Algorand Consensus Staking Overview

With the recent transition from Governance rewards to Consensus rewards, CompX has joined the list of projects that will be helping to provide consensus for the Algorand blockchain.

Consensus is the mechanism by which Algorand determines and builds the ledger. While a detailed description can be found here, the explanation of the process provided on this page will be brief.

Algorand runs on user provided nodes. Nodes are nothing but computers that have the appropriate software installed and are connected to the network. Users then associate their Algos with that node which enters a lottery that's weighted against all other nodes by its total Algo stake. That means that nodes with more Algos will be picked more often than nodes with a smaller stake.

When a node wins the lottery, it collects the transactions for the block being built and writes them immutably into the blockchain. The node that writes a block is then rewarded by the protocol with the fees that were paid by users to save their data on chain, and any additional rewards that the Algorand Foundation use to incentivize consensus.

The security of the network relies on a diverse set of nodes, and the total stake that they hold. The more Algos that are associated with nodes and are participating in consensus, the more secure the Algorand blockchain is.