A deep dive into Alephium and its ecosystem
What Is Alephium?
Alephium is a sharded Layer-1 blockchain featuring a custom virtual machine designed for diverse smart contract applications. It directly eliminates the risk of re-entrancy attacks and two-step unlimited contract approvals, two of the most common attack vectors on traditional blockchains. Thanks to its proprietary sharding algorithm, Alephium can also theoretically process over 10,000 transactions per second. Moreover, the unique Proof of Less Work model enhances Bitcoin’s Proof of Work model energy efficiency, substantially minimizing the environmental impact through the native token burning process.
Alephium initially published its whitepaper in February 2019, followed by the launch of its testnet in December 2020, and subsequently, its mainnet in November 2021.
Since that time, the Alephium blockchain has experienced significant growth and development, achieving a total value locked (TVL) on-chain of $14.14 million as of writing. Additionally, the blockchain supports more than 50 active projects and has accumulated over 305,000 active addresses.
Source: DeFiLlama (Link)
According to Minerstat, the Alephium hash rate has also increased by more than 25x since 6 months ago to 50 PH/s, indicating a general increase in network security, possibly due to improved hardware from existing miners or increased miner participation.
Source: Minerstat (Link)
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How Does Alephium Work?
Alephium’s architecture builds on the strengths and weaknesses of earlier blockchains, incorporating Bitcoin’s UTXO model alongside Ethereum’s account-based model. It also features a proprietary virtual machine called Alphred and a unique programming language named Ralph for developing applications on its platform. The chain employs sharding to enhance scalability and a refined Proof of Work consensus mechanism, known as Proof of Less Work (PoLW), that minimizes energy consumption while ensuring security.
Alephium’s technical innovation in scalable infrastructure through sharding and energy efficiency from its Proof of Less Work mechanism made it an ideal candidate for their recent partnership with Gigatons, a technology and funding platform designed to facilitate the global move towards net-zero carbon emissions. Gigatons seeks to tackle the climate crisis through scaling infrastructure to decarbonize transport and energy, mobilizing capital to scale new climate-focused projects and boosting the transparency to tackle greenwashing. Specifically, Gigatons will support the end-to-end tokenization and validation of carbon credits by leveraging blockchain technology to ensure full transparency in carbon credit management.
Additionally, Alephium’s high security and programmability makes it an ideal candidate to secure and manage the large dollar value in tokenized assets, which are expected to be transacted on the Alephium blockchain under this partnership.
But how do each of these features work? Let’s explore each element in greater detail.
Stateful UTXO (sUTXO) Model
Alephium operates on a Stateful UTXO (sUTXO) framework that merges two widely used models in blockchain accounting: the UTXO model from Bitcoin and the account-based model utilized by Ethereum.
In this system, Alephium leverages Bitcoin’s UTXO for asset and token management while employing Ethereum’s account-based approach to oversee smart contracts and states. The UTXO model offers simplicity, transparency, security and scalability. However, its inherent ‘stateless’ nature limits its applicability for diverse applications and makes it less flexible for developers. Conversely, the account-based model is more intuitive, resembling traditional databases by maintaining state and balances.
Source: Alephium Medium (Link)
Under sUTXO, token issuance, transfers and accounting are all natively built into Alephium and are stored in UTXOs, just like the native token, ALPH. This overcomes the inability of Bitcoin to handle tokens, while also circumventing the need for specific token standards on Ethereum, which require the ERC-20 standard to manage fungible tokens and ERC-721 to manage NFTs. Simplicity aside, this also reduces security risks surrounding token standards which may be introduced with each new token standard.
Source: Alephium Medium (Link)
The sUTXO model also introduces states to Alephium, hence the term “stateful” in its name. The introduction of state enables smart contracts and decentralized applications, which often have to rely on the blockchain state to function, to flourish on the chain.
Alephium Virtual Machine (Alphred)
The sUTXO model of the chain is enhanced by the Alephium Virtual Machine, known as Alphred, which operates as its underlying platform.
A virtual machine serves as the computational backbone for decentralized applications and smart contracts on the blockchain. Each blockchain either opts for an existing virtual machine or develops its own, along with a tailored programming language and compiler that fits its requirements. In the case of Alephium, Alphred is designed specifically to accommodate the sUTXO architecture and is coded in Scala—the same language used for Alephium nodes.
Just like developers on the Ethereum Virtual Machine (EVM) program in Solidity, Alphred utilizes its own programming language called Ralph. Ralph is crafted specifically for the Alphred environment and takes advantage of the virtual machine's built-in features.
Compared to the EVM, Alphred offers an improved user experience and heightened security. In the EVM environment, user approval is needed for token transactions, which can be perplexing for newcomers. Conversely, Alphred eliminates this approval step by defining permissions at the function level, minimizing human errors and design flaws—such as the risk of inadvertently approving infinite token spending, a frequent pitfall in EVM applications.
EVM blockchains also frequently face MEV attacks. On Alephium, with each transaction navigating an Input/Output flow due to the UTXO model, executing complex MEV attacks necessitates multiple sequential transactions, amplifying the risks for those searching for MEV opportunities. Higher risks diminish the appeal of MEV attacks, resulting in their reduced occurrence on the Alephium blockchain.
Additionally, the UTXO component of the sUTXO model inhibits flash loans. This limitation arises because an output cannot be utilized until its transaction is disseminated throughout the network, meaning a loan cannot be taken and repaid in one transaction. By prohibiting flash loans, Alephium mitigates risks associated with exploits leveraging this function.
The sUXTO model also makes re-entrancy attacks impossible on Alephium as outputs must be validated before they can be reused again. Re-entrancy attacks are a common attack vector on Ethereum, with billions in losses attributed to this type of attack.
Finally, Alphred features built-in safeguards to prevent common errors and bugs. It also incorporates the Asset Permission System (APS) for additional verification, ensuring that submitted token transactions comply with smart contract regulations.
Source: Alephium Medium (Link)
Ralph Programming Language
As discussed earlier, Ralph is the smart contract programming language on Alephium. Ralph is a high-level programming language that is optimized for human readability. It is designed to be simple and straightforward, ensuring that there is usually a clear and correct way to complete a task, allowing code to remain clean and readable. Despite being a language designed specifically for Alephium, it takes inspiration from well-known languages such as Rust, making it easy for developers to pick up.
Sharding
Alephium utilizes sharding to further scale the blockchain to increase its throughput. Sharding enables transactions to be executed in parallel by dividing the blockchain’s transactions down into manageable, parallel chains known as “shards”.
This is managed through Alephium’s sharding algorithm, which is known as Blockflow. Blockflow uses a Directed Acyclic Graph (DAG) structure to split the network into two levels of sharding: Group Level Sharding and Transaction Level Sharding.
Group level sharding splits blockchain addresses into distinct groups, with the current addresses on the chain split into 4 groups, which can be scaled up to 32.
Transactions are processed on specific shards based on the groups they originate from and the groups which the transactions impact. Each shard either manages transactions within a group or between two groups.
Source: Alephium Medium (Link)
Blockflow therefore enables efficient parallel transaction execution without the need for multiple verifications across shards, which improves the user experience. Moreover, the DAG structure ensures a high level of security while ensuring high scalability across groups and shards. Blockflow is the critical element in Alephium’s architecture that enables it to achieve a theoretical throughput of 10,000 transactions per second.
Proof of Less Work
When it comes to block mining, Alephium leverages the Proof of Work (PoW) consensus mechanism designed by Bitcoin, but sought to reduce its energy consumption, which had long been a key criticism of the Bitcoin blockchain. As a result, Proof of Less Work (PoLW) was born.
This mechanism dynamically adjusts the mining difficulty for every new block and changes the mining schema whenever the network exceeds 1 exahash/s in hashrate. When this threshold is surpassed, a portion of the external cost is borne by burning ALPH tokens. This means that while mining the block still requires the same cost, it consumes significantly less energy, thereby reducing energy consumption without sacrificing the security of the network. Compared against the classic PoW mechanism, PoLW uses 87% less energy, assuming the same network conditions.
Rhone Upgrade
The Rhone Upgrade was Alephium’s second and latest network upgrade, which occurred in June 2024.
This upgrade reduced blocktimes from 64s to 16s as well as enabled gasless transactions, allowing users to make transactions without the need to hold the ALPH token. Block execution times on nodes were also improved by 80% with the upgrade.
Additionally, the Rhone upgrade reduced contract storage rent fees by 90%, making it much cheaper for developers to deploy new smart contracts on Alephium.
Finally, the upgrade also introduced new improvements for developers, including mapping which improves the storage and retrieval of data on the blockchain and multiple inheritance, which provides for better smart contract organization and code reusability.
Danube Upgrade
In 2025, Alephium looks to execute the Danube Upgrade, named after the second-longest river in Europe.
The Danube upgrade represents a significant leap forward in Alephium's user experience and performance. At its core, the upgrade reduces the network's block time from 16 to 8 seconds, enabling faster transaction confirmations. It also introduces PassKeys for streamlined user onboarding and eliminates the need for group management through groupless addresses, making the platform more accessible to mainstream users.
On the technical front, Danube brings major improvements to developer capabilities and network performance. The upgrade introduces new signature primitives including Secp256R1 and BLS signatures, expanding cross-chain possibilities and enhancing security options. Developers gain the ability to execute chained contract calls in TxScript, offering more sophisticated smart contract interactions. Additionally, the upgrade includes a complete overhaul of the syncing protocol, optimized transaction propagation and validation, and several refinements to the BlockFlow architecture, all working together to boost the network's overall efficiency.
Alephium Ecosystem
Since its mainnet launch in 2021, Alephium has steadily built a community of builders and decentralized applications. New users of the ecosystem can explore some of the best applications on Alephium via their ecosystem directory, Alphland.
Wallets
Every on-chain action begins in a wallet, and Alephium is no exception. Alephium’s official wallet comes in both desktop and mobile versions as well as a handy browser extension supported on both Chrome and Firefox.
Source: Alephium (Link)
Other notable wallets on Alephium include the OneKey, Ledger and Safepal.
Decentralized Exchanges
AYIN and Elexium are the top 2 DEXs on Alephium, making up the majority of the chain’s TVL. Despite Elexium’s higher TVL, AYIN sees significantly higher daily volumes, due to higher liquidity in critical liquidity pools such as the ALPH/USDT which generates almost one-third of AYIN’s daily volumes. Additionally, the ALPH/AYIN pool, which provides liquidity for AYIN’s governance token, also sees significant volume, making up a large percentage of AYIN’s daily DEX trading volumes.
Source: AYIN DEX (Link)
What makes Elexium special is that it is a ve(3,3) DEX, designed after the famous Solidly project from Andre Cronje in 2022. This introduces the game theory from the Olympus DAO project and the ve-tokenomics from Curve Finance, to align the incentives of token holders and liquidity providers.
Source: Elexium DEX (Link)
Launchpads
Alephium's main launchpad is AlphPad, which supports the launch of new tokens for upcoming projects on Alephium. AlphPad has completed ten IDOs so far, with some of their past launches including the Elexium DEX (EX) and upcoming stablecoin and lending platform, AlphBanX (ABX).
Source: AlphPad (Link)
NFTs and NFT Marketplaces
Like most chains, Alephium also boasts a variety of NFT projects and several NFT marketplaces for these NFTs to be traded. The top NFT marketplace on the chain are DeadRare and Alphaga, allowing users to list, purchase and mint new NFT collections on the platform. TIll date, DeadRare has processed over 180,000 ALPH in NFT trading volume. Alphaga is also a popular choice for NFT enjoyers, which is well known for being the first NFT marketplace on Alephium to introduce the auction mechanism.
Source: DeadRare (Link)
Upcoming Projects
Beyond the applications that are already live, many more are in development, preparing for their mainnet launch on Alephium. One such project is AlphBanX, an overcollateralized stablecoin project. AlphBanX seeks to use ALPH as collateral for their stablecoin, AlphBanX Dollars (ABD), at a collateralization ratio of 150%. Much like other crypto-backed stablecoins, as the price of ALPH falls, users will have their collateral liquidated by the protocol to ensure sufficient collateral backing the ABD stablecoin.
Alephium Tokenomics
Alephium’s native token is ALPH, which was launched alongside its mainnet launch on 8th November 2021. The ALPH token’s supply is currently capped at 1 billion tokens. 86% have been allocated to mining rewards, which is distributed to miners who secure the network. The allocation is expected to last for an estimated 80 years of operations from mainnet launch in 2021.
Mining rewards are computed based on the minimum between a time-based reward and a hashrate-based reward. The time-based reward is determined by the emission rate of the Alephium token, which gradually falls over time. The hashrate-based reward is dynamic and changes based on the network hashrate.
The remaining 140M tokens, or 14% of the maximum supply was minted with the Genesis blocks.
Of the 14%, 3% has been allocated to the Alephium treasury and the team, which are locked on-chain for three years and vested quarterly. Another 3% is allocated to the community and ecosystem development, which is similarly locked, but for four years and vested quarterly. The remaining 8% was allocated to the presale and future private sales. 62M tokens or 6.2% were sold and these tokens will be fully unlocked by 25th July 2025.
Source: Alephium Medium (Link)
Alephium possesses several deflationary forces 100% of all transaction fees are burnt in each block, reducing the supply of the token further over time. Additionally, the Proof of Less Work mechanism also results in ALPH token burn when the hash rate and energy consumption reach the threshold, further reducing the total token supply.
Conclusion
In conclusion, Alephium is an innovative and scalable L1 blockchain that builds on the successes of existing leading L1s, such as integrating Bitcoin’s UTXO model with Ethereum’s account-based system, resulting in a robust Stateful UTXO (sUTXO) architecture. Its custom-built Alphred virtual machine and Ralph programming language also provide a secure and developer-friendly environment for scalable smart contracts and applications to flourish.
Despite being a relatively young project, Alephium has consistently delivered on its roadmap commitments, implementing features that even larger blockchain projects still have in development. The ecosystem has established strong foundational infrastructure including bridges that enable major stablecoin integration, hardware wallet support, and oracle services. With over 40 live projects, a growing ecosystem, and a TVL exceeding $14.14 million, Alephium is well-positioned to capture a spot for itself alongside the other leading L1s in the space.
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