What is Hedera (HBAR)?

Hedera hashgraph is a distributed ledger system launched in July 2017.

Note : "Hedera hashgraph is NOT a blockchain"

Instead, it is a distributed ledger that is less about blocks and more about graphs.

Hashgraphs to be specific, just like its name.

The hashgraph is based on a technology known as the DAG (Directed Acyclic Graph). This is a mathematical way of representing the order of activities using a graph. The technology allows Hedera to have faster transaction speeds and low fees.

Hedera has four core features which include:

• Consensus- Fast, fair and secure consensus.

• HBAR- The token that allows low fees and easy transactions.

• Smart Contracts- to build decentralized applications

• File Storage- decentralized way of storing information

Key Points

• Hedera hashgraph is a distributed ledger which uses hashgraph technology instead of a blockchain.

• Hedera uses a method called “gossiping” as a consensus mechanism

• Hedera has well-known partners backing their network like Google and Boeing.

What Is A Hashgraph?

The hashgraph is an alternative system to the blockchain that operates in a graph format rather than blocks and links. It relies on a protocol known as Gossip about Gossip and virtual voting as a consensus mechanism.

Gossip about Gossip

Just like gossiping, the system works by having one node randomly conveying a message to another node until all the nodes in the network have received the message.

This helps the message get distributed with the least amount of energy possible and makes the whole network more efficient.

We can even estimate the time when the message was received by the nodes using the median time value.

As the message travels from one node to another, it creates lines which eventually look like a graph that is built as the timeline increases.

Information such as the signature, time stamps, transaction infor and two hashes are embedded within the hashgraph providing a snapshot of the transaction that occurred.

Virtual Voting

Gossiping allows all the nodes to become aware of the message. Thus, each node is also aware that the other nodes have the message. They can also predict when the nodes would vote which allows virtual voting with zero communication.

It’s like knowing what someone else would vote for so why communicate? This makes things more seamless within the network.

Blockchain VS Hashgraph

Bitcoin was the digital currency that introduced the concept of blockchain. Hedera hashgraph is looking to challenge the current leading distributed ledger system with the hashgraph.

There are several differentiators between a blockchain and a hashgraph:

Copyright

The hashgraph network is patented by the company that patented the network which is Swirlds.

When it was launched, the network was closed-sourced. Hedera was only open-reviewed.

This meant that the code could be used for reviewing, compiling and testing but not to be forked or improvised.

Blockchain is an open-source network which means anyone could fork or copy the code and make it better.

Consensus Mechanism

With hashgraph, the consensus mechanism is virtual voting which occurs after

gossiping. The process is efficient and takes less energy than a commonly used consensus mechanism in blockchain like Proof-of-Work.

It also has an energy efficiency that’s 885,000 times higher than that of Bitcoin. Every user burns just 0.001 kilowatt-hours of energy per transaction.

In comparison, transactions in Bitcoin consume 885 kWh of energy.

This could be why Hedera is often quoted to be carbon-negative.

Speed

The typical blockchain is able to conduct 7 to 50,000 transactions per second. This depends on its consensus mechanism and network.

hashgraph claims to be able to perform up to 10,000 transactions per second which would be incredible if proven.

Decentralization

It is said that blockchain is more decentralized as regular people can become nodes or miners and participate in the verification process.

However, with the hashgraph system, there are only 39 members that could participate as nodes and these are generally large partners consisting of companies like Google, Boeing and IBM.

This calls for criticism because it eliminates regular people from having the chance of participating as a node.

Big Players Behind Hedera

The way Hedera’s network works is that they have a maximum of only 39 members who run the network governance. These members will consist of global organizations that each have a 2.6% influence on decision-making.

Thus, they have the backing of huge brands. Since their conception, they have established partnerships with huge firms and institutions like LG, University College London, Standard Bank and even Google. These companies run nodes and help run the network governance.

While regular folks can’t participate as a node, we can still table our suggestions for the committee to review.

However, they may open up the chance for users to operate nodes in the future.

HBAR And Its Uses

The HBAR token helps run the hashgraph network. To perform transactions and operate applications, it’s vital to have the token on hand. Currently the token supply is at fifty billion which is relatively low.

HBAR tokens can be staked using “proxy staking” where they can lock up their tokens in a special contract that allows them to allocate funds to a node. From this, they can get a share of the rewards when transactions are processed by the node.

HBAR is also used for payment in transaction fees.

The Genius Who Challenged Blockchain

Dr Leeman Baird is a computer scientist who founded the hashgraph. He has over twenty years of experience being a senior scientist as well as establishing tech startups.

Currently, Dr. Leeman is the co-founder of Swirlds, the company that owns the patent for the hashgraph.

Dr. Leeman is a perfect example of a scientist who also has business acumen.

A perfect blend of both.

How Is The Hashgraph Used In Real Life?

Hedera hashgraph is one of those projects that have a ton of real-use cases which says a lot about the potential and viability of the hashgraph. Some of those applications include:

1. Sagewise

Sagewise is building a smart contract that helps manage other smart contracts. When a contract is disputed, the two parties can freeze the contract until the dispute is resolved. In short, it helps deal with errors and conflicts within smart contracts.

2. hearo.fm

This dApp allows music artists to sell and display their music directly to their consumers using a decentralized platform. hashgraph is great for this as it is the only network that allows micropayments for streaming music

3. Alto.io

Alto is a gaming platform that allows users to sell, mint and use their crypto stuff. They let users create games that could use NFTs (Non-Fungible Tokens) that could be an asset to the user.

These are just a few of the many use cases of the hashgraph network. You can dive into the rabbit hole of more applications at the Hedera hashgraph website.

The Pros And Cons Of Hedera

Just like any other network, there’s always pros and cons to its uses.

The Good

1. Fast transactions and low fees when compared to well-known blockchains like Bitcoin and Ethereum.

2. Excellent for institutions and enterprises that value carbon efficiency.

3. First secure, scalable and fair network.

4. Backed by well-known global partners.

5. Has a high level of security on all networks.

The Bad

1. Can handle only ten transactions per second for smart contracts.

2. Still an entry-level project and not as well-known as blockchain.

3. More centralized than blockchain due to its no-fork policy.

4. Currently governed by a 39-member council of only industry giants.

Final Thoughts on Hedera

Hedera is a unique network, one of its kind actually. While Hedera is definitely cutting edge and better than blockchain in some ways, it does have work to do. One of its biggest downfalls is centralization and this is something the team has said they will be working on.

There is some confidence that the network is going to take off quite well because it is currently backed by large industry players. Investing in HBAR is still a risk due to its volatility and small popularity. However, if you believe hashgraph is the next blockchain, it might be worth considering.