Simply Explained: Elrond (EGLD)
As tedious as Bitcoin and Ethereum can be due to the aforementioned scaling issues, they possess incredible traits. Bitcoin is a phenomenal store of value, and Ethereum is a programmable blockchain that allows people to use smart contracts. Elrond is looking to solve the scaling issues and combine the best of both.
What is Elrond?
Elrond is a layer 1 blockchain project similar to Ethereum. It aims to fix the scalability issues faced by other blockchains with something called “sharding.” The goal of Elrond is to develop its ecosystem and establish itself as a store-of-value asset. It’s also considered an IOT (internet of things) and a hub for decentralised finance.Elrond's main selling point is scalability. It has managed to implement 3 types of sharding; state, network, and transaction.
The project boasts some impressive numbers including its ability to process 15,000 transactions per second (TPS), with six-second latency, and a transaction cost of $0.001.
Typically, if you wanted to switch chains. Let’s say from Binance Smart Chain to Avalanche you'd have to send your crypto back to a centralised exchange to make that final conversion. Elrond is looking to implement “bridges” that could remove this step. They plan to do this through the Elrond virtual machine which we will get into at a later time.
How does Elrond work?
Adaptive state sharding
Sharding is when data is split into smaller chunks for storage. Picture a highway broken down into multiple roads which massively reduces congestion.On a single chain, you can only fit so many nodes. When you have multiple chains (shards), you can have more nodes. More nodes equal faster and cheaper transactions. Have you ever been stuck at airport security because there are only two counters open? That’s what it’s like without sharding. Implementing sharding is like opening up all the other counters.
The validator nodes on Elrond are split into four shards: three execution shards, and a coordination shard.
Each execution chain can process over 5,400 transactions per second. And the coordination shard helps to bring them together.
Elrond uses an adaptive state sharding method. This basically means if demands are unmet it can scale further by adding an additional shard. This way, the network can scale as adoption increases. Something Ethereum and Bitcoin weren’t able to do.
In a test run, a TPS of 263,000 was hit when 1,500 nodes were split over 59 shards in a public display.
Secure proof of stake (sPoS)
Elrond uses a secure proof of stake (sPoS) consensus mechanism to validate transactions. This mechanism is very similar to proof of stake, in which users lock up tokens and earn a % of the transaction fees as a reward. However, with sPoS, reduced latency means it’s quicker. And, at the beginning of every round, the members of the consensus group are decided by the shard.This mechanism also takes into account how many coins you hold, and how many transactions you were right about in the past, to prioritise and reward you for your work.
What is Elrond doing to grow?
To increase adoption, the project supports developers building on the platform by incentivising them. Developers receive 30% of the smart contract fees as royalties. This is a smart approach. Many blockchains focus on bringing users first in the hope that developers will follow, but that rarely seems to work. After a short while, people realise there are no good apps on the network and leave. In this way, developers will come over, build apps that people will want, and users will follow.The tokenomics of eGold
The project's native token eGold, also known as EGLD, is to Elrond what Ether is to Ethereum. It is the fuel that powers the Elrond engine. The token has many use cases that you’ll be familiar with if you’ve read through crypto school.- Reward validators who stake their tokens
- To pay for transactions on the network
- The development of dApps
- For the execution of smart contracts
EGLD had a starting supply of 20 million tokens, with a max supply of around 32.4 million tokens. There are currently 23 million tokens online as of March 2022. The new supply is for incentivising developers and rewarding validators.
Do note many tokens are burned during transactions, meaning there's less supply.
The asset is non-inflationary and therefore if demand goes up, so will the price.
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