Why ERGO is The Sleeping Giant of DeFi!

Ergo, also known by its market ticker ERG, is a crypto project you may not be familiar with.
This is likely because it currently sits just within the top 300 crypto projects and isn’t listed on the largest exchanges like Coinbase or Binance.
Ergo claims to be powering the future of finance, but does it live up to the hype? Let’s find out!

Ergo is a layer-1 blockchain, meaning it serves as the foundation for other decentralized applications to be built on, similar in function to platforms like Ethereum.
Ergo was created in 2017 by Alexander Chepurnoy, with the blockchain going live in 2019.

Interestingly, Alexander Chepurnoy was also a co-founder of smartcontract.com, now known as Chainlink, a core developer at NXT, and one of the first employees at IOHK, the company behind Cardano.

According to the Ergo website, Ergo is a next-generation smart contract platform that ensures the economic freedom of ordinary people through secure, accessible, and decentralized financial tools.
But what exactly does that mean?

What are smart contracts on Ergo?

Well, to start, smart contracts are a type of self-executing code that automatically enforces the terms of an agreement between parties once certain pre-agreed conditions have been met.

The idea behind a smart contract is to remove intermediaries from an exchange. Meaning, instead of making a deal through a broker who charges a fee, you can now make a secure agreement direct with an individual for no extra cost, with no trust required.

This works as the terms of the agreement are encoded within the smart contract itself and stored on a blockchain, where the contract automatically executes once the criteria has been satisfied.

These smart contracts allow Ergo to provide ordinary people with secure, accessible, and decentralized financial tools such as decentralized marketplaces.

As these smart contracts are automatic and processed by the blockchain, no one is in the middle charging a fee and creating a barrier to entry, meaning anyone with an active internet connection can participate.
But how does it all work?

Ergo uses a Proof-of-Work consensus mechanism similar to ones we’ve talked about previously.
But to summarize quickly, Proof-of-Work is a consensus algorithm used in many blockchain networks to validate transactions and maintain the integrity of the blockchain.

Under a Proof-of-Work setup, users in the network compete to solve a cryptographic puzzle that verifies a list of transactions. Once completed, this new block of transactions is added to the blockchain.
Users are typically rewarded a small amount of crypto if they solve this puzzle.

Of course, this isn’t a trust-based economy and there are validators who ensure that the answer submitted is correct before it’s committed to the blockchain. These users are also rewarded with crypto for their work.

Unlike a lot of Proof-of-Work blockchains, Ergo uses an ASIC-resistant Proof-of-Work algorithm known as Autolykos.
While we have seen ASIC-resistant blockchains in the past, with Litecoin perhaps being the most famous, usually they always succumb to the pressure, and ASIC miners end up mining the network.
But what exactly is an ASIC miner, and why does this matter?

What is an ASIC miner?

An ASIC, or Application-Specific Integrated Circuit, miner is a specialized piece of computing hardware with the sole purpose of mining cryptocurrencies.

Unlike traditional computer hardware, which is designed to perform a wide range of tasks, ASIC miners are optimized to perform one task exceptionally well. This makes them much more efficient at mining cryptocurrencies than regular computers.

ASIC miners are typically more expensive than traditional computer hardware, but they offer a significant advantage in terms of efficiency and profitability.

Overall, ASIC miners are often a necessary component of cryptocurrency mining, as they provide the immense computational power to validate transactions and maintain the integrity of the blockchain.

So why would you want to ban them?

Simply put, it is not fair or fully decentralized when the only efficient way to secure the network is with specialized hardware that the average person can’t afford.

If the machines to mine and verify the network’s transactions are affordable only to corporations
and wealthy individuals, this in itself is a form of centralization.

Although it is not a company or country in control, it is one demographic in control which goes against Ergo’s philosophy of openness and inclusion.

To Ergo, the easiest way to ensure inclusivity is to try ensure that mining the network remains profitable for everyone. An effective way to do that is to exclude specialized hardware which costs multiple thousands to purchase and operate.
Though, as we know, projects live and die by their tokenomics, so how does ERGO compare?

The total supply of ERG has a hard-coded limit, which is released over an 8-year schedule, known as the emission schedule.
By the end of these 8 years, there will be just under 98 million ERG in circulation.

Ergo was fair-launched, meaning there was no pre-mining and no large quantities handed out to team members or early investors.

In the beginning, if you wanted some ERG you had to wait until it was available to mine or market just like everybody else.

Like most cryptocurrencies, these ERG tokens can be used to pay for transactions and fees on the network.

While Ergo is smart-contract compatible, unlike Ethereum, which pioneered the smart contract, there are no gas fees.

Instead, users pay a simple transaction fee that doesn’t fluctuate according to user demand, making its pricing a lot more predictable for traders on Ergo’s decentralized finance apps and NFT marketplaces.

In conclusion, Ergo is a blockchain that aims to combine the best of Bitcoin and the best of Ethereum.

In honesty, Ergo grows away in the background, far from the main crypto headlines, and its true potential is hard to predict.

However, when the founder of Cardano, one of the largest crypto projects going, has been an admirer of your blockchain since 2017, it likely has some legs to stand on.

With a clear mission, and a team of seasoned crypto veteran developers, it is always possible Ergo could still become the sleeping giant its hardened supporters believe it to be.