- Staci Warden is the CEO of Algorand Foundation, which is behind the algorand protocol (ALGO).
- Warden explains why algorand’s pure proof-of-stake model intrigues her the same way as bitcoin did.
- She shares algorand’s commitment to decentralized finance and one problem to solve in the space.
In the race to solve the blockchain trilemma of decentralization, security, and scalability, many smart contract platforms have risen to claim that they alone can balance the three without compromise.
To Staci Warden, the algorand protocol is one of the few that have met the head-on challenge and succeeded.
To be sure, Warden is the newly pointed chief executive of the Algorand Foundation, the Singapore-based entity behind the algorand protocol (ALGO). But her appreciation for the platform’s so-called pure proof-of-stake consensus mechanism grew long before she assumed her current post.
Warden, a traditional finance veteran whose career spanned JPMorgan, Nasdaq, and the US Treasury Department, was working at the Milken Institute in 2013 when she was asked to give a lecture about bitcoin to the local press.
“I just went down that rabbit hole. Six days three pizzas later, I emerged from my house,” she said in an interview. “It was really the proof of work that I thought was so incredible.”
While cryptographic concepts had more or less existed prior to bitcoin’s inception, Satoshi Nakamoto, the digital currency’s pseudonymous creator, was able to solve the double payments problem by coming up with the “genius mechanism” that is proof-of-work, in her view .
Warden soon got into crypto, first purchasing bitcoin at around $400. As the nascent market continues to grow, she became more involved in the industry and was asked to join the board of algorand. Despite the protocol’s relative obscurity back then, she began to research the platform that aims to usher in the future of finance.
“The more I read about it, the more I understood about it, I had that same feeling that I had back in 2013,” she said. “I hadn’t had that feeling since when I first understood proof of work, it just was love at first sight.”
What is so special about algorand?
What Warden saw in algorand the most was an elegant solution to the thorny problems afflicting blockchain networks such as the lack of security, equality, energy efficiency, and scalability.
It doesn’t hurt that algorand was also the brainchild of the Turing Award-winning MIT professor Silvio Micali, who co-invented zero-knowledge proofs and verifiable random functions — concepts that are already used in the crypto industry. In pure proof-of-stake, Micali seeks to avoid the disadvantages of existing consensus mechanisms.
“In a proof-of-work, you are racing as fast as you can to solve a puzzle and that turns into a bit of an arms race,” Warden explained. “Like any other kind, it ends itself in the excess use of energy and resources to win the race.”
On the other hand, the proof-of-stake model is less energy-intensive, but it has a winner-takes-all element where those with bigger stakes are more likely to be selected to append the next block to the blockchain.
“That has deep inequality built into it. This idea that it is deeply unequal is something that I didn’t love about that solution,” she said. “In addition, though, it is not secure because everybody can point to the guy with the biggest holdings as the guy that’s going to be the one most worth attacking.”
In algorand’s pure proof-of-stake model, 1,000 nodes are selected around the world. While big holdings increases the probability that a node will get selected, it does not automatically determine that the wallet will be selected.
“All of these participation nodes all over the world are running these little lotteries,” she said. “If you are picked you are one of the 1,000 but nobody knows in advance if they are going to be picked for it. It’s an extremely secure system.”
To be sure, despite its technological prowess, the ALGO token has had a rather weak performance, falling 36% in the past year amid a crypto
and down 31% in the last month. It was trading at $0.950141 as of Tuesday afternoon in New York, according to CoinGecko pricing.
One problem to solve in crypto and DeFi
With a heavy focus on decentralized finance, the Algorand Foundation launched a $300 million fund in September to help support DeFi projects within its ecosystem.
Warden shared that the ecosystem is about to have its fourth decentralized exchange and more derivative protocols while adding borrowing and lending projects.
However, to drive a broader institutional adoption, the TradFi veteran thinks that the interface between traditional finance and the crypto ecosystem will have to be at least “a little bit easier to navigate.”
“We are going to need custody solutions, interfaces, and tools that institutional investors are used to seeing before they can participate fully in the crypto space,” she said. “So I think that’s going to be a very important thing for the industry as a whole to focus on.”