Hedera Hashgraph is a cryptocurrency platform that aims to enable anyone to conduct transactions and build applications.
However, the platform is managed by a group of businesses. In order to achieve this goal, Hedera Hashgraph has made certain design choices that distinguish it from other platforms.
Key Takeaways
- Hedera Hashgraph is a distributed ledger technology based on Hashgraph consensus.
- The Hedera network is run by a council of 39 global organizations that oversee the operation of the network and make decisions about its direction and development.
- HBAR is the native currency that secures the platform.
- Hedera Hashgraph offers several network services, including a distributed file system, a smart contract platform, as well as token creation and management.
The network allows for fast transactions using Hedera’s native token – HBAR, but only permits certain approved nodes to participate in determining transaction history.
Hedera is regarded as the most sustainable enterprise-grade public network for the decentralized economy. The network claims to achieve blazing-fast transaction speeds at incredibly low bandwidth consumption.
By limiting the number of nodes involved in important tasks such as timestamping and transaction ordering, Hedera Hashgraph is able to achieve finality quickly, reducing the chances that the state of transactions might be altered later. The Hedera team believes that this provides businesses with the assurance they need, as they can trust in the data when making decisions.
How does Hedera work?
A council of 39 multinational corporations from around the world governs the platform and the software. To reach consensus, network nodes on the Hashgraph “gossip” with each other and compare notes on the network’s transaction history rather than using mining.
As the nodes communicate with each other, they select a few “famous witnesses,”. These are events or transactions that tie to the nodes early in the process. The selected nodes then compare the gossip about these well-known witnesses in the majority of nodes.
The aim is to reach a point called “strongly seeing,” where two nodes can confidently predict the decision or outcome of a vote by a third node because they reach the same conclusion at multiple stages of the process.
In the future, Hedera plans to make mainnet nodes permissionless. This will enable more people to participate in the transaction verification process and protect the network from attacks.
The Hedera Hashgraph network consists of four main components or services that work together to enable value transfers, the creation and execution of smart contracts, file transfers, and more. These are:
- HBAR: A cryptocurrency used for enabling low-fee, customizable transactions on Hedera.
- Smart contracts: Used for automatically executing logic and building decentralized applications for a variety of use cases.
- File Service: For redundant, distributed file storage with granular controls, such as append and delete.
At its core, Hedera offers two network services: the Consensus Service (HCS) and Hedera Token Service (HTS).
- The HCS allows clients to send messages to the network to negotiate consensus timestamping and order. It also allows users to define privacy and access control.
- The HTS enables token creation and management and includes built-in tokenization capabilities.
Hashgraph
Hashgraph is the consensus mechanism that powers the Hedera network, setting it apart from other public distributed ledgers.
The consensus was developed in 2015 by Dr. Leemon Baird and is based on a DAG (direct acyclic graph). A few months later, Baird and his business partner, Mance Harmon, founded Swirlds, Inc. to develop and commercialize hashgraph for private implementations and to eventually use it to create a decentralized, fast, fair, and secure public distributed ledger with mainstream adoption, known as Hedera Hashgraph.
Hedera offers better performance than first and second-generation blockchains like Bitcoin and Ethereum. According to the Hedera website, a cryptocurrency transaction or Hedera Consensus Service message takes 3 to 5 seconds to finalize, and costs USD 0.0001 (paid in HBAR cryptocurrency). The network can handle up to 10,000 transactions per second. For comparison, Visa processes an average of 1,700 transactions per second, although it can handle more during peak demand. HBAR far exceeds even the highest transaction throughput requirements.
Hedera’s Consensus Algorithm
Hedera Hashgraph secures itself by an algorithm called asynchronous byzantine fault-tolerant consensus. It has been mathematically proven to provide optimal security for a distributed network.
This algorithm derives from the Byzantine Generals Problem. It’s a classic computer science exercise that involves four armies coordinating their efforts by sending messages, but some of which may be false messages sent by enemies impersonating reliable messengers.
The solution to this problem is the byzantine fault tolerance algorithm, which allows for a reliable solution despite the presence of false messages. This solution forms the basis of Hedera’s approach to validated transactions on a distributed open ledger.
Proof of Stake
Hedera’s ABFT consensus algorithm is a proof-of-stake (PoS) system in which stakeholders use a “gossip about gossip” protocol to verify and timestamp transactions. This is similar to the PoS algorithms used by blockchains like Ethereum. Users are eligible to become validators based on their HBAR holdings.
Validators earn fees in microtransactions for participating in the validation of HBAR transactions. Users who are not validators can stake their HBAR holdings with validators and receive a portion of the fees based on their contribution.
Hedera FAQ
Frequently asked questions about HBAR.
Who Are the Founders of HBAR?
The origin of Hedera Hashgraph traces back to American computer scientist Leemon Baird. Baird, a former professor of computer science at the United States Air Force Academy, developed the hashgraph distributed consensus algorithm that sits at the core of Hedera Hashgraph. In 2015, Baird co-founded Swirlds, a corporation that holds the patents for his hashgraph innovations and licenses the technology to customers who are building customized dApps for internal use in various industries.
In 2017, Baird co-founded HBAR, assembling a management team and securing key investors. The company publicly launched in March 2018 in front of a live audience in New York City and 50,000 live stream viewers, releasing the website, cryptocurrency, governing council, and whitepaper.
What makes HBAR unique?
Unlike many other cryptocurrency platforms, Hedera Hashgraph is not built on top of a traditional blockchain. Instead, the Hedera network utilizes a unique type of distributed ledger technology called a Hashgraph.
This technology allows Hedera Hashgraph to outperform other blockchain-based solutions in several important areas, such as speed, cost, and scalability. HBAR transactions have an average fee of just $0.0001 and typically achieve finality within five seconds. Overall, Hedera Hashgraph claims it can process over 10,000 transactions per second (TPS), in contrast to the 5-20 TPS of most popular proof-of-work (PoW) blockchains.
The platform offers several key network services, including:
- A token service that enables users to easily configure and create both fungible and non-fungible tokens (NFTs) on Hedera with just a few lines of code.
- A consensus service that serves as a layer of trust for any application or network that requires a secure, verifiable record of events.
- Smart contract tools that allow developers to build powerful and efficient decentralized applications.
- Decentralized file storage services with features such as proof-of-deletion, controlled mutability, and time-based file expiry.
How Is the HBAR Network Secured?
Hedera utilizes a unique version of proof-of-stake (PoS) that allows HBAR users to contribute their resources to secure the network. At present, all Hedera nodes are managed either by Hedera itself or the governing council members. The company has plans to transition to a permissionless system in the future.
The Hedera Hashgraph governing council currently includes Boeing, Deutsche Telekom, FIS WorldPay, Google, IBM, LG, Nomura, Tata Communications, and others.
Final Thoughts
The potential of crypto has no clear limits. Whether it’s institutional or retail, business or governmental, serious or full of jokes. The open-source nature is what enables all of this. Getting to build infrastructure on top of blockchain networks by simply paying them small fees enables anyone with a creative mind and the right skills to come up with any solution to a specific problem.
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