ALQO Masternode: A Beginner's Guide
Last Updated: 1st November 2018
ALQO, which stands for ‘A Liquid Object’ is an open-source community driven decentralized cryptocurrency that is designed to serve as a comprehensive payment system. It aims to do this by developing a platform that can facilitate secure and anonymous low-cost transactions, utilizing mechanisms such as the ALQO Masternode to achieve this. The ALQO team has built the platform in mind to tackle what they have identified to be the 4 main bottlenecks facing blockchain technology: Centralization, Sustainability, Governance and Network capacity (transactions per second).
Centralization
The current proof-of-work mining system in Bitcoin is such that it has become largely a centralized activity. Individuals who possess ASIC hardware (Application-Specific Integrated Circuit) now have a considerable advantage over those that do not. This has resulted in an uneven mining landscape in which mining bitcoins is only economically feasible for individuals who can afford ASIC hardware.
With this in mind, ALQO makes use of a hashing algorithm, known as Quark, that is designed to make the mining process a much fairer one. Quark is a lightweight algorithm that allows for mining to be done with modest hardware. This means that the scope of individuals that can participate in ALQO’s mining process is much larger, with mining possibly even being done with a smartphone. By using the Quark hashing algorithm, ALQO reduces the barrier to entry for mining on the network for the average ALQO end user.
Sustainability and Governance
The success of any decentralized network, in some part, will be determined by its ability to sustain itself and grow organically independently of third parties. As a result, the implementation of a governance mechanism is vital in achieving this success.
The ALQO platform features ‘Ad-Hoc Dev Funding’, which is a development fund that allows developers to be compensated for their work in helping to grow the ALQO platform. In order to ensure that developers are always working in the interest of the community, funding can only be authorized by approval of a proposal that is submitted to the community. Moreover, the community decides whether or not to grant funding on an ad-hoc basis. Funds are also cryptographically sealed and can only be deployed if a certain proposal outlining the use of funds and the amount needed is accepted by the community via a vote.
The ALQO platform also employs a system known as ‘Carbon Voting’, whereby ever 1 ALQO token is representative of 1 vote. The rationale behind this is to eliminate financial barriers that could prevent an individual from participating in the network’s community voting system.
Scalability and Network
Currently, the Bitcoin protocol mandates a block size limit of 1MB. Because only a limited number of transactions can fit into a block, relative to the user activity on the network, it is argued by some individuals that the Bitcoin network, at its current parameters, will not be able to sustain a future increase in its user base and transaction volume. This scenario occurred in December of 2017, where the average transaction fee on the Bitcoin network peaked at approximately $60 following an influx in user activity on the network.
ALQO seeks to avoid this problem by introducing larger blocks onto its network. With a block size of 4MB, it is argued that ALQO can handle approximately 40x the transaction volume than Bitcoin. AlQO also intends to employ ‘Flexible Block Sizes’. According to the team, approximately 1 year into ALQO’s life cycle, the network will transition from a proof-of-work mining algorithm to proof-of-stake. At this stage, the protocol will also switch to dynamic block sizes, which will mean that block sizes will adjust in accordance with the network transaction volume. According to the ALQO whitepaper, the ALQO network will switch entirely from proof-of-work to proof-of-stake in late 2018, which will commence at block #475,201.
ALQO Masternode
ALQO Masternode is a second-tier architecture that is designed to provide enhanced serves to the ALQO network. These services include:
- Faster transacions
- Anonymous transactions
- Voting validation
- Possessing a full copy of the blockchain
In order to become an ALQO Masternode, individuals are required to put up 10,000 ALQO tokens as collateral. This serves as a disincentive for ALQO Masternode operators to engage in malicious activity, as their collateralized 10,000 ALQO coins may be slashed. Each ALQO Masternode is also required to have its own dedicated IP address. In exchange for investing their computational resources to help the network, ALQO Masternode operators are rewarded with ALQO tokens. The reward pay-out for an ALQO Masternode during the proof-of-work and proof-of-stake phase can be found below:
ALQO Masternode and the Libra Effect
Whilst the reward pay-out to both miners and Masternode operators is a fixed distribution during the proof-of-work phase, a more dynamic approach toward reward distribution between stakers and Masternodes will be initiated during the proof-of-stake phase. This dynamic approach is known as the ‘Libra Effect’, and this mechanism will dynamically increase or decrease the block reward pay-out to Masternodes depending on the number of Masternodes operating on the network. For example, the higher the number of Masternodes operating on the ALQO network, the smaller the reward that will be paid out to Masternodes. Conversely, if the number of Masternodes on the network decreases, then the reward pay-out to Masternode operators will increase. This same mechanism also applies to the number of stakers on the ALQO network.The rationale behind the Libra Effect is to achieve a fair balance in the reward pay-out to stakers and Masternode operators on the network.
Setting Up an ALQO Masternode
Any individual that is interested in setting up an ALQO Masternode can choose to do so on their own, or by using a Masternode hosting service.
