Analyzing Algorand’s Economic Improvement Proposal (EIP)

Algorand is a Boston-based open-source software company working towards building a borderless economy. The brainchild of Turing Award winner, MIT teacher, and zero-knowledge proof creator – Silvio Micali – is a next-generation blockchain platform that utilizes a permissionless, Pure Proof-of-Stake (PoS) protocol with open participation, scalability, security and transaction finality.

Recently, Algo Capital – the financial institution focused on accelerating access, adoption, and liquidity of the native Algo tokens – announced that they will be initiating Algorand’s first Economic Improvement Proposal (EIP-090319AC). Algo Capital will be initiating this with support from many of the relay node runners.

The Current Situation

The Algo token is critical for the smooth functioning of Algorand’s ecosystem. After all, anyone with the Algo tokens can take part in the public, permissionless, pure PoS consensus mechanism. However, since the launch of the mainnet and the start of trading of the Algo tokens, the community has noticed a potential problem.

The Algorand project is still in its infancy and several of its key features are yet to be fully executed. As such early use cases are still just coming online. It has become pretty clear that a large number of tokens are being issued every day relative to Algorand’s present state of adoption. The problem with this is that certain wealthy investors, aka whales, are simply going to eat up a considerable portion of these tokens. Following that, these whales can manipulate the market price as and when they want. Maintaining a proper token distribution is key to a project’s long-term success.

The Solution: EIP-090319AC

The Economic Improvement Proposal (EIP-090319AC) came about after Algorand’s community and stakeholders raised concerns regarding the token situation. A project’s community is critical to its success. By executing this EIP, Algorand showed that they are prioritizing their community’s requests. This EIP will extend the current 2-year linear daily reward for relay node runners to a 5-year linear daily reward.

By executing this EIP, Algorand will:

• Provide themselves enough time to reach full adoption potential.
• Create a healthy long-term relationship with their community.
• Help the community by achieving a wide and fair token distribution.
• Lower circulation supply increase rate through nodes by approximately 60%

Conclusion

Algorand is a promising project which is currently going through the early stages of adoption. Some of the main examples are:

• Algorand is working closely with the International Swaps and Derivatives Association (ISDA) to define a Blockchain standard for derivatives financial instruments.
• Tether, the most widely-used USD-backed stablecoin, is looking to launch its product on Algorand.
• IDEX, the most popular Ethereum-based decentralized exchange platform, has decided to build a faster and more scalable version of its application on Algorand.
• AssetBlock (company which is enabling secure real estate investments, increasing access, and lowering the cost of capital) launches investment platform on Algorand with Initial $60 Million in Real Estate Assets
• $200 Million Algo VC Fund raised through Arrington XRP, 11-11 Ventures, NGC among others.

Having said that, these are still early days. Far more growth is expected in the near future. This EIP will allow the token distribution to grow in direct accordance with Algorand’s adoption level. Currently, the EIP has been submitted to the Algorand Foundation economic committee for their consideration. Here is a list of relay node runners who have already expressed their support (in alphabetical order):

• Algo Capital Node I
• Algo Investor
• Algorand DG Group I
• Applied Crypto
• Arrington XRP Capital
• AssetBlock
• BB Land Holdings
• Blockdaemon
• Brainchild
• Cartan
• Cognitive Blockchain
• Coinfabrik / Randlabs
• Collaborative Fund
• Eterna Capital
• Flipside Crypto
• First Rice Algo Blocker
• IMO Ventures
• MEWN
• Multicoin Capital
• Nirvana Capital
• Pillar VC
• PureStake
• QCP Capital
• Slow Ventures
• Union Square Ventures
• 11–11 Ventures
• Wing VC