Launched in July of 2020, Elrond is a self-designated ‘internet-scale blockchain,’ built for high throughput and fast execution. It achieves this by using its unique scaling solution, Adaptive State Sharding, as well as its version of Proof-of-Stake known as Secure PoS.
While Bitcoin averages 7 TPS (transactions per second), and Ethereum 15-20 TPS, the Elrond network can support 15,000 TPS with a 6s block time. In fact, it even claims that it can scale to 100,000 TPS!
Its native token, EGLD, is integral to the protocol, with utility ranging from governance and transaction payment to staking rewards. The total supply of EGLD is theoretically capped at 31.4 million coins, with current circulating supply of 19,301,641 as of August 2021.
Elrond can also notably operate on your average computer, instead of requiring specialized and expensive hardware - resulting in very low transaction costs. Let’s dive into how Elrond works!
Elrond is primarily supported by three technological pillars: its Adaptive State Sharding mechanism, Secure PoS consensus mechanism, and Arwen WASM Virtual Machine. The network also boasts high resilience through a reshuffling system, and fast finality for cross-shard transacting.
Adaptive State Sharding
Sharding is a scaling solution for blockchains that improves transaction processing speed by breaking the main chain into several smaller chains. Each smaller chain, or shard, processes its designated portion of transactions. There are three main kinds of sharding used in tandem by the Elrond network - network sharding, transaction sharding, and state sharding. The use of all three simultaneously is what gives Elrond a competitive edge.
Network sharding is responsible for grouping nodes across the network into individual shards. Transaction sharding, in turn, refers to the assigning of specific transactions to the shards. State sharding is the most complex of the three, as it splits the storage of the blockchain state across different shards. This means that if a transaction is included in different shards, the network state must be updated and shards must be able to exchange messages.
Elrond’s Adaptive State Sharding is innovative because it achieves a more comprehensive sharding system, which allows for fast communication and impressive scalability. Nodes also periodically undergo shuffling to increase security and prevent collusion. When this happens, nodes only need to download their new shard’s state (as opposed to the entire network), which makes the synchronization process far swifter.
Secure Proof-of-Stake (SPoS)
Elrond uses a tailored form of Proof-of-Stake for consensus, known as Secure Proof-of-Stake, which differs slightly from the original algorithm. This is because the network must select validator nodes to produce blocks within shards, as opposed to the whole network. How is this achieved?
Let’s first look at the three roles that uphold Elrond’s SPoS: validator, observer, and fisherman. Elrond validators are responsible for verifying transactions and securing the network. They receive transaction fees and network rewards for their efforts. Observers are information sources, either containing the entire blockchain history (Full) or just 2 epochs (Light).
They are not rewarded for this service, nor are they required to stake EGLD to participate. Like on the Polkadot Network, Elrond Fishermen are tasked with inspecting and/ or challenging processed blocks to monitor for malicious activity. Validators not currently involved in consensus, or observers, can be fishermen and receive rewards for their service.
Validators are chosen with the help of a randomness source, which is computed using the previous block and must be signed by the block proposer (the validator acting as consensus leader for the current round). The derived signature will then act as the randomness source for the following round.
For every round, a single validator is chosen from the consensus group to be the block proposer in a shard. They are in charge of producing the block in that round, while the rest of the group is responsible for validating and signing it. Elrond uses a modified Boneh-Lynn-Shacham (BLS) multisignature system, which allows the consensus group to produce and validate a new block in two communication rounds instead of five.
The random selection of validators and the consensus group occurs almost instantly at around 100 milliseconds, thanks to the network’s sharded state. This speed is what earns it the distinction of being an internet-scale blockchain.
Arwen WASM Virtual Machine
A virtual machine provides the right environment to enable smart contract execution on blockchains. Elrond uses its own virtual machine, fittingly known as Arwen, to achieve this.
Arwen supports WebAssembly (WASM), which means it can handle smart contracts in all programming languages that are WASM-compatible, like C, C++, C#, Rust and TypeScript, among many others. The protocol recommends Rust however, because of the comprehensive Rust framework that is provided.
Arwen’s API provides a few noteworthy features we should mention. It is a stateless virtual machine, meaning that it records smart contract execution into a temporary data structure rather than the network state. The changes are only added to the blockchain once they are successfully executed and finalized.
Arwen also operates separately from nodes, communicating with them via anonymous pipes. This keeps Arwen’s process more secure. Designed to be fully interoperable, the Arwen WASM VM can also support Ethereum smart contracts by cooperating with its Virtual Machine (EVM).
Elrond Roadmap & Use Cases
After its 2020 mainnet launch, Elrond has been expanding its use cases with exciting new milestones on its roadmap. These include the introduction of the Maiar app, a new on-chain governance system, and an upcoming array of DeFi applications like ESDTs, NFTs, lending, and more! Introduced as the Elrond DeFi 2.0 module, it aims at providing an accessible, decentralized, scalable and rapid financial framework.
Released January of 2021, Maiar is Elrond’s relatively new mobile wallet and payments app, built to store and transfer EGLD. The first app to cryptographically hash phone numbers in order to create a crypto wallet, Maiar does not retain private keys nor can it access user funds. It does not store user phone numbers or address books either.
Currently, you can exclusively store and transfer EGLD, ETH, BTC, and BNB. More tokens will be added in time. Maiar also supports usernames known as herotags, which are generated with the help of Elrond’s Distributed Name System (DNS) service. These easy-to-remember names help prevent the potential vulnerabilities associated with complex addresses.
The Elrond team currently manages the network, which includes overseeing improvements and upgrades. The network will eventually transition to an on-chain governance system, whereby EGLD token holders will be able to vote on protocol improvement proposals. Keep an eye on updates regarding this!
New Tokens: ESDT (Elrond Standard Digital Tokens) and NFTs
Similar to Ethereum’s ERC-20 token standard, ESDTs will enable cheap token transfers that do not require smart contracts to function. This will encompass stablecoins, fiat currencies, and other assets.
Elrond has also created an NFT standard native to its platform, which is essentially an ESDT with added metadata. This could include royalty fees, or URI information that locates the associated NFT file. This allows for rapid and low cost NFT operations like minting and transferring.
According to its blog, Elrond is set to incorporate an AMM, borrowing and lending features, synthetic assets and bridges to its growing DeFi ecosystem. With its Adaptive State Sharding, bespoke Secure Proof-of-Stake consensus, and versatile Arwen Virtual Machine, Elrond is poised to make a significant impact here.