, just having a lot of capital is no longer enough. This means that everyone has a chance to verify a transaction on the blockchain and thereby receive a reward. Because before, it was always the case that the person who placed the most capital in a staking wallet was always allowed to verify the transaction on the blockchain. Participating in the network was not necessary. So now, with this blockchain, that is required. I also applaud this development because it ensures that people with smaller staking amounts can still receive rewards by participating well in the network.

  • Validators process and record transactions: Validators stake—agree to not trade or sell—EGLD tokens to earn the right to process EGLD transactions. Validators work together to simultaneously process transactions and add new blocks to the Elrond blockchain. 
  • Fishermen continuously hunt for malicious transactions and users: Fishermen in SPoS networks verify new blocks after they are added to the Elrond blockchain by validators. Fishermen are tasked with finding any invalid blocks or malicious actors participating in the network.
  • Observers passively maintain the history of the Elrond blockchain: Observers of the Elrond blockchain store the blockchain’s entire history. Observers are passive network participants who do not create new blocks and are ineligible for EGLD rewards.

Validators, fishermen, and observers operate the Elrond blockchain simultaneously. This concurrent participation is what makes the Elrond blockchain highly scalable.

The Elrond explorer

To see all the transactions of the Elrond blockchain, click here

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