While both Proof-of-Work (PoW) and Proof-of-Stake (PoS) blockchains have a lot to offer, in 2020, especially Q4, the focus has shifted to PoS. Ethereum 2.0 is coming closer, changing to a PoS approach, and there are various other networks that are gaining traction.
Shedding light on some of the largest Proof of Stake blockchains in the industry in our first review, this second one takes a look at the remaining staking networks. Based on the Block Research data of value staked in PoS chains (see figure below), we will dig deeper into Algorand, Cosmos, Avalanche, and Tron to present their specificities and differentiators.
As of mid-November, nearly $1 million worth of funds were staked in Algorand, Cosmos, and Avalanche each, and another $600k in Tron. This makes them viable challenger networks within the industry, taking each a sizable chunk of the pie.
Founded in 2017 by Turing award winner and MIT professor Silvio Micali, Algorand is a permissionless Proof-of-Stake blockchain protocol which uses a consensus mechanism where anyone can participate in voting to create new blocks. The minimum voting requirement is only one ALGO, which makes it quite different from some other networks. The network claims to be the first-of-its-kind, supporting the scale, open participation, and transaction finality required to build systems for billions of users. It has a primary focus on developers and their needs, with Algorand's node repository being open-sourced and publicly available.
The project received an initial investment of more than $60 million from investors such as venture capital firms Union Square Ventures and Pillar Venture Capital, and in 2019 launched publicly with a $60 million ICO, which led to a technology upgrade. Algorand 2.0 presents a compelling option for developers focused on adoption beyond the world of crypto-assets.
Its technology finalizes blocks in seconds and provides immediate transaction finality while preventing forks. The network is capable of 1,000 transactions per second.
Algorand users can earn a reward without staking their assets, as the protocol distributes tokens throughout the network to all ALGO coin holders. In total, there will only ever be 10 billion ALGO tokens. It’s a significantly different PoS model providing economic incentives to any token holders, instead of rewarding only validator nodes. Also, tokens are not locked giving users more freedom and making funds more liquid than on other PoS blockchains.
The blockchain’s native token, ALGO, was set to drive the system of incentives. In July 2020, a surprise listing on Coinbase has seen its price spike nearly 30% in less than 24 hours, pushing the network’s market cap to a record high.
With Tether and USDC both operating on Algorand, it has two of the largest stablecoins on its network. The blockchain has recently pushed initiatives to further focus on decentralized finance (DeFi), with three key features recently added: the addition of stateful smart contract functionality to the base layer, fast catchup, and rekeying. This could make it a viable competitor in the DeFi space, bringing centralized and decentralized finance closer together thanks to key development partners such as Archax. Within the hype around CBDCs, the Republic of the Marshall Islands has selected Algorand as a technology partner for its national digital currency, in March 2020.
After two years of research and development since its ICO in 2017, where the project raised $16 million, Cosmos launched in March 2019. Also termed as the “Internet of Blockchains”, this network sets itself apart from other platforms, defining itself as a network of blockchain networks. The goal of the project is to allow separate blockchains to communicate with each other in a seamless manner.
Cosmos Network was developed by Tendermint Inc, a software development company that was appointed by Swiss non-profit Interchain Foundation to develop a cross-blockchain ecosystem. The blockchain focuses on customizability and interoperability rather than prioritizing its own network. Its goal is to create an ecosystem of blockchains that can easily share data and tokens.
Cosmos’ launch caused quite a stir in the blockchain space as one of the first platforms offering blockchain interoperability. Two of the major bottlenecks Cosmos is trying to solve are interoperability and scalability. This is achieved through a set of open-source tools like Tendermint, the Cosmos SDK, and IBC designed to let people build custom, secure, scalable, and interoperable blockchain applications quickly.
As a PoS network, users can earn a passive income staking their crypto. To be eligible to become a node in the Cosmos network, you will need to remain in the top 100 stakers. This strategy deters nefarious nodes as they would have the most to lose from any financial hits.
Avalanche, or Ava Labs, was created by three co-founders, including Emin Gün Sirer, a professor at Cornell University and crypto veteran long associated with Bitcoin and decentralized networks. The project was initiated in May 2019. It raised $12 million in a private sale led by Galaxy Digital, Bitmain, and Initialized Capital, and a further $42 million in a public token sale in July 2020.
Avalanche launched its mainnet in September 2020, making it the youngest of our studied blockchains. The network’s native token, AVAX, has various tasks within the platform and also functions as a rewards and payment system for users.
Avalanche focus has clearly been DeFi from the beginning - to solve major issues like over-congestion by providing a highly scalable blockchain network. It was built to unify DeFi applications and blockchain deployments in one ecosystem.
According to the project’s team, Avalanche is capable of confirming transactions in under one second, with a capacity of over 4,500 transactions per second and security thresholds well-above the 51% standards of other networks. This would make it unique in the industry providing subsecond transaction confirmations.
Protocols in the Avalanche consensus family operate through repeated sub-sampled voting and achieve all three properties of the scaling trilemma, consisting of decentralization, scalability, and security. It allows anyone to create their own tailor-made application-specific blockchains, supporting multiple custom virtual machines written in popular languages. This virtual machine can then be deployed on a custom blockchain network, called a subnet, which consists of a dynamic set of validators working together to achieve consensus on the state of a set of blockchains where complex rulesets can be configured to meet regulatory compliance. Avalanche is a platform of platforms ultimately consisting of thousands of subnets to form a heterogeneous interoperable network of many blockchains.
It is yet to see how this new network scales in comparison to the “older” ones, but with a staking value of $1 million already, it seems quite promising for investors and users.
Tron is an early Ethereum challenger. It was founded in 2017 by the Tron Foundation, with an ICO worth around $70 million, but is more widely known by its lively CEO Justin Sun. It made big headlines with its acquisition of BitTorrent in 2018.
The blockchain was inspired by Ethereum’s value proposition. In May 2018, the Tron (TRX) cryptocurrency that first launched as an ERC-20 token moved to its dedicated blockchain. Similarly to Ethereum, Tron enables developers to create and utilize complex protocols via smart contracts that live on its native blockchain. Today the platform is best known for its zero transaction fees and high transaction speeds (~2000 transactions per second).
Inspired by EOS, the network relies on a Delegated-Proof-of-Stake (DPoS) consensus mechanism to secure the blockchain. Only elected nodes can approve blocks of transactions. In the Tron system, 27 Super Representatives are elected every six hours, chosen by the community of users staking their TRX. These Representatives then generate and validate blocks within a 3 second block time through a decentralized autonomous organization (DAO).
Similar to other delegated PoS systems, Tron’s approach has been accused of being too centralized. It even cost the network its co-founder Lucien Chen who left the project due to its “pseudo-decentralized”.
Polkadot is the most popular network for staking, nearly $3 billion worth of DOT tokens are at stake - TheBlock ; Nov 15, 2020 
What is Tron (TRX)? - Coinhouse ; Nov, 2020 
Investing in TRON (TRX) – Everything You Need to Know - Securities.io ; Oct 26, 2020 
Investing In Cosmos (ATOM) – Everything You Need to Know - Securities.io ; Oct 25, 2020 
Algorand Secures $62M in Funding and Announces Appointment of Executive Team - Businesswire ; Oct 24, 2018 
Avalanche blockchain network to launch full mainnet - Cointelegraph ; Sep 16, 2020 
Challenging Ethereum 2.0? Competing blockchains are seizing the moment - Cointelegraph ; Sep 09, 2020 
Algorand’s Newest Upgrade Turns the Project’s Eyes Toward DeFi - Cointelegraph ; Aug 19, 2020 
2020 Is Becoming the Year of Staking With Some Major Achievements - Cointelegraph ; Aug 03, 2020 
Algorand Spikes 30% After Surprise Coinbase Listing - Cointelegraph ; Jul 17, 2020 
All in on PoS Blockchains: An Overview of Crypto-Staking Networks - Cointelegraph ; May 17, 2020 
Tron Co-Founder and CTO Leaves Project, Alleging Excessive Centralization - Cointelegraph ; May 13, 2020 
Cross-Platform Blockchain Project Cosmos Launches First Hub After $17 Million ICO - Cointelegraph ; Mar 2019