What Is Elrond (EGDL)?

It has already been a little over two years since Decentralized Finance (DeFi) rose, and they have been very productive years in terms of developing decentralized applications (DAPPs) and other financial tools. The growing interest in decentralized applications has brought to light some scalability problems for many blockchain protocols, first of all that of Ethereum, which has tried to run for cover in different ways, even without having found a proper solution yet. However, we are talking about a very young field in the blockchain sector, which could already reach full maturity in a short time.

Elrond presents itself as a highly scalable blockchain, suitable for the development of decentralized applications and smart contracts. Its goal is to become a point of reference in the DeFi world and in the business solutions sector.

The Elrond project began to take shape in 2017 from an idea of the brothers Beniamin and Lucian Mincu, and of Lucian Todea. In June 2019, they conducted a private investment round raising $ 1.9 million from several investors and, after a few days, they held an Initial Exchange Offering (IEO) on Binance, managing to allocate 25% of the token supply in exchange for $ 3.25 million. The project was officially launched in July 2020.

Elrond is designed to provide decentralization, security, and scalability, allowing the processing of at least 15,000 transactions per second, with six-second latency and low transaction costs. These parameters would allow the network to compete with currently existing major internet platforms, and would make it well-suited for machine-to-machine transactions and the IoT economy. In addition, the project claims that it will always remain permissionless, borderless, and globally accessible for all those who want to improve its features and help it become more and more decentralized. One of the most interesting features of Elrond is the possibility for developers to execute smart contracts in a very short time and, above all, built using the most common programming languages. This represents an important level of accessibility to the network by developers, who are not forced to learn a totally new language.

How Does Elrond Work? Secure Proof of Stake (SPoS) and Adaptive State Sharding

The main feature that makes Elrond highly scalable is the use of a particular consensus mechanism called Secure Proof of Stake (SPoS), in which validators are selected to verify the block in a random, unpredictable and incorruptible manner. In a nutshell, Elrond adopts all the basic features of the Proof of Stake blockchains, but it adds an extra level of security: the selection of validator nodes, in fact, occurs randomly and with reduced latency, thus eliminating the possibility of any malicious actors to influence the proposals of the blocks.

There are three specific types of nodes in the Elrond consensus mechanism, listed below.

• Validators: Are nodes of the network that are responsible for processing transactions and making the network secure. To become a validator, each node must delegate 2500 EGLD tokens as collateral, and they can earn rewards for their contribution to the network. A node can also decide to participate as a Delegator, delegating its EGLD tokens to a validator node.
• Observers: Are nodes that passively observe the network’s activities, and act as an interface for reading and relaying information. Unlike what happens with Validators, Observers do not have any staking requirements and there is no reward for their services. The Observers, in turn, are divided into two categories: Full - they keep the entire blockchain, and Light - they keep only two epochs of blockchain history.
• Fishermen: Are nodes whose task is to check the processed blocks. In the event that there are any anomalies or invalid blocks, the Fishermen challenge these invalid blocks. This role can be fulfilled by validators who are not part of the current consensus round or by observers, in order to avoid collusion. Fishermen are rewarded for their service in proportion to their effectiveness.

As previously mentioned, validators are selected in a random, unpredictable and incorruptible manner. This additional security mechanism is enabled by the so-called Blockchain Sharding, which is a method for distributing data across multiple machines, obtained by fragmenting the blockchain into different networks.

In a classic blockchain, a certain number of transactions are recorded on a block, which is then created and recorded. Instead, in the case of Elrond, which functions as a blockchain that works with the sharding mechanism, the network is divided into pieces, or shards, for nodes to only process a fraction of the network’s transactions.

Normally, in a sharded blockchain, nodes keep the entire state of the chain. In Elrond’s case, however, each shard maintains only a portion of the state. Therefore, performing a transaction that is divided into several shards requires that they communicate perfectly with each other.

Once the transactions are processed, the shards broadcast them to the Metachain (Elrond’s coordination chain) where they will be settled. To prevent malicious actions between validators within a shard, they are regularly reshuffled between different shards. This process occurs every 24 hours and concerns exactly 1/3 of the validator nodes. This increases the security level of the network, as it decreases the predictability of blocks.

To summarize: the transaction validation process occurs in parallel via shards, which improves transaction finalization speed and overall efficiency. The mechanism is able to adapt according to the number of available nodes and network usage, always aiming for the maximum possible efficiency. Ultimately, the more the number of validators grows, the more the network efficiency expands. This mechanism is called ‘Adaptive State Sharding’.

As already mentioned, Elrond offers the possibility for developers to use the most common programming languages to build smart contracts. This is made possible thanks to the so-called ‘Arwen WASM Virtual Machine‘, which allows smart contracts to become compatible with Arwen’s language via the WebAssembly (WASM) standard. The languages currently supported are C, C ++, C #, Rust, Go, TypeScript, and others. The main features of this high-performing Virtual Machine are: \

• Fast execution: Elrond makes sure that smart contracts being built are checked in advance, thus improving compilation and programming efficiency.
• Stateless execution: After a smart contract has been executed, it is only allowed to be written into a so-called transient data structure, which is then applied to the blockchain only in case of success. This increases execution efficiency, because it removes the need to revert transactions in case of a failure.
• Composability: Amart contracts can make asynchronous calls to one another, maintaining composability even across different shards. If the contracts are in the same shards, the execution is simply synchronous and happens inside the VM. If the contracts happen to be in different shards, the execution will be automatically switched to an asynchronous mode, and the final flow is processed by the VM.

What Is the EGDL Token?

EGLD is the native token of the Elrond Network, and it plays a key role in powering and maintaining the whole network. Its maximum supply is 31,4 million units, of which 23,6 (75%) are already in circulation (November 2022). Initially, the token was launched as an ERC20 token called ERD, then migrated to the Elrond blockchain and renamed EGLD.

EGLD can be used in multiple ways: pay for transaction fees and the cost of deploying dApps on the network, participate in the governance of the platform, and reward the various entities that contribute to the functioning of the network, such as validator nodes.

Even if the max supply of EGLD has already been fixed and the issue of new coins already scheduled, the actual max supply may end up being less than theorized. This could happen due to the economic policies adopted by the protocol: a part of the transaction fees will be subtracted from the issue of coins, resulting in a reduction of the max supply that depends on how much the transaction fees increase. In other words: as network usage increases, the scarcity of EGLD will increase. According to the software’s rules, there will only ever be 20 million EGLD.

Elrond Ecosystem

Elrond has all the credentials to become a reference point in the DeFi and automation world, thanks to its high technology and an experienced team. Below are some of the most popular projects currently being built on Elrond.

• Maiar App: So far, the most successful use case of the Elrond ecosystem. Launched in January 2021, Maiar App is a digital wallet and global payments app that allows users to exchange and securely store money on their mobile phone. At the moment, it supports EGLD, ETH, BNB, and BTC with a promise to integrate more coins in the future. It also includes a very simple and enjoyable staking service to use.
• Maiar Exchange: The first DEX (Decentralized Exchange) on the Elrond blockchain. Launched in November 2021, Maiar Exchange is a classic DEX with AMM (Automated Market Makers) features that allows users to exchange a certain number of tokens for an automatically calculated amount of another asset. Users can also provide liquidity on the platform in exchange for a reward, which can in turn be staked to obtain additional earnings in MEX, which is the exchange’s token.
• Maiar Launchpad: A decentralized incubator developed by Elrond for distributed apps and enterprises. Maiar Launchpad aims to be a kind of growth engine for startups, which will have the opportunity to get in touch with the global Elrond community and with their partners and investors. These companies, due to the support of technology, can raise funds and support on the blockchain. All of this makes Maiar Launchpad a kind of hybrid between traditional incubators and decentralized fundraising.

As can be seen, the Elrond ecosystem is not limited only to DeFi and wallet functions, but also extends to the traditional technology sector. Taking Maiar Launchpad as an example, you can understand how, in the future, the next potential technological giants will be able to go through decentralized incubators and thus reduce time and costs.

Is Elrond a Good Investment?

Elrond is considered by many to be a highly innovative project. It is one of the fastest and most efficient blockchains out there, which has proven to be very scalable. It may still be early to give a definitive judgment, as it is a still very young project that has not yet been faced with important stress tests. The products that are about to be launched on the Elrond blockchain appear to be very valid and promising, even if many of them are still not complete. The development team’s goal is to go far beyond the common opportunities of modern fintech and DeFi industries. In fact, the services built on Elrond can affect many other sectors, such as the IoT, cybersecurity, and contracts & licenses.

In addition, speaking of the EGLD token, it has to be considered that it has a limited and quite low offer, which is not common in utility tokens. Also, the issuance schedule and the high percentage of locked coins are considered to be positive crypto-economic indicators regarding Elrond’s long-term viability.

How to Own EGLD?

To own EGLD, you can use the services of a centralized crypto exchange. Start by creating a Gate.io account, get it verified and funded. Then you are ready to go through the steps to buy EGLD.

News on Elrond

According to an announcement on Elrond’s official blog, it appears that the Romanian central bank approved the company to buy Twispay, a financial institution licensed to provide payment services. In addition, this firm is also licensed to issue electronic money and can operate across the European Economic Area.

This is considered a very important step forward for the Elrond ecosystem, as it could establish itself as a bridge between traditional finance and the cryptocurrency industry. In particular, this new acquisition would allow Elrond to issue stablecoins that can be used in the EU, both for personal and business use for payments and value transfer, helping the blockchain sector achieve the much-desired mass adoption.

Useful References

For the latest updates about Elrond, you can visit:

• The official website
• Twitter
• Telegram
• GitHub

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