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What Is Elrond? (EGLD)
Elrond is a software that seeks to incentivize a distributed network of computers to run a smart contract platform that aims to prioritize scalability and low transaction fees.
In this way, Elrond is designed to compete against major blockchains, such as Ethereum and Zilliqa, aiming to grow an ecosystem of decentralized applications and cryptocurrencies.
To do so, Elrond employs two unique features:
- Adaptive State Sharding – The process of splitting the Elrond infrastructure to support more transactions and programs
- Secure Proof-of-Stake (SPoS) – The consensus mechanism devised to sync separate network components to a common ledger
Further, developers will use the Elrond Integrated Development Environment to write and launch customizable programs that replicate goods and services on its platform.
Elrond is powered by its native cryptocurrency, EGLD coin, which is used to interact with applications, send transactions, and incentivize actors supporting the network.
Who Are The Founders Of Elrond?
Elrond was co-founded in late 2017 by brothers Beniamin and Lucian Mincu alongside Lucian Todea as a solution to the problem of blockchain scalability, which they thought to be the most pressing problem facing the industry.
Prior to Elrond, Beniamin and Lucian Mincu co-founded MetaChain Capital, a digital asset investment fund, with Beniamin Mincu serving as CEO and Lucian Mincu as chief technology officer. The two also co-founded ICO Market Data, an aggregator of information around initial coin offerings.
Beniamin Mincu was also responsible for product, marketing and community for blockchain platform NEM from 2014 to 2015, in addition to being an early investor in projects such as Zilliqa (ZIL), Tezos (XTZ), Brave and Binance. Lucian Mincu has additional experience as an information technology engineer and security specialist, having worked with Uhrenwerk 24, Cetto and Liebl Systems.
Todea is a serial tech entrepreneur who previously founded and served as CEO of Soft32, a software review and download site, and a partner of mobilPay, a mobile payments application. He is also an angel investor, having invested in biometrics tech company TypingDNA and accounting platform SmartBill.
How Does Elrond Work?
Sharding is a technique that breaks data down into smaller pieces and distributes them across multiple chunks of the network, or shards, each comprising a number of nodes that process transactions.
As a core concept, it’s not unique to Elrond; Zilliqa is another sharded blockchain with similar aims, while Ethereum 2.0 will also implement sharding techniques. What Elrond does a bit differently is to implement three different kinds of sharding—state, transactions, and network—and use parallel processing to speed up transaction time and handle more at once.
Elrond also uses what it calls a secure proof-of-stake system consensus mechanism. It pairs the weight of a validator’s staked EGLD tokens with a network rating for each node, creating something of a meritocracy, plus it implements random validator selection and regularly reshuffles nodes between shards. It’s said to be a secure, low-latency solution for consensus.
The Elrond network offers many features common to other cryptocurrency networks, like smart contracts, transaction settlement, and token issuance.
Developers can use programming languages (such as Rust, C and C++) to run custom programming logic (smart contracts) and design new programs (decentralized applications) to offer a variety of products and services.
Unique to Elrond is its design variations of sharding and proof-of-stake, helping process roughly 12,500 transactions per second.
Sharding works by splitting the network into pieces, or shards, for nodes to only process a fraction of the network’s transactions. This practice is also implemented in competing other blockchains such as Zilliqa and Polkadot.
Elrond’s transaction processing mechanism is called ‘Adaptive State Sharding,’ where nodes are split into subsets to verify transactions. Once the transactions are processed, the shards broadcast them to the metachain (Elrond’s central blockchain) where they will be settled.
Of note, every 24 hours, one-third of the nodes validating transactions in each shard are reshuffled to a new shard, with the intent of preventing collusion among validators in each shard.
Secure Proof of Stake (SPoS)
Central to Elrond is the Secure Proof of Stake (SPoS), a Proof of Stake governance mechanism that keeps the distributed network of computers running its blockchain in sync.
Similar to traditional PoS, SPoS is used by computers running the Elrond software to secure the network, validate transactions, and distribute newly minted EGLD coins.
However, since Elrond’s network consists of shards rather than a single chain, its SPoS consensus mechanism is used to select validating nodes to produce blocks within a shard rather than the entire network.
To achieve final settlement, validators must check the work of block producers and sync with other shards within the network. Once a batch of transactions is successfully appended to the Elrond blockchain, these contributors are rewarded with EGLD tokens.
How Many Elrond (EGLD) Coins Are There In Circulation?
The Elrond economic model has a limited supply that starts at 20,000,000 EGLD, with new tokens minted to reward network validators. The maximum supply can never exceed 31,415,926 EGLD, but this number will decrease as more transactions are processed.
Elrond’s native token was first made available for purchase through a private sale, in which 19% of its initial supply was sold, with 7.5% made available immediately upon token generation and another 15.41% released every three months. Elrond also held an initial exchange offering on Binance, in which 25% was sold and made available immediately.
Of the remaining 56%, 7% was reserved for ecosystem rewards, with 50% released immediately and 50% after six months; 8.5% for marketing, grants and an accelerator pool for DApp developers, with 81.17% released immediately and 9.41% every six months; 2% for a community fund, with 33.3% released immediately, 33.3% after six months and 33.3% after 12 months; 2.5% for advisors, released after one year; 19% for Elrond’s founders and core team members, with 10% released after six months, 10% after 12 months, 15% after 18, 24, 30 and 36, and 20% after 42 months; and 17% for the company for ecosystem support, with 33.3% that can only be used for staking during the first year released immediately and 66.6% released in three equal installments over three years, starting after one year.
Elrond’s tokens were first issued on Binance Chain under the name ERD with a total supply of 20 billion. 500 million were burned in November 2019 and minted on the Ethereum blockchain as ERC-20 tokens, and the company launched a token swap event in September 2020 for token holders to swap their ERC-20 and BEP-2 tokens for mainnet EGLD tokens. During the process, the total token supply was reduced from 20 billion to 20 million by setting the swap ratio at 1,000 ERD for 1 EGLD.
Highly Determined Team
Elrond is built by a team of experienced entrepreneurs, engineers and researchers with significant blockchain backgrounds and technical experience at Microsoft, Google, Intel, and NTT DATA. The team includes two PhDs in CS & AI, multiple math, CS, and AI Olympiad champions, and a former member of the NEM core team.
How Is The Elrond Network Secured?
Elrond uses what it calls a secure proof-of-stake consensus algorithm in which nodes must stake their EGLD tokens to participate in the validation process, and each validator is assigned a rating score based on past activity, which also influences whether or not they are selected. If a validator’s rating becomes too low, it will not be selected and must pay fines. Validators can also be removed from the network and have their stakes slashed if they continuously act in a manner that is against the integrity of the network.
Validators are randomly selected in a way that can be neither predicted nor modified based on the previous round of validations. In addition, validators are periodically shuffled between shards as a way to prevent collusion. Nodes communicate among one another using modified Boneh-Lynn-Shacham, or BLS, multi-signatures for strong cryptographic protection.
The Elrond Network has several key pieces that make up the framework of the blockchain.
Nodes and Users: These are the two main pieces keeping the network running. Users deploy transactions on the network, either as a transfer of value or as the execution of a smart contract. Nodes are the devices on the network that process these transactions in both an active and passive manner.
Validator: These are special node types that provide block generation and consensus building in return for rewards. Validators are required to stake tokens to become eligible and are then nominated by other stakeholders. Other special node types include observers and fishermen, which we will describe later.
Shards: The Shards are smaller partitions of the Elrond network and are used for scaling: each shard is responsible for a portion of the state (accounts, smart contracts, blockchain) and transaction processing, so that every shard can process only a fraction of the transactions in parallel with other shards.
Metachain: The Metachain is the blockchain that runs in a special shard, where the main responsibilities are not processing of transactions, but notarizing and finalizing the processed shard block headers, facilitating communication between shards, storing and maintaining a registry of validators, triggering new epochs, processing fisherman challenges, rewarding and slashing.
eGLD Tokens: The eGLD token is what powers the network, acting as the entry point for the network, and providing the means to pay for transactions, dApp deployment, storage, smart contract execution and rewards to validators. Transaction fees are split between validators and the Elrond Community Fund.
Adaptive State Sharding Technology
Adaptive state sharding is a unique way to employ sharding technology, and while it has long been a database optimization technique, it is only recently being introduced to blockchain applications.
Sharding Tree Structure & Shard Redundancy across Epochs. Image via Whitepaper.
Elrond is using adaptive state sharding to accomplish a number of key goals:
- network will be able to maintain scalability without affecting the availability of the network. This means that no matter how many shards are present in the network it shouldn’t impact state updates or network uptime.
- Determining the destination of transactions is easy to calculate and deterministic thanks to the sharding solution, leading to instant traceability and dispatching.
- The adaptability of the network means shards remain balanced at all times.
- The state sharding solution employed by Elrond means demand changes are handled without an impact on the security of the network.
The Elrond Network divides its blockchain timeline into epochs and rounds. While it is possible to modify epochs by modifying the architecture of the system, for the most part, the epochs have a fixed duration.
At the end of an epoch, shards are pruned and reorganized across the network. Rounds also have a fixed time span. As each new round begins a new consensus group is randomly selected for committing one block.
Secure Proof Of Stake Consensus (SPoS)
The SPoS consensus mechanism used by Elrond was developed to improve the existing Proof of Stake solutions. It reduces the latency in the network and allows any node in the shard to determine which members will be part of the consensus group at the start of each round.
Randomization is provided through the aggregated signature from the last block. The Elrond team estimates this reduces the time required to elect a consensus group to under 100ms.
Graphical Representation of Elrond Sharding. Image via Elrond Docs.
There is also a weighting factor introduced that serves to promote meritocracy among nodes while also considering stakes. And Elrond introduces the Bellare and Neven multi-signature scheme which was designed to reduce the number of rounds of communication necessary in the signing algorithm.
As a more sophisticated version of Proof of Stake, it aims to ensure distribution of shards is fair, and it is a compromise between increased energy and computational demands and security.
Elrond Network Roles
Validator: are nodes on the Elrond network that process transactions and secure the network by participating in the consensus mechanism, while earning rewards from the protocol and transaction fees. In order to become part of the Elrond network, a validator needs to put up collateral in the form of EGLD tokens, which are staked to align the incentives between validators and network goals. Validators stand to lose, their stake if they collude to disrupt the network.
Observer: Observers are passive members of the network that can act as a read & relay interface. They can be either Full, keeping the entire history of the blockchain, or Light, keeping only 2 epochs of blockchain history. Observers are not required to stake EGLD tokens to join the network and are not rewarded for their participation.
Fisherman: A node which verifies the validity of blocks after they have been proposed. They challenge invalid blocks resulted from adversity of malicious actors and are rewarded for their service. The Fisherman role can be fulfilled by validators which are not part of the current consensus round or by observers.
Elrond Network Performance
Elrond launched its mainnet on July 30, 2020. The developers are looking to create a blockchain that is at the heart of a global, border-less and fully accessible digital economy.
This can be achieved by making Elrond a platform that uses a scalable value transfer protocol along with easy deployment of decentralized applications (dApps). The first such dApp called Maiar was launched alongside the mainnet launch. The Maiar mobile dApp, which is both a wallet and a fiat on-ramp, has a number of features that tie in with the broader goals of Elrond.
One of the key features offered by Elrond is its near-instant transaction performance and the linear scaling that will allow the network to grow. The Elrond website claims the network can process 250,000 transactions per second, and Elrond’s Adaptive State Sharding enables up to 260,000 TPS according to their recent testnet results.
The platform also features reduced storage requirements and improved linear scaling as more nodes join the network. The combination of linear scaling and parallel processing is the key that will allow Elrond to surpass the throughput of current centralized solutions.
Cross Chain Interoperability
In addition to efficient decentralization, Elrond is also looking to provide cross-chain interoperability. The team wants to deliver full decentralization in hopes of minimizing the possibility of bad actors exploiting a single point of failure.
The team also hopes to do away with exchanges as the main point of interoperability between blockchains. The Elrond Network has plans to allow full communication between various external services, beginning with the implementation of the Elrond Virtual Machine (EVM).
Components of the Elrond Virtual Mahchine
This virtual machine will support smart contracts written in Solidity, allowing users to create secure transactions between Elrond, Ethereum and other ERC-20 tokens without using an exchange. The Elrond VM will also feature an adapter mechanism that will allow communication with other chains that include adapters to work with Elrond.
The Maiar dApp
One of the major goals of Elrond is to develop a dApp ecosystem and that got off with a bang as the team released the very first dApp, called Maiar, in conjunction with the launch of the mainnet.
Benjamin Mincu, founder and CEO of Elrond, has called the Maiar mobile app the “gateway to the unbanked”, noting that “A large population of the world is unbanked, without access to the existing financial infrastructure, and so their opportunities to participate in wealth creation are extremely limited”
Maiar is a blazingly fast, privacy-focused browser first and foremost, but it will also have a wide array of useful features. These include the ability to store, stake, send, and receive eGLD coins. Users will also be able to purchase eGLD tokens right from the wallet using more than 150 different fiat currencies.
Elrond Maiar App on the Apple iTunes Store
Maiar has been positively received from the start, with a 4.4 star rating on the Google Play store, and a 5 star rating on the Apple App store. Unlike many new dApps Maiar is fully developed at launch, with few bugs. It has a clean and easy to understand interface that is meant to make adoption by new users as stress-free as possible.
Elrond hasn’t released a roadmap for new Maiar features, but we can bet it will include a connection to a dApp store and links to any coming DeFi applications
The Elrond Network has been in the works for three years, and with the release of the mainnet is joining the mainstream blockchain projects. The fact that the project was backed by Binance Launchpad is a good sign, indicating Elrond was fully vetted by Binance and found to be a solid project.
The run-up in the price of the ERD token ahead of the mainnet launch is also highly encouraging, especially when you consider the lack of coverage by cryptocurrency exchanges for the token. That’s also been followed up by a rise in the value of the new eGLD token, showing that the token value has staying power.
Certainly, the team seems very competent, with a deep skillset. So far they have performed very well, hitting deadlines and deliverables as promised. This alone is valuable in the blockchain space.
With the unique Adaptive State Sharding and Secure Proof of Stake, the project promises speed and scalability that hasn’t been seen from many projects. And the inclusion of support for multiple smart contract languages can only help as Elrond moves into the decentralized application space.
It’s an ambitious project to be sure and we will have to wait to see how rapidly the team is able to continue developing and deploying solutions to determine the potential longevity of the project. While the project looks excellent on paper, it will need to remain nimble and agile to remain ahead of the competition.