MIT Professor’s Startup Algorand Nabs $4M for Blockchain Aiming to Avoid Bitcoin’s Flaws
A new startup out of MIT called Algorand has raised $4 million from investors to help it launch a blockchain-based system that the company says could address some of the technological problems dogging Bitcoin and other popular digital currencies.
Pillar Companies and Union Square Ventures are the investors in Boston-based Algorand’s seed funding round announced Thursday. It’s a relatively small amount of money being raised by a startup entering an increasingly crowded sector. But part of what makes Algorand worth watching is the people involved and the claims the venture is making.
Algorand’s co-founder is Silvio Micali, an MIT computer engineering professor and cryptographer who has won the prestigious A.M. Turing Award. Micali (pictured above) co-authored the open-source software protocol underpinning the virtual currency and transactions system that Algorand plans to launch this year.
In a press release, Algorand said its software is designed to deliver a decentralized network that is secure and can handle massive transaction volumes, but doesn’t require as much electrical power or computing resources as many existing blockchain networks. For those who want to get into the details, a spokesperson said Algorand will validate each transaction in the blockchain using an approach called “proof of stake,” which doesn’t require solving complicated cryptographic puzzles, unlike the “proof of work” approach used by Bitcoin, Ethereum, and others. (Ethereum is also reportedly working on a proof-of-stake-based blockchain system called Casper.)
Algorand claims its system will be able to confirm transactions within seconds and keep transaction costs low.
“Algorand is a sophisticated approach to addressing existing blockchain challenges—scale, settlement times, and cost,” said Pillar partner Jamie Goldstein in a prepared statement.
Of course, Algorand will have to prove its technology works as advertised, and it’s too early to tell whether users will flock to it. The company said it will use the funding to develop its technology and expand its 10-person team.