What is Elrond? Your ultimate guide
Elrond’s solution to the blockchain trilemma is attracting investors and developers
- What is Elrond (EGLD)?
- Adaptive state sharding
- Secure Proof of Stake (SPoS)
- What is Elrond coin used for?
- Maiar Exchange
- Elrond review
Elrond (EGLD) is a relative newcomer in the crypto scene, having only launched its blockchain in 2020. Its claimed offering, however, is enough to make any crypto enthusiast blink in awe. Next for Elrond is to prove its blockchain model is sustainable and can handle the transaction speed it promises.
What is Elrond (EGLD)?
There is a belief among the crypto community that blockchains can only have two of the following features: decentralisation, scalability and security. Vitalik Buterin, the co-founder of Ethereum, coined this the blockchain trilemma. The Romanian brothers Beniamin and Lucian Mincu believe they have solved this trilemma with their new blockchain Elrond (EGLD).
Elrond’s goal was to improve upon the original blockchain's performance and make a decentralised network that can compete with centralised rivals. Elrond offers fast network speed through a technique called sharding, which it claims can handle 15,000 transactions per second. It is also secured and decentralised through a unique blockchain protocol, called secure proof of stake.
The blockchain wants to build an ecosystem of decentralised apps, smart contracts and tokens, making it a capable rival against leaders in the field, such as Ethereum.
Adaptive state sharding
Sharding is a key piece to the puzzle in understanding how Elrond works. This process splits the network into pieces, called shards, meaning nodes only have to process some of the blockchain’s transactions. As only a limited number of nodes have to process a transaction, the process is much faster than with many other blockchains.
Sharding is a concept invented long before the blockchain but this new technology is giving the concept another application. Other blockchains have used the sharding technique, including Zilliqa and Harmony. However, Elrond has uniquely combined three different sharding techniques to create its “adaptive state sharding” method.
The network is currently split into four shards. Three are called execution shards: these processes the transactions and each one is capable of verifying 5,400 transactions per second. The other shard is the Metachain, a coordination shard that finalises the transactions.
Secure Proof of Stake (SPoS)
The process behind validating the transactions on Elrond is called secure proof of stake. Proof of stake usually works by choosing a node to validate a transaction based on the number of tokens they are holding, like an auction.
Secure proof of stake (SPoS) has developed an idea pioneered by the blockchain Algorand, where there are selection committees, groups of nodes that pick a validating node. There is also an element of randomness to the node selection, making this process more decentralised.
There are few main differences to Elrond’s method. SPoS has used a rating system where nodes are rated on their past performance, which is taken into consideration in the choosing process. Elrond’s process is also faster. Selecting a committee can take Algorand up to 12 seconds, while it takes Elrond under 100 milliseconds.
This protocol is able to maintain high security, as it shuffles a third of the nodes into a different shard every 24 hours. This is to prevent collusion in the group and ensure the process is unbiased.
What is Elrond coin used for?
Elrond’s native token goes under the ticker EGLD. It is used as a store-of-value currency for users and developers to pay for network usage. EGLD coin can also be used for staking and as a governance token to vote on network decisions.
The Elrond cryptocurrency initially launched on Ethereum and the Binance Smart Chain under ERD, with a total supply of 20 billion. When the mainnet launched in September 2020, only 20 million EGLD were minted, with a maximum possible supply of 31 million. Holders of ERD could swap their tokens for EGLD at a ratio of 1,000 to 1.
For the first three months, the EGLD coin stayed between $5 and its launch price of $12.40. At the end of December 2020, the Elrond cryptocurrency saw its first bullish trend that continued into April where it peaked at $239.24.
EGLD started climbing again in November when it reached its all-time high of $542. It has dropped dramatically since then and at the time of writing it is sitting at $192.
Elrond’s surge in November 2021 was backed by an event on its decentralised exchange platform called Maiar Exchange (another name chosen, like Elrond, from the Tolkien legendarium). This exchange allows users to swap tokens, stake them and provide liquidity for the platform.
Elrond ran an incentive scheme to encourage people to use its exchange. Those who provided liquidity in EGLD, USDC and MEX, the maiar token, would receive a portion of the $1.29bn liquidity pool.
Elrond also launched its own payment platform and digital wallet last year, which was called Maiar as well. This platform provides its users with an accessible way to use financial services such as payments, investments, and passive earning.
Many critics argue that Elrond has demonstrated that it has potential to grow and become a successful blockchain. SA Shares points towards its scalability and “amazing transaction speeds”. It said: “Elrond entered the cryptocurrency space in 2020 and took it by storm, with the project piquing the interest of investors, traders, and cryptocurrency enthusiasts from around the world.”
CoinBureau noted its unique processes used to achieve its scalability and transaction speeds. The site said: “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.”
Elrond does look good on paper, it offers greater scalability, decentralisation, and transaction speeds than many other blockchains. However, it has been less than two years since the mainnet launched, Elrond must prove its model is sustainable and it can handle greater demand.
There are 20 million EGLD coins in circulation. When Elrond released its BEP-2 and ERC-20 token under the ticker ERD, 20 billion coins were created. Holders of ERD can swap 1,000 ERD for 1 EGLD.
Elrond was created by brothers Beniamin and Lucian Mincu, who wanted to create a unique solution to the blockchain trilemma. It was founded in 2017 and the mainnet went live in September 2020.
Elrond uses a secure proof of stake protocol to ensure the blockchain can maintain its security. This method selects a committee that chooses a verification node, this is the computer that processes a transaction. According to Elrond, this process can take under 100ms.