Algorand, a Boston-based blockchain company, raised over $60 million in a token sale held on CoinList. When combined with the Algorand Foundation’s token distribution fund of 2.5 billion Algos it would have a market cap of $6 billion, putting it at seventh above Binance Coin and below EOS.
Algorand’s token sale implies a $6 billion value
A young blockchain company that aims to create a truly democratic and efficient public ledger just completed its token sale which would put it among the top 10 crypto companies by market capitalization.
Algorand, a Boston-based company created by MIT professor Silvio Micali, completed its inaugural Algos auction on June 19. According to the company’s press release, the auction sold out in under four hours due to oversubscribed demand from a large group of global participants.
Each token was sold for $2.40 in a Dutch Auction, where the price of the coin is gradually reduced until a buyer is found. When combined with the 2.5 billion Algos that the Algorand Foundation is holding in order to participate in securing the Algorand network, the coin currently has a market capitalization of $6 billion.
This puts Algos among the top 10 cryptocurrencies by market cap—just below EOS (EOS), which has a market cap of $6.48 billion, and above Binance Coin (BNB) and its market cap of $5.30 billion.
This week’s equity funding matched the $66 million Algorand raised in the past year from major venture capital firms such as Union Square Ventures and Pillar Venture Capital.
The same day, Algorand also launched its mainnet, just two days after it open-sourced its node repository.
Apart from the incredible amount of tokens sold, Algorand made news as it was among the first companies to offer a refund policy on its tokens. According to the company’s website, auction buyers will be able to return their tokens at 90 percent of the purchase price up to a year after the sale.
Token auction plan could increase Algorand’s market cap to $24 billion
Instead of holding one large token sale, Algorand opted to have sales on a rolling basis. The Algorand Foundation website states that the company plans on auctioning off 600 million Algos coins every year for five years until the total supply reaches 10 billion coins.
If the coin was to keep roughly the same price as it had in the latest sale, Algorand would have a market cap of $24 billion. While it’s hard to predict how much the market cap of other top cryptocurrencies will grow, at the current state of the market, Algorand would be the third largest coin, just after Ethereum.
However, many researchers believe the company’s valuation is a bit unrealistic. Analysis from ICO Drops found that while the hype around Algos was high, so was its risk rate. The expected ROI from the coin was also rated as normal, which means that the coin could retain a relatively stable value. Nonetheless, a market cap of $24 billion will most likely be unsustainable.
The Algorand foundation also said that it won’t use its Algos reserves to transact. Instead, the foundation will keep its full allocation online and use it to contribute both to the overall governance of the network as well as the process of “responsible decentralization.”
Algorand’s mission could be too optimistic to succeed
Founded in 2017 by Turing Award and Gödel Prize-winner Silvio Micali, Algorand was designed to improve blockchain decentralization. The platform utilizes the Byzantine Agreement protocol in order to reach consensus among network participants. Similar to a proof-of-stake protocol, Algorand’s consensus mechanism allows minimal computation in order to qualify as an honest block producer.
The company made headlines thanks to its approach to decentralized consensus that randomly and secretly selects new block generators and validators in every step of the voting process. The protocol also assumes that 2/3 of the block producers are honest, which would make forking virtually impossible—a notion that was heavily criticized by many cryptanalysts.
As the network offers no incentives or financial rewards to honest block generators, honest nodes can simply go offline due to a lack of monetary support. A recent research paper argued that it was also possible to bribe validators and fork Algorand.
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