What is Hedera Hashgraph (HBAR) and how does it work? All you need to know

Hedera Hashgraph (HBAR) serves as the native currency for the Hedera network, which utilizes a different form of distributed ledger technology (DLT) called hashgraph. Unlike traditional blockchains, hashgraph offers decentralization, distribution, and security through hashing, while addressing the issue of low transaction speeds. With the ability to handle up to 10,000 transactions per second (TPS), Hedera surpasses first-generation blockchains in scalability and speed. Let's explore hashgraph technology and its potential applications in the cryptocurrency space.

What is Hedera Hashgraph (HBAR)?

HBAR serves as the native currency for the Hedera network, a distributed ledger technology (DLT) platform that operates differently from traditional blockchain networks like Bitcoin and Ethereum, despite serving similar purposes. Hedera employs hashgraph technology instead of blockchains, offering several advantages over traditional blockchain systems. Notably, hashgraph eliminates mining, leading to reduced environmental impact, with Hedera even being carbon negative. Additionally, Hedera boasts fixed transaction fees of $0.0001 per transaction, ensuring stability regardless of HBAR's price fluctuations. Moreover, hashgraph-based networks provide enhanced performance and higher processing capacity while maintaining security and anonymity features akin to blockchain-based ledgers.

Hedera stands as the sole DLT implementation based on the hashgraph algorithm, with HBAR being the sole hashgraph-based cryptocurrency. Despite being a pioneer in this field, Hedera provides comprehensive guidelines and source code examples for application programming interface (API) calls, facilitating developers in building their crypto projects on the Hedera network.

The Hedera network has garnered attention from major technology companies and investors due to its potential to deliver blockchain-like ledger benefits while overcoming scalability challenges. Notably, Hedera has formed partnerships with renowned companies like Boeing, Google, and IBM, which are members of the Hedera Governing Council.

Hedera Hashgraph (HBAR) token

HBAR boasts a circulating supply of 22.9 billion tokens, with a maximum supply capped at 50 billion. Currently, it holds a market capitalization of $1.4 billion, securing its position as the 37th largest cryptocurrency. Unlike other tokens, the issuance of HBAR does not require intricate cryptographic consensus mechanisms. The Hedera network minted the entire 50 billion token supply prior to the launch of its Mainnet in 2018.

The value of the HBAR token is multifaceted. Firstly, it serves as the utility token for the Hedera network. Participants engaged in validating network transactions as Proof-of-Stake (PoS) node operators are incentivized to utilize HBAR tokens. Additionally, validators receive rewards in HBAR tokens for securing the Hedera network.

Moreover, HBAR has garnered attention from crypto investors who anticipate its value appreciation as the Hedera network gains broader adoption. Furthermore, the network's adoption of the energy-efficient PoS mechanism, rather than the energy-intensive Proof-of-Work (PoW) model, has positioned it favorably to attract environmentally-conscious partners and investors.

Where can one purchase Hedera Hashgraph (HBAR)?

HBAR is available for trading on more than 50 cryptocurrency exchanges, such as Binance, HitBTC, KuCoin, Huobi Global, and Bybit. It's essential to conduct thorough research before investing in any cryptocurrency.

How does the Hedera Hashgraph work?

Hedera Hashgraph leverages the concept of directed acyclic graphs (DAGs) from graph theory. These DAGs facilitate the creation of data structures and flows that don't rely on previous states. When applied in a distributed ledger technology (DLT) network like Hedera, DAGs ensure the immutability of transactions once they are verified and included in the network.

Hedera utilizes these DAGs within its nodes (network validators) to implement an asynchronous Byzantine fault-tolerant (ABFT) consensus mechanism. This mechanism serves as an efficient alternative to the slower and resource-intensive cryptographic consensus methods employed by blockchain-based ledgers. Hedera asserts that the ABFT mechanism is more efficient, rational, and secure, enabling transactions to be included in the network with greater energy efficiency and cost-effectiveness.

With full support for smart contracts, Hedera has the potential to host decentralized applications (dApps). This capability allows developers to create apps that facilitate the transfer of value and assets without the need for intermediaries such as banks or brokers. By removing intermediaries, dApps built on Hedera can be more cost-effective, faster, and secure compared to traditional applications. The Hashgraph consensus and governance model underpinning Hedera contribute to its scalability, making it well-positioned to potentially become the first DAG-based DLT network to achieve widespread adoption.

Hashgraph consensus

Hedera Hashgraph operates on a proof-of-stake (PoS) model, utilizing an open-source hashgraph distributed consensus mechanism. Originally developed and patented by Dr. Leemon Baird, co-founder and former Chief Scientist of Hedera, the mechanism has since been made open source as of August 5, 2022. It boasts high efficiency in bandwidth usage and has the capacity to handle up to 10,000 transactions per second (TPS).

In contrast to first-generation proof-of-work (PoW) networks like Bitcoin, where a single miner selects the next block, hashgraph operates on a consensus mechanism where the community of nodes collectively decides on which transactions to include in the ledger. This is achieved through processes like gossip-about-gossip and governance voting, ensuring consensus on transaction legitimacy and timestamps. Once verified, transactions are recorded in the ledger with 100% finality.

Unlike blockchain-based ledgers that require blocks to be verified in a single, continuous chain, hashgraph adds each package of transactions to the ledger without discarding any. This approach is considered more efficient since all branches of the ledger are retained and interconnected, rather than being pruned like branches on a tree. Additionally, hashgraph does not face the risk of failure due to rapid transaction requests, as transactions are not discarded, eliminating the need for artificial mechanisms to regulate growth, as seen in blockchains.

Governance

Hedera Hashgraph operates under the governance of the Hedera Governing Council, which consists of 39 prominent organizations from diverse industries, such as Google, LG, and Boeing. This council is fully decentralized, with each member holding an equal vote on matters like software upgrades, network pricing, and treasury decisions. Additionally, council members have term limits and do not receive compensation from Hedera.

The council plays a crucial role in realizing Hedera's vision of a fully decentralized, impartial, and dependable governance structure for the long-term interests of the network. Each member bears partial ownership of the network as per the Hedera LLC agreement. Furthermore, the minutes of each council meeting are accessible within one month following the vote.

Hedera's governance framework significantly reduces the risk of ideological or personal conflicts affecting governance decisions, a common challenge faced by many public networks. To foster a robust developer community and ensure a roadmap driven by developers, users can submit proposals for features, functionalities, and standards through the Hedera Improvement Proposals (HIPs). These proposals are community-driven, evaluated and approved by the Hedera Governing Council, and implemented by a distributed team of project engineers.

Hashgraph Vs. Blockchain

Blockchain and hashgraph are both types of distributed ledger technologies (DLTs) utilized for securely recording and storing transaction data. Despite significant differences, as outlined in the comparison table below, they serve similar purposes. The key distinction lies in their consensus algorithms: blockchain typically relies on Proof of Work (PoW) or Proof of Stake (PoS), whereas hashgraph employs a consensus algorithm called gossip-about-gossip.

How is Hedera Hashgraph utilized?

Utilizing Hedera Hashgraph's network services offers diverse applications across various sectors. Whether you're a developer, startup, investor, or large corporation, you can anonymously leverage the network for a range of purposes:

• Payments: Enable secure, fast, and cost-effective peer-to-peer transactions using HBAR, stablecoins, and other tokens.
• Content authenticity: Verify and publicly validate the authenticity of personal documents, such as academic credentials.
• Central Bank Digital Currencies (CBDCs): Issue CBDCs for domestic or international remittance solutions.
• Audit logs: Build publicly auditable data logs for events like payments and IoT sensor data at a lower cost.
• Decentralized Finance (DeFi): Establish financial marketplaces, borrowing, and lending platforms using Solidity smart contracts, eliminating the need for intermediaries.
• Decentralized identity: Implement secure and anonymous decentralized identity solutions.
• NFTs: Create markets for the minting and trading of non-fungible tokens (NFTs).
• Permissioned Blockchain: Execute private transactions on permissioned blockchains like Hyperledger Fabric.
• Interoperability: Develop bridges that connect public and private networks to facilitate seamless value transfer between them.

In summary, HBAR serves as the cryptocurrency powering a distinctive network that addresses many of the limitations hindering the widespread adoption and effectiveness of blockchain-based DLT applications. The algorithms underpinning Hedera Hashgraph and HBAR represent innovative approaches that aim to overcome the shortcomings of blockchain technology. Nevertheless, as the network expands in terms of users and applications, potential downsides and inefficiencies in hashgraph technology may emerge and need to be addressed.