ALGORAND

DIGITAL ASSET REPORT:

ALGO Review and Investment Grade
Grade-B-minus

Crypto Briefing Research Department

December 3, 2019

Quick Facts

Current Price$0.283361
Market Capitalization$128,583,974
Buy Up To Price$0.430000
Dutch Auction DatesJun 2019
Dutch Auction Price$2.40
Public Allocation$60,000,000
Private Fundraise Dates2018
Private Fundraise Allocation$66,000,000
Circulating Supply2,984,670,749 ALGO
Total Supply10,000,000,000 ALGO
Top 10 AddressesN/A
ATH Price$3.28 (Jun 21, 2019)
Sharpe Ratio-0.40
30-Day Average Price$0.259157
24H Volume$123,243,836
30-Day Average Volume$112,956,767

Contents

Fundamental Factors

Market Opportunity 67;
Underlying Technology 76;
Ecosystem Development 70;
Token Economics 70;
Core Team 83;
Roadmap Progress 70;
Token Performance 47;

Combined Score: 7.0

Introduction

DeFi has become the dominant use case across the blockchain industry. It is a decentralized, trustless, intermediary-free approach to global finance and addresses a variety of real economic issues, ranging from services for the unbanked to cross-border capital transfers and loans.

While the market presents an enormous opportunity, current general-purpose dApp platform leaders lack the infrastructure capabilities to serve as a base layer for DeFi applications at scale.

Algorand aims to prove that it is different. With a star-studded team, top-notch investors, and growing brand recognition, Algorand has been one of the most hyped projects of the first half of 2019.

Despite ALGO suffering a precipitous drop in value after the Dutch auction token distribution, Algorand has maintained a steady pace of technological and ecosystem development.

Moreover, the team has shown awareness and willingness to adapt quickly to challenging market conditions and resolve its supply-demand imbalance. With the price still grounded, the project appears to be underappreciated by the market.

Combined with technological updates, the improved token economy may once again make Algorand one of the crypto market’s favorites.

A Wealth of Human Capital

In large part, the expectations surrounding Algorand can be attributed to its team. The project is led by Silvio Micali, a Turing Award winner, whose research in the field has laid the foundation for much of the present developments in the industry.

Additionally, other members of the team have extensive research and industry backgrounds. CEO Steve Kokinos is chairman and founder of Fuze, a cloud communications and collaboration software platform with over 700 employees, located in Boston, MA. Project’s CTO, Yossi Gilad, has held various research positions at IBM, MIT, and Boston University. Similarly, most of the other members of the team have also worked at IBM, MIT, and other well-known companies.

Moreover, Algorand has won the support of many of the industry heavyweights. The project attracted $66M during two equity rounds in 2018, and $60M during the token sale in 2019. Among the many high-profile investors are MutiCoin Capital, NGC, CMB International, and USV. Some of these funds have a reputation for strategic investing, and actively helping their portfolio companies. For a startup project — no matter how well-capitalized — the

ability to open doors and make partnerships is paramount to achieving meaningful adoption.

The project has attracted a number of talented individuals to its ecosystem entities. The Algorand Foundation is run by Fangfang Chen, former COO Asia Pacific at State Street Corporation, with AUM of over $2.5T. The Economic Advisory Committee has members with extensive banking and research experience, and the Algo Capital, which attracted $200M for ecosystem development, is run by veteran blockchain investor David Garcia.

In the startup game, having the right team is critical. Things will not always go as planned, and having the right talent will enable the project to adjust on the fly.

Algorand has proven that it is agile and flexible by delivering updates and designing token economy improvements quickly. Few projects in the industry have been able to demonstrate these qualities with tangible deliverables.

Given the all-star cast that Algorand has assembled, it would be unwise to discount the project because of the early struggles of its token.

Rapid Development and Growth

Algorand launched its mainnet on June 20, 2019. The network featured Pure Proof of Stake (PPoS) and was touted as secure, scalable, and decentralized. At its core, there are two types of nodes: Relay and Participation.

Relay nodes - serve as central network hubs and maintain connections to other nodes in the network. They are often located at internet exchange points and have high bandwidth to decrease propagation time.

Participation nodes - represent an address’ stake and hold participation keys for proposing and voting on blocks within the consensus algorithm.

According to the team, there are around 81 relay nodes, “that have been bootstrapped by a number of entities representing a wide array of technical and organizational backgrounds across many different countries and continents".

Even though the price plummeted from $3.28 to $0.27, Algorand maintained its focus on technological and ecosystem development.

Only six months later, it was able to deliver the Algorand 2.0 update, featuring key attributes necessary for dApp development. Compared to some of the other heavyweights in the industry, this turnaround was impressive.

Recently, Algorand released version 2.0 of its platform. This is the first major upgrade since the mainnet launch. The update unlocks important features, such as smart contract functionality, atomic transfers, and standard asset creation. This should significantly expand the range of dApps and use cases that can be built on the platform.

Although smart contracts introduced by Algorand are not turing-complete, the team does not believe that "turing-completeness is necessary for the majority of use cases.” Moreover, it allows for simpler functionality, which usually means better security. Given that the project is targeting the DeFi space, this should give the platform an extra level of trust — which is an absolute necessity for DeFi developers.

The addition of Algorand Standard Assets should also help the project promote its network as a tokenization platform. The feature allows the creation of any kind of assets (fungible and non-fungible) and could help the project establish itself as one of the key players on the STO market.

At the same time, Algorand expanded its ecosystem through partnerships and use cases.

The project has already partnered with World Chess, which holds the broadcasting rights to the most recent World Chess Championship. World Chess will use Algorand to conduct a “Hybrid IPO,” which includes an STO with a forthcoming London Stock Exchange listing. With the growing popularity of STOs, Algorand has the ability to become the best option for many traditional companies.

Furthermore, in September 2019, AssetBlock announced the launch of its real estate investment platform on Algorand, and, through a joint venture with Lodging Capital Partners (owner and manager of luxury hotels), is planning to tokenize $60M of exclusive hotel properties. Given that the real estate market is the world’s largest asset class, this could represent a good foundation for the project to build on.

However, STO’s are not the only use case scenario that the project is working on. Algorand is aiming to promote a variety of use cases and has been actively growing its network of partners in order to achieve this.

Among others, there are projects like DUST Identity. The company invented the Diamond Unclonable Security Tag which will be used for supply chain security and full lifecycle tracking. DUST Identity was named one of the CNBC Upstart 100 projects, and, in partnership with Algorand, will be offering its innovative solution on the supply chain market. Supply chain is usually considered one of the major use cases for the blockchain industry and can offer a lot of opportunities for projects that bring innovation to the space.

The project has also been successfully working with blockchain wallet providers, which could introduce the platform to a large number of potential users. In August, Algorand partnered with the custody service provider BitGo, which started to offer the support for multisig wallets and custody services for Algorand. Blockchain.com has also recently announced that it has added Algorand to its userbase of 45M wallets, and plans to add the support of Algorand standard assets at the beginning of the next year.

The project has made significant progress in a relatively short amount of time and is well positioned for 2020.

Learning From Mistakes: Weaknesses Become Strengths

The main difficulty that the market has had regarding Algorand is the disproportionate supply-side pressure fueled by the rapid vesting of tokens. As price plummeted over the summer, the project instituted a number of vesting freezes and recently has been reviewing a new Economic Improvement Proposal (EIP-090319AC).

EIP-090319AC proposes to extend the two-year linear daily reward for relay node runners to a five-year linear daily

reward, which should significantly reduce the daily token inflation and stabilize supply/demand.

The proposal is likely to be accepted by the majority of relay nodes, since a large number of nodes have already expressed their support.

Algorand price chart

Source: https://coinmarketcap.com/currencies/algorand/

It is encouraging to know that the team is not ignorant of the token price, and is taking action to achieve a healthy token dynamic. Moreover, the recently issued report on the State of the Algorand Economy, prepared by the economic advisory committee, states that “sustainable growth of supply must be matched by a sustainable growth of demand, with the goal of creating a stable market with expanding market capitalization.”

This approach should support the value of the project going forward.

This also shows that Algorand has very proactive governance that can take action and solve arising issues effectively.

With a concrete plan for fixing its biggest issues, Algorand should be better set up for future growth.

Things to Think About

If Algorand was at this stage a year ago, it would have looked a lot more impressive. Now, the market is getting crowded with a number of heavyweights, such as Ethereum (which is continuing to expand) or Cardano (which is about to launch their core offerings). As such, Algorand will have a tougher road ahead to achieve adoption.

Although the project has shown its ability to build partnerships and the necessary technology at the current state of development, the network still lacks adoption. This is the major issue for the entire industry, and Algorand will have to show that it is able to create the demand and compete with projects that have already gained significant network effects. Otherwise, this will be just another blockchain with no particular use cases or activity on the network.

Traditional competition also represents a threat for Algorand. While the project aims to enable “frictionless finance,” there are players like JP Morgan and Libra that are also exploring the space, and sooner or later will enter with their own financial products.

Furthermore, Algorand’s new token economy looks a lot like a plan to support its token’s price. In fact, it specifically mentions token appreciation milestones and further ties them to the release schedule. Given the recent activity from regulators (Telegram’s case), Algorand may find its ALGO considered a security. If that were to happen, as a US project, Algorand would have a tough time continuing to expand.

Conclusion

Despite the recent fall in the token price, Algorand remains a solid project with an all-star team and a long line of institutional supporters that have invested in its ecosystem.

Furthermore, after the launch of the mainnet, the project has shown good progress and continues to build technology and expand the ecosystem.

With the approval of the Economic Improvement Proposal, and the stabilization of supply/demand of the tokens, the project has a good chance to grow its value and improve its position in the crypto space.

Therefore, the project receives a grade of B-.

The author(s) of this report is/are invested in the following coins: ETH.

How to buy ALGO

Step 0. Choose your preferred exchange.

ALGO can be purchased from several cryptocurrency exchanges, the full list of available exchanges can be seen ​here​.

Step 1. Head over to your preferred exchange.

If you want to purchase ALGO, it is a good idea to use Coinbase Pro. It has a good liquidity and is among the most reputable on the market.

Step 2. Create an account on the exchange of your choice if you don’t already have one.

Step 3. Top-up your exchange balance with some of your USD.

On Coinbase Pro, ALGO can be purchased with USD, so make sure to first verify your ID and set up your debit card or bank account.

Step 4. Purchase ALGO with a market or a limit order.

If you want to buy just a small amount instantly, it is easiest to use a Market Order.

Input the amount of ALGO you want to purchase and press Buy.

If you need to purchase a large amount of ALGO, it is best to use a Limit Order to get the best possible price.

Input the amount of ALGO you would like to purchase, and the price at which the order should be filled at and press Buy. (It might take some time for the whole order to be filled if you are purchasing a large amount).

Step 6. Store your ALGO on one of the supported wallets for increased security.

To store ALGO, you can use Ledger or Trust Wallet​ for improved security.