What is Aleo Network (ALEO) - A Comprehensive Overview

Bitcoin and the crypto arena promised us a new payment paradigm, an era of decentralization, and an alternative to fiat currencies. Something that got overlooked in this process is digital privacy. Aleo Network is here to plug that gap in the market.

In this article, we’ll explore Aleo's architecture, the Aleo staking model, and the unique advantages it brings to the blockchain ecosystem, particularly in terms of privacy and security.

What is Aleo Network?

Aleo Network is a privacy-focused Layer-1 blockchain that uses Zero-Knowledge proofs and smart contracts to enable secure and private online transactions.

The Aleo network puts privacy first and helps developers code and deploy applications that allow users to operate with complete privacy on a layer-1 blockchain. On a regular blockchain like Ethereum or Bitcoin, all your transactions are fully visible to the public. In this case, if I were to figure out your wallet address, I would be able to track all your incoming and outgoing transactions.

With ZK-SNARKS (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge), Aleo can conduct an activity that is hidden but can be verified. These are then truly private transactions where none of us know who is doing the transactions but the identity of the person is verified by the application or the blockchain.

What Aleo is envisioning is being one of the largest developer platforms that allows ZK-based applications. For this, they have launched many developer tools to make these applications a breeze.

How does Aleo Network operate?

Apart from just the Layer-1 blockchain, Aleo Network also runs the following tools to help developers make ZK proofs an integral part of their Web3 applications:

1. snarkVM is a decentralized virtual machine that can be downloaded easily as a Rust crate

2. snarkOS is what helps the Aleo peer-to-peer network run smoothly. Any user can connect directly to peers and have nodes up and running by building connectivity to beacon nodes

3. Leo is the proprietary programming language of the Aleo network. Being a statically typed language, it includes the ease of use and readability of Javascript along with the security and speed of Rust. Leo also has in-built ZK capabilities that allow even first-time crypto developers to include ZKs in their applications.

The type of participants in the Aleo Network and their role in its smooth functioning are:

• Stakers : You can become a Staker by locking up your Aleo credits with Validators. Validators then participate to create consensus on the blockchain and thus secure the network. As a Staker, you will earn rewards according to the number of credits you have staked.

• Provers : As a Prover, you need specialized hardware to generate proofs and solve puzzles that will help you earn Aleo Credits. These proofs are then verified by Validators and included in the upcoming blocks.

• Validators : As a Validator, you will run nodes, validate transactions, and participate in consensus to add new blocks to the blockchain. For this effort, you will be awarded fees and rewards. You will need a minimum of 1 million Aleo Credits to get started.

All together, these participants create a mutually beneficial ecosystem.

ALEO tokens & Aleo Credits

Aleo Credits or Aleo tokens are the fuel for an ecosystem built around user privacy and facilitating transactions and program executions. Here are the ways that you can use them:

• Executing transactions : When you want to make a transaction on the Aleo blockchain, you will require some Aleo credits to process it. The number of credits required depends on how complex or big the transaction is. These tokens are then used to make sure that the computational resources used for this are compensated accordingly.

• Running programs : If you have created a program that will run on the Aleo blockchain, you can know in advance how many credits it will cost you to run it. This will allow you to make changes if you are not happy with what it is costing, or to ration your remaining credits accordingly. In this way, this process is transparent and predictable which helps maintain trust amongst the users and the network.

• Using DApps : You can use your Aleo Credits if you want to use some DApps on the blockchain. Just like with executing a transaction or running a program you have created, you know before paying how many Credits you will have to pay for it. This incentivizes both the users and creators of DApps as the costing model is clear and transparent.

Where can Aleo be used?

Aleo Network’s focus on privacy and security opens up numerous applications across various fields. Here are some key areas where Aleo’s technology can make a significant impact:

Finance: Aleo enables private financial transactions by ensuring that while your assets remain under your control, the details of your transactions stay hidden from public view, solving a key issue in the crypto space.

Private Identification: With Zero-Knowledge Proofs (ZKPs), Aleo allows the creation of applications that verify identities without revealing personal information, enhancing privacy in digital interactions.

Machine Learning: Aleo’s ZKP-based approach allows for secure data processing in machine learning models, ensuring that sensitive information is used without compromising user privacy.

How is Aleo different from other privacy tokens?

As one of the leading privacy-focused blockchains, Aleo aims to have a completely private ledger. Here are some ways this makes it different from other privacy tokens:

• Default to privacy: When you make a transaction on Aleo it is private by default and does not need you to click a button or tick a checkbox. While other blockchains use ZK proofs, they need you to take a few extra steps to ensure a private transaction.

• Developer-centric: To make it easier to deploy, Aleo has its programming language, Leo. This makes creating privacy-centric applications easier than other tokens with a built-up developer ecosystem but no dedicated programming language. As a developer, you might have to put in more effort to conquer the learning curve for these other tokens.

Who is the team behind Aleo Network?

Aleo came to be in 2019 as the brainchild of Howard Wu, Raymond Chu, and Collin Chin. Before Aleo, the team was closely involved with other ZK projects like ZCash and Monero.

The current CTO (Chief Technological Officer), Howard Wu, also co-authored one of the more important papers that discuss the application of ZK to Web3. Their current CEO, Alex Pruden, was a partner at a16z.

The team behind the Aleo blockchain is Aleo Systems which will shift focus once the project is launched as a decentralized layer-1. They will then build products for the ecosystem including applications.

Drawbacks of Aleo Network

While Aleo is doing great work in the privacy and security domain, it’s not all smooth sailing. Here are some issues that the Aleo team is still attempting to solve.

New Language

With Leo, developers are required to adjust to a new language to be able to build ZK-compatible applications on the Aleo blockchain. Undoubtedly the job becomes easier once you learn the language but there is an initial learning curve that requires you to learn new syntax.

Even after learning Leo, you are going to be able to program on Aleo only and these language skills will not transfer to other ZKP-compliant blockchains. Also, the documentation for Leo is scarce compared to something like Solidity which has been a developer favorite over a longer time.

Small App Ecosystem

For a user, there are not many options in terms of applications on the Aleo blockchain as it is new and developers are still getting up to speed with ZKPs and what Aleo brings to the privacy table. This is a matter of time and will change as Aleo makes efforts to bring more developers to the table.

Slow Proof Generation

The underlying principle of Aleo, aka the proof generation, takes up a lot of computational power. This in turn slows down the network and the addition of blocks. The team has tried to solve this with applications like Leo wallet using browser-based GPU acceleration but there is still some work to be done on this front.

Final thoughts on Aleo Network

What Aleo is doing for privacy and security will have ramifications way beyond the web3 domain and will positively impact the way applications are built on the Internet. It will help develop a mindset in creators where privacy is front and center and not just something that is an afterthought. What Aleo looks to have gotten right is using Zero-knowledge cryptography and merging it with smart contracts which makes it easier for developers to build on.