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Is Algorand a Good Investment?
Last Reviewed: February 2023
In the below article AlgoDaddy discuss the different reasons as to why is Algorand a good investment as well as why that might not be the case.
For investors the main goal of an investment is monetarily profit. However, there can be other reasons to own Algorand and its tokens (also known as ASAs). That would include everything from pure interest in the technology and wanting to exploring the ecosystem, to practical reasons such as using Algorand (or USDC on Algorand) as transactional tool or for storing value.
You can find the conclusion at the bottom of this article.
What is Algorand?
Algorand is a blockchain that was launched in April of 2019. It was originally created by MIT Professor Silvio Micali with other leading scientists. Micali envisioned Algorand to be not just a cryptocurrency, but also a blockchain which could properly leverage its high security to be used as a platform for smart contracts and related assets, thus enabling it to be integrated in a wide variety of use cases.
This doesn't by default answer to why is Algorand a good investment, but this is what we're about to find out.
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Why is Algorand a Good Investment?
These are the core arguments as to why we think Algorand might be a good investment.
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Algorands transaction speed is approximately 4 seconds (compared to Litecoin's 2.5 minutes, or Bitcoins 10-minute average transaction time) and the transaction fee is fixed at 0.001 ALGO (roughly 0.0003 USD). Few cryptocurrencies come even close to these sorts of figures, especially while remaining scalable for wider adoption.
✔️ Educated and Capable Team ✔️
Algorand currently have one of the strongest teams behind itself out of any cryptocurrency. Algorand was founded in by MIT professor Silvio Micali. He has a PhD in Computer Science from Berkley and is currently teaching and researching at MIT. His research covers cryptography, pseudorandom generation, secure protocols, and more. You could call him one of the fathers of modern cryptography.
Moreso, the rest of the Algorand team are highly educated and well-versed in the world of IT, cryptography and business. For example, Algorands Chief of Cryptography, Chris Peikert, holds a PhD from MIT. The interim CEO of Algorand, W. Sean Ford, holds a master's from Harvard.
✔️ Smart Contracts & Growing Ecosystem ✔️
The Smart Contracts function of Algorand is one the main pillars of its success and usability. It allows secure transfers and contracts to be made, without any middleman cutting into potential profits or charging high fees. Due to it being cheap, fast and secure it also bolsters growth of the ecosystem as the threshold for users to engage in new platforms are low. Scalability is an important aspect when choosing investments, and Algorand is very scalable.
✔️ Algorand is Sustainable ✔️
Algorand is sustainable and environmentally friendly. Algorand is using ClimateTrade to offset its impact on the environment. Each Algorand transaction produces only 0.0000004 kg of CO2, unlike Bitcoin that produced roughly 338 tons of CO2 and takes 1,449 kWh to complete a single transaction. AlgoDaddy thinks it's ethical to invest in crypto that doesn't destroy the planet.
Why is Algorand a Bad Investment?
These are the main reasons as to why we think Algorand might be a bad investment.
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❌ Historical Price Development ❌
To be brutally honest, the Algorand price development is not a pretty sight. While seeing some success in the latest bull market, the bear market is ever so present and the price of Algorand is down about 90% from ATH. That's a tough loss to swallow if you bought at the top. Granted, the whole crypto market is having a thought time, and this alone doesn't determine is Algorand a good investment or not.
That being said, ALGO has lost half its value against BTC and is almost at an all-time low.
❌ Algorand is Centralized (Kind of) ❌
If you know how Algorand works, then you'd understand that Algorand have a component of centralization to it. The network actually runs on about 140 permissioned relay nodes that were chosen by the Algorand Foundation. The relay nodes work as network centers that ensures connectivity to other relay and non-relay participation nodes. The relay nodes are actually spread across the world to increase the amount of decentralization. Despite this they are quite few, expensive to run, and basically controlled by the Foundation.
❌ Concentrated Token Distribution ❌
Above-described relay nodes controlled by the Algorand Foundation were also given preferential early investing rounds and predetermined future token allocations. This led to a quite unfair token distribution at launch, and early investors have been continuously selling off. Luckily with the end of the Accelerated Vesting Program this contributes less and less to selling pressure. This does however raise the question as to what the incentive for running relay nodes are and how will the Algorand Foundation ensure that their being kept running.
In Conclusion
Our conclusion to whether is Algorand a good investment or not depends on your risk tolerance and timeframe.
The long-term outlook is modestly positive - Algorand has a great opportunity to lead the way among altcoins in another market upturn. Its technology is superior to most other blockchains, while also having a strong dedicated team to back it up.
However, due to its history of imbalanced token distribution it has suffered continuous selling pressure and it's unclear whether this will lead to positive price movement years down the line. Short-term it's at risk due to market volatility and overall insecurity concerning the crypto markets.
Check out our library of Algorand articles and guides to further educate yourself on the ecosystem. If you're just looking to relax and have a good time, then why not visit our Algorand reddit sub.
