A weakening dollar combined with high gas fees on Ethereum’s network opens the door for alternative cryptocurrencies like ALGO
Jesse J Rogers Feb 14, 2021 · 9 min read
As Guy from Coin Bureau explains in this fantastic video:
There is a “trilemma” of challenges faced by cryptocurrencies. They have to be 1) decentralized, 2) secure, and 3) scalable. Proof of Work protocols like the type used by Bitcoin (BTC) and Ethereum (ETH) have managed all three, but with tradeoffs.
Scalability, in particular, is suffering for BTC and ETH as demand is driving gas prices up. But cryptographers have now developed a second-generation protocol called Proof of Stake. Proof of Stake is very popular with users because you can stake your own coins to help secure the network, and earn coins for yourself as a reward.
Ethereum 2.0 is in the works, and the community is switching to Proof of Stake as quickly as they can. But the demand is already here now, bogging down the transaction process.
As an alternative, the first pure Proof of Stake network, called Algorand, is already in place ready to meet the need. Transaction costs on the network are .001 ALGO, which is currently around a tenth of a penny.
Algorand was created by one of the cryptographers who invented Proof of Stake, an MIT professor named Silvio Micali.
The Algorand team not only has an excellent academic pedigree using top-notch tech. After several rounds of fundraising, they also have more than $200 million of investor backing.
Despite these advantages, when it first went to market, ALGO was priced at more than $3, but quickly plummeted due to oversupply, and not enough demand. It was still a slump in crypto-markets at the time of release, so value dipped to less than $.50. This delivered stunning losses to early investors. In an integrity move, the Algorand team bought coins back at 90% of the purchased value.
Screenshot from the author’s Coinbase account
When I first took notice of ALGO it was around $.30. As you can see from the chart at the top of this article, those first coins I bought are now worth 5x that amount. This all happened in only about 2 or 3 months. I strongly believe this is only the beginning. If you feel like you missed the boat when Bitcoin skyrocketed from $100 to $50,000 in just a few short years, consider the possibility that BTC was only a harbinger of even bigger things to come.
That isn’t to say that I have any doubts about either Bitcoin or Ethereum’s success. I’m currently holding a little bit of all of these. I think there is room for dozens or even hundreds of big players.
There are admittedly some winner-take-all network effects to consider. But for the most part, crypto seems to have the kind of dynamic of a mall, a food court, or an app store, where competitors are a good thing. You wouldn’t want to do business in a mall where you’re the only store. That would be a depressing place. Sure, there will be niche players in niche markets that are in fierce competition with each other. But broadly speaking, more projects and tokens is a good thing for everyone involved. Each good-faith participant in the crypto space boosts the value to each other project even if aspects of those projects compete with each other the way Algorand, Bitcoin, and Ethereum do.
The future of crypto, but particularly Algorand, looks extremely bright to me. So I’m all-in on Algorand. Well, not literally… I diversify by holding about $100-$300 worth of every coin I can get my hands on in Coinbase. But I plan to keep at least 20% of it staked for the next several years, compounding daily and earning me more and more ALGOs.
In my experience, by far the biggest risk is to do nothing. So do your research. Diversify. But whatever you do, don’t sit this out. Get your money working for you instead of it only ever being you working for your money.
Here’s the latest episode of the podcast where my buddy Rich Casada breaks down his comparison of Algorand to other alternatives.
In 2017–2018 I mostly listened to people who told me things like:
“Don’t listen to the hype, if it sounds too good to be true, it probably is.”
“Only invest in what you understand.”
“Bitcoin is dead.”