What Is Hedera Hashgraph (HBAR)?
Billed as the "trust layer of the internet," Hedera Hashgraph is a public network that allows individuals and businesses to create powerful decentralized applications (DApps).
It is designed to be a fairer, more efficient system that eliminates some of the limitations that older blockchain-based platforms face — such as slow performance and instability.
It was funded through an initial coin offering (ICO) in August 2018 and first launched open access to its mainnet just over a year later in September 2019. As part of the ICO, investors were able to purchase the platform’s native utility token (HBAR) at the lowest possible pricing.
The HBAR token has a dual role within the Hedera public network.
First and foremost, HBAR the fuel that powers Hedera services, such as smart contracts, file storage and regular transactions. Second, it's used to help secure the network, since HBAR users can stake their tokens to assist with maintaining the integrity of the platform.
Hashgraph has been described as a continuation or successor to the blockchain concept, which provides increased speed, fairness, low cost, and security constraints. The Hedera white paper co-authored by Baird explained that "at the end of each round, each node calculates the shared state after processing all transactions that were received in that round and before," and it "digitally signs a hash of that shared state, puts it in a transaction, and gossips it out to the community."
It has been claimed that hashgraphs are less technically constrained than blockchains proper. Cornell Professor Emin Gün Sirer notes that “The correctness of the entire Hashgraph protocol seems to hinge on every participant knowing and agreeing upon N, the total number of participants in the system,” which is "a difficult number to determine in an open distributed system.” Baird responded that “All of the nodes at a given time know how many nodes there are.” A hashgraph developer at the time noted that "...a node joining the network is a transaction like any other - it gets assigned a consensus timestamp, after which point all nodes now include it in consensus.
Who Are the Founders of Hedera Hashgraph?
Hedera Hashgraph has two founders: Dr. Leemon Baird and Mance Harmon.
Dr. Leemon Baird is credited as the investor of the hashgraph distributed consensus algorithm and currently works as Hedera's chief scientist.
Prior to founding Hedera Hashgraph, Baird accumulated more than a decade of experience in various computer science and security roles and previously worked as a senior research scientist at the Academy Center by Cyberspace Research. He also holds the position of co-founder and CTO at Swirlds Inc., a platform for building DApps.
On the other hand, Mance Harmon is Hedera’s CEO and an experienced technology executive and seasoned entrepreneur. Harmon has around two decades of experience holding executive roles at prominent firms — many of which are in the IT security industry. Like Dr. Leemon Baird, Mance Harmon also holds a second position at Swirlds Inc., as its co-founder and CEO.
In addition to the founders, the Hedera leadership team also comprises more than a dozen individuals, many of which have had distinguished careers.
How Does Hedera Hashgraph Work?
Hedera Hashgraph’s most unique feature is its data structure for grouping transactions called a hashgraph, which claims to process more transactions more cheaply than existing blockchains.
The Hashgraph is a patented algorithm where all nodes are constantly communicating their information with each other, and was originally designed for private use.
The Hedera Hashgraph is the first iteration of the algorithm that is used in a public network.
Hashgraph Consensus Service
To ensure all the computers in its distributed network agree on its transaction history, Hedera Hashgraph uses the Hashgraph consensus mechanism, powered by two types of nodes.
Consensus nodes determine transaction ordering and history, while mirror nodes relay this information to other stakeholders throughout the network.
By using a limited number of nodes to determine its history, the Hedera model ensures that the transactions won’t later be undone. This differs from how most traditional blockchains achieve consensus, in which the state of the blockchain is determined by users who propose blocks to be added to the chain in a market competition open to anyone.
As a result, Hedera Hashgraph claims to offer features that combine the advantages of both public and private blockchain networks.
Hedera Governance
Hedera Hashgraph is governed by a body known as the Hedera Governing Council, which is charged with running the consensus nodes that determine transaction ordering.
As of 2020, a total of 39 members sit on the council, including Google, IBM and Boeing. The council’s role is to manage the software, voting on changes, ensuring funds are allocated correctly and safeguarding the network’s legal status in various jurisdictions.
Of note is that space on the council is limited. Each member can have up to two consecutive three-year maximum terms. During this time, members have an equal vote on the network and platform decisions.
While the Governing Council members run mainnet nodes today, the Hedera team intends to open that up to anyone who wishes to operate nodes in the future.
What Makes Hedera Hashgraph Unique?
Unlike most other cryptocurrency platforms, Hedera Hashgraph isn’t built on top of a conventional blockchain. Instead, it introduces a completely novel type of distributed ledger technology known as a Hashgraph.
This technology allows it to improve upon many blockchain-based alternatives in several key areas, including speed, cost, and scalability. Hedera transactions have an average transaction fee of just $0.0001 USD and typically reach finality in under five seconds. Overall, Hedera Hashgraph claims it can handle more than 10,000 transactions per second (TPS) — compared to the around 5-20 for most popular proof-of-work (PoW)-based blockchains.
The platform offers several major network services. These include:
- A token service that allows users to easily configure and mint both fungible and non-fungible tokens (NFTs) on Hedera with just a few lines of code.
- A consensus service that acts as a layer of trust for any application or network that needs a secure, verifiable log of events.
- Smart contract tools that let developers build powerful and efficient decentralized applications.
- Decentralized file storage services with features include proof-of-deletion, controlled mutability, and time-based file expiry.
Why Does HBAR have Value?
The HBAR cryptocurrency is used to power the Hedera Hashgraph network, meaning users need to buy this asset to perform transactions and operate applications.
Of note for investors is that the supply of HBAR tokens is fixed at 50 billion, the entire supply of which was created when the network launched in 2018.
Some HBAR tokens will be distributed through a process called “proxy staking,” in which any HBAR holder will be able to lock their cryptocurrency in special contracts, allocating those funds to one of the approved nodes on the network
By staking HBAR with another node, users would gain the ability to earn a slice of the rewards and fees these computers receive from processing transactions on Hedera Hashgraph.
Lastly, the HBAR cryptocurrency is used to pay the transaction fees in the network.
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Cryptocurrency