About Consensus on Algorand

How does consensus work on Algorand?

Consensus is a process that ensures the Algorand network is secure and resilient. Users stake their Algo into consensus through nodes–hundreds of which are currently run by independent operators across the globe. The more Algo that is staked, the stronger the security of the network becomes.

Algorand leverages the pure proof-of-stake (PPoS) mechanism to achieve consensus. Unlike other proof-of-stake approaches, PPoS enables the user to maintain control of their Algo at all times.

Sophisticated cryptography including Verifiable Random Functions (VRF) and cryptographic sortition enable PPoS to maintain fairness and high security, and prevent collusion. A new block proposer and a new validator committee – both randomly selected in a private and non-interactive method out of all online users, with probability based on the users’ stake – are elected for each block.

Algorand’s PPoS approach achieves agreement on every block in under 3 seconds:

A VRF identifies potential block proposers, resulting in multiple “valid” block proposals from different proposers.
Each node that observed the block proposals propagates the “best” block – that is, the block with the lowest hash of the VRF proof.
Another VRF identifies a soft vote committee; that committee votes to reach agreement that the proposed block is indeed “best.”
Another VRF identifies a committee for certification votes; that committee votes to certify that the proposed block does not contain any violation of the protocol (i.e. double-spending, overspending, etc.)
The block is then written to the blockchain.

Learn more about Pure Proof-of-Stake and consensus on Algorand.

About Algorand Staking Rewards

What are staking rewards on Algorand?

Algorand’s staking rewards are given to users who actively contribute to network security by bringing their Algo online to participate in consensus. When an account’s proposed block is written to the chain, if the proposing account has at least 30,000 Algo then it will then be given an amount of Algo as a reward.

Rewarding block proposers is beneficial for the broader network as it incentivizes participation in consensus, driving greater decentralization and thus greater network security.

Is participating in consensus the same as "staking" on other blockchain networks?

Algorand is designed to guarantee security through advanced cryptography and does not rely on economic disincentives to secure the network, unlike other blockchains.

In other proof-of-stake (PoS) approaches, a user often locks up their tokens for a given period of time. The lockup period on Ethereum, for example, is highly variable ranging from hours to days; on Solana the minimum lockup period is one epoch (roughly two days); etc. Instead, on Algorand, the user maintains control of their Algo at all times, since the tokens remain in the user’s wallet while securing the network as part of consensus.

Put simply, the word “stake” is sometimes used by other networks to mean “lock up” or putting tokens “at stake.” On Algorand, to stake simply means to bring your Algo online in consensus, and there is no period of lost access to your tokens for independent validators.

That said, Algorand is similar to all proof-of-stake blockchains because ownership of stake incentivizes participants to act honestly in consensus, as any harm done to the network would devalue their stake.

Additional factors that make participating in consensus on Algorand particularly user-friendly and inclusive are:

No slashing risk: staked Algo is not subject to slashing (that is: confiscating a staker’s tokens as a penalty for behavior that could cause harm to the network). Instead, on Algorand, ineffective nodes are simply algorithmically removed from consensus, forgo rewards, and face minor costs to re-join the network.
Low cost: running a node on Algorand is extremely cheap. You only need a computer with at least 8vCPU, 16GB of RAM, a fast SSD, and a low-latency internet connection with bandwidth of at least 100 Mbps and ideally 1 Gbps. You can find a complete list of node-running best practices here, as well as more information about how to run a node here.
No lockup period: On Algorand, independent validators maintain control of their Algo at all times. Staked tokens remain in their wallet while securing the network as part of consensus.
Security: On Algorand, the consensus operations running on the node never expose the wallet’s key. Algorand consensus decouples the keys used to propose and vote on blocks from the main spending keys that control the Algo. This means that users can join consensus while their Algo are kept safe, even on hardware wallets.

Who can participate?

Anyone with as little as 1 Algo can participate in consensus and help keep the network secure. However, to be eligible for staking rewards, an account must commit a minimum of 30,000 Algo to consensus.

Users with fewer than 30,000 Algo can do their part to secure the network, and get rewarded, by participating in staking pools or utilizing other delegator services.

How are staking rewards funded?

The rewards funding will come from transaction fees paid by users of the network. In addition, for at least a period of 24 months, a fixed pool of Algo from the Algorand Foundation treasury will be allocated toward per-block bonus rewards. The bonus rewards will start at 10 Algo per block and will decay by 1% every 1 million blocks. The Algo supply will remain capped at 10 billion.

How are transaction fees awarded to block proposers?

Just as rewards are given to the proposing account of blocks added to the chain, a share of transaction fees paid in the block will also be given to the block proposer. These fees are paid into the global Fee Sink account on all transactions, and these Algo are then available to compensate accounts participating in consensus by assembling and proposing blocks on a participation node.

Updated on: 08/11/2024