logo academy

Elrond and eGold: a scalable blockchain, a usable coin

July 16, 2021

10 min

Elrond and eGold: a scalable blockchain, a usable coin

Elrond is a blockchain whose native cryptocurrency is eGold (EGLD). It is a project focused on developing smart contract-based technologies to create a complete DeFi offering. Its strength is scalability and thus transaction speed.

Elrond: a scalable blockchain for eGold

Elrond Origin Story

Elrond launched with an IEO on Binance in June 2019 and has since built an incredibly comprehensive ecosystem in record time. The idea came from two brothers originally from Transylvania, Beniamin and Lucian Mincu, who started working on Elrond at the end of 2017 after already collaborating on the founding of MetaChain Capital and ICO Market Data.

Before diving into its fascinating architecture, we cannot ignore the name of this project, reminding us of a character in The Lord of the Rings.

In an interview, Benjamin Mincu said that with this name he wanted to communicate great power, but dedicated to doing good, just like the character of Elrond in the saga. Elrond, therefore, presents itself as a project that is not only interested in wealth, but also in using its technological innovation in a positive way.

Throughout the article you will find other elements inspired by Tolkien’s work that make up the project’s ecosystem.

Features of the Elrond blockchain

Elrond is based on the Secure Proof-of-Stake consensus mechanism, a version of PoS we will elaborate on below, and thus has all the basic features of PoS blockchains. These include the possibility of staking, the lower energy consumption compared to Proof-of-Work and Governance using the main cryptocurrency.

Elrond owes its speed and scalability to its sharded structure, i.e. ‘fragments’ of the blockchain that operate in parallel.

It is precisely the fragmentation of the blockchain into several networks, on parallel layers, that enables the scalability of transactions.

It is the same mechanism that Ethereum is adopting with its version 2.0, the difference being that Elrond was born this way and does not have to waste resources on mass migration.

How sharding works

Let us compare the way a standard blockchain works to a sharded blockchain:

Transactions on a standard blockchain are validated like this: N transactions are recorded on a block, the block is created and recorded, then it moves on to the next block.

This type of operation prevents going beyond a certain speed. However, if the aim of the crypto sector is to at least run alongside the traditional economic and financial system, it needs to be able to compete with the speed of the dominant circuits.

With sharding, Elrond has managed to fall within the range of transactions per second to which Visa belongs. In fact, during the first stress tests, the Elrond network showed an unbeatable result: 263 thousand transactions per second, 10 times more than Visa, which is able to process up to 25 thousand transactions per second.

Here’s how transactions are validated on a sharded blockchain:

N transactions are recorded on block A of blockchain 1, simultaneously N transactions are recorded on block A of blockchain 2, 3, 4 and so on.

At the same time, the sharded blockchain validates as many blocks as a normal blockchain, as there are shards.

Elrond: a scalable blockchain for eGold

This type of structure is undoubtedly faster, but it is essential not to lose sight of the security and communication between the shards.

Elrond Gold

The Elrond cryptocurrency was initially launched as an ERC20 token called ERD, which was then migrated to the Elrond blockchain and renamed eGLD.

The eGLD coin has multiple uses on Elrond. It is used as part of the platform’s governance mechanism, as a collateral and reward for validators, and to pay transactions and smart contracts fees. eGLD is designed to be used on the Maiar app, Elrond’s proprietary Wallet, which allows users to send near-instant transactions over the Elrond network. Maiar offers eGLD lending, transfer and staking functions.

As of June 2021, the circulating supply of eGLD coins was 17.7 million, with 57% of these locked in the network’s rewards protocol. New eGLD coins will be released slowly over the next 10 years until the final supply of 31.4 million eGLDs is reached. The relatively low supply of eGLDs, the issuance schedule and the high percentage of locked coins are considered to be positive cryptoeconomic indicators regarding Elrond’s long-term viability.

Use Cases and DeFi functionalities

Smart Contracts

The technology on which all DeFi functionalities are based is smart contracts. Here too, Elrond has a major advantage.

Thanks to Arwen, the Elrond Virtual Machine, smart contracts can be executed in record time, and smart contracts can be developed in the most common programming languages, without having to learn a project- or industry-specific language.

This allows many more developers to contribute to the project, with fewer barriers to entry.

The Token Standard 

Elrond also has its own proprietary token standard: the Elrond Standard Digital Tokens, on which NFTs and SFTs are also based. The standard is used to tokenise non-native cryptocurrencies (wrapped tokens) and support all kinds of assets on the Elrond blockchain.

The advantage of ESDT is that it does not require the use of smart contracts to be used, again lowering costs.


According to the roadmap, during the second quarter of 2021 Elrond worked on interoperability with other blockchains and Decentralised Exchanges. Since the migration from the ERD token to EGLD, there is already a bridge connecting with the Ethereum blockchain, but it is possible that more will be created soon.

New cryptocurrencies are also expected to be launched via the Launchpad, a feature which at the time of writing is still marked as “coming soon”.

Maiar Wallet

Perhaps the most successful and accessible use case is the Maiar app, which is a wallet with a staking service that is incredibly simple and pleasant to use, even though it comes from a complex DeFi project.

Similarly to the Dash wallet, it provides the possibility of writing the username of the contact you want to send EGLD to, instead of entering the wallet address in numbers and letters.

To sum up, the scalability of Elrond’s basic structure and the usability of its services – both by the developers and by any trader – are an asset for the future of this project in its infancy.

Diving Deeper: Elrond’s Architecture

Elrond: a scalable blockchain for eGold

There are 3 building blocks of the Elrond blockchain: the shards, the metachain and the nodes.

We know that a node is a device that is connected to the network and somehow participates in it, we know that the shards are fragments of the network/blockchain that run in parallel. The only thing missing is the Metachain, which reminds us of the investment fund created by the Mincu brothers.

The Metachain is the blockchain operating in a special shard, where the main responsibilities are not transaction processing, but the “notarisation” and finalisation of already processed blocks, facilitating communication between shards, storing and maintaining a log of validators, processing and managing the activity of nodes.

A node may assume different roles, namely validator, observer or fisherman.

Elrond Validators have the same role as most PoS network validators.

They are nodes in the Elrond network that process transactions and protect the network by participating in the consensus mechanism, while earning rewards from the protocol and transaction fees. To join the Elrond network, a validator must provide a collateral by staking EGLD tokens. Validators risk losing their share if they collude against the network.

Observers are passive members of the network who do not have to give collateral or receive compensation, but simply store the blockchain’s history.

A Fisherman is a node that checks the validity of blocks after they have been proposed. They challenge invalid blocks proposed by malicious parties and are rewarded for their service. The Fisherman role can be played by validators who have not been selected for the current validation round or by observers.

SPoS: the consensus mechanism

In very simplistic terms, this rather technical PoS system, Secure Proof Of Stake, is ‘Secure‘ because of the way validators are selected. This step is in fact particularly fast, being deterministic and requiring no communication.

The speed and level of randomness of this process guarantee greater security, since time is of the essence for a malicious node wishing to influence or hinder the validator selection in order to have validation power.