Elrond is a blockchain-based platform that enables users to create and develop decentralized applications and cryptocurrencies, aiming to build a new digital economy. The project focuses on solving blockchain network congestion by offering scalable solutions. It provides fast transactions and a scalable environment for developers, businesses, and users, along with a user-friendly experience and low transaction fees.
The network can handle up to 15,000 transactions per second, making it one of the fastest blockchain networks available. Its native token, eGold (EGLD), is a versatile cryptocurrency used for staking, voting, and conducting transactions on the network. It serves as the core asset within the incentive system that rewards network participants. Elrond also features a six-second latency, scales through sharding, and offers attractive transaction fees as low as $0.001.
At its core, Elrond is blockchain software that rewards participants whose computational power supports the smart contract system. Developers can use this system to build decentralized applications and digital assets.
Elrond is designed for creating dApps and developing digital assets backed by smart contracts. To scale the environment for developers and users, it employs Adaptive State Sharding—a function that divides the network infrastructure to support the growing number of applications and transactions on the ledger.
Elrond uses the Secure Proof of Stake (SPoS) consensus mechanism, a variant of the traditional PoS protocol, to ensure that all distinct network partitions created by sharding are connected into a functional platform on the ledger. Developers can use Elrond’s integrated development environment to build decentralized applications that mimic real-world products and services.
How Elrond Works
The Elrond network leverages sharding and a unique consensus mechanism to achieve high throughput and scalability. Here’s a breakdown of its operational framework:
Adaptive State Sharding
Elrond’s Adaptive State Sharding divides the network into smaller fragments, allowing nodes to validate transactions and network operations by addressing one partition at a time. This approach enables the network to process thousands of transactions per second while maintaining low fees.
Sharding is performed by splitting the network into smaller fractions so that nodes can resolve portions of transactions individually, avoiding congestion and enabling scaling. The Secure Proof of Stake consensus mechanism synchronizes network nodes to link all fragments separated by sharding. Thanks to sharding, Elrond can process a minimum of 12,500 transactions per second.
Secure Proof of Stake (SPoS)
Elrond’s blockchain uses a variant of the PoS protocol called Secure Proof of Stake. The network relies on a system of nodes and validators that must stake EGLD to participate. The SPoS mechanism has proven to be more cost-effective and efficient than traditional alternatives like Proof of Work. This allows Elrond to achieve maximum security and high transaction speeds in combination with sharding.
Before settling transactions on the main chain, Elrond’s Adaptive State Sharding employs one-third of the existing nodes to validate these transactions. Every 24 hours, nodes are transferred to new shards in a continuous process that prevents validators from colluding when changing shards.
Validators verify block producers to ensure everything is in order and all transactions are legitimate. Once blocks are validated, validators synchronize with other shards in the network. After shards are synchronized with validators, transaction settlement is performed in bulk. Network participants are then rewarded with EGLD and incentivized to contribute to securing the network and validating transactions.
Development Flexibility
Developers can harness smart contracts with multiple programming languages, including C, C++, and Rust, and can also create decentralized applications with the same set of languages. Nodes manage the network to support transactions and secure the platform.
Founders and History of Elrond
Elrond was created and launched in 2017 by Lucian Todea, Beniamin Mincu, and Lucian Mincu. The Mincu brothers also co-founded ICO Market Data, an initial coin offering information aggregator, and MetaChain Capital, a digital asset investment fund. The Elrond team organized a private funding round that raised nearly $2 million for the project.
In July 2019, Elrond held an ICO that raised over $3.2 million by selling 25% of its total supply. Initially, Elrond traded under the code ERD, but the symbol changed to EGLD (eGold) once the mainnet launched.
What Makes Elrond Unique?
Elrond stands out due to its use of Adaptive State Sharding, which divides the network into smaller fragments so that nodes can validate transactions and network operations by handling one partition at a time. This allows the network to process thousands of transactions per second while requiring only low fees.
The Elrond project aims to create a new digital economy where decentralization and scalability are integral features of its blockchain infrastructure. It enables users to create new assets, build decentralized applications, and perform low-cost transactions. The project is also unique because it supports enterprise-level dApps while allowing scaling and offering three programming languages to work with.
What Gives Elrond Value?
Elrond derives its value from its technical potential, the underlying technology, its ability to scale, its enterprise solutions for dApps and digital assets, and its general use cases. All these elements determine Elrond’s intrinsic value as a project. Intrinsic value often does not correspond to the market value of EGLD, which is why EGLD can be frequently overbought or oversold.
The market value of Elrond is expressed through its price movements, which are subject to frequent changes and trend reversals. It is affected by volatility and defined by a multitude of specific factors that can drive the price up or down. Ultimately, Elrond has as much value as its level of adoption, so the number of active users can also indicate the value of Elrond as a blockchain project with particular utility.
EGLD Supply and Tokenomics
There are currently EGLD coins in circulation. Elrond was launched with a maximum supply cap of 31,415,926 tokens, toward which the circulating supply tends due to a gradually decreasing inflation rate that provides staking rewards during the first ten years of the project.
However, fees are also used to provide staking rewards, and as the sum of fees increases, inflation decreases. Inflation reaches zero if the amount of fees generated exceeds the minimum guaranteed rewards. This creates the conditions for a transition to a deflationary monetary system.
The number of EGLD coins in circulation multiplied by the current price of EGLD equals the market capitalization. Market capitalization defines EGLD’s rank compared to other cryptocurrencies and also determines its market share and dominance.
Storing EGLD: Wallet Options
You can securely store your eGold tokens in one of the available wallets on the mainnet, such as the Elrond Wallet, which offers transaction fees 100 times lower and full custody of your funds. Maiar is another official eGold wallet, backed by the Elrond blockchain. You can register your phone number in the wallet app to easily access your funds and activate a wallet account. You can use an identity key to recover access if you lose your wallet. You can also use the Frontier Wallet for EGLD in combination with the Elrond app to enable the service.
There are many other places where you can store your EGLD, and the wallet you choose will likely depend on how you intend to use it and how much you need to store.
Hardware Wallets
Hardware or cold storage wallets like Ledger or Trezor offer the safest option for storing cryptocurrencies with offline storage and backup. However, they may require more technical knowledge and are a more expensive option. As such, they may be better suited for storing larger amounts of EGLD for more experienced users.
Software Wallets
Software wallets are another option. They are free and easy to use. They can be downloaded as smartphone or desktop applications and can be custodial or non-custodial. With custodial wallets, private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets use secure elements on your device to store private keys. While convenient, they are considered less safe than hardware wallets and are more suitable for smaller amounts of EGLD or novice users.
Online Wallets
Online wallets, also called web wallets, are free and easy to use, accessible from multiple devices using a web browser. However, they are considered hot wallets and may be less secure than hardware or software solutions. Since you will be trusting the platform to manage your EGLD, you should choose a reputable service with a proven track record in security and custody. As such, they are more suitable for holding small amounts of cryptocurrency or for those making more frequent transactions.
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Frequently Asked Questions
How many types of nodes operate on the Elrond network, and what do they earn?
Validator nodes participate in the consensus mechanism to process transactions and earn rewards. They must stake at least 2,500 EGLD. As of August 2021, the annual yield for validators was 21.45%. Users can also participate in the network without staking EGLD or earn rewards as observers. These are passive network members who can serve as read interfaces and relays. Finally, a fisherman is a node that verifies the validity of blocks after they have been proposed. Observers or validators not part of the current consensus cycle can fulfill the fisherman role in exchange for rewards.
What kinds of projects make up the Elrond ecosystem?
The Elrond ecosystem includes over 100 projects, including stablecoins, wallets, validators, and payment providers. Elrond is also integrated with decentralized finance projects like Orion and Reef, while other blockchain-based projects include UTU and ARPA.
What factors influence the price of EGLD?
The price of EGLD is subject to frequent fluctuations determined primarily by the volatility of the cryptocurrency market. The price can also be affected by numerous factors that influence Elrond's market value. Besides traditional factors such as market sentiment, the flow of assets on exchanges, and the general economy, the price of EGLD is also influenced by the number of tokens staked and the balance between protocol fees and inflation used to pay staking rewards.
How can I buy or sell EGLD?
To buy EGLD, you can visit a reputable cryptocurrency exchange platform. If you already own EGLD and hold it in an exchange wallet, you can easily sell it by navigating the interface and choosing your desired payment option.
Is Elrond suitable for enterprise applications?
Yes, Elrond supports enterprise-level dApps with high scalability, low transaction costs, and support for multiple programming languages, making it a robust choice for business applications.
How does Elrond ensure network security?
Elrond secures its network through a staking process supported by the Secure Proof of Stake consensus mechanism. All nodes must stake EGLD to secure the network as part of the validation process where nodes act as validators. Validators are chosen randomly and shuffled between shards to prevent collusion, and they are rated based on their activity.