Hedera Hashgraph is poised to be one of the most eagerly anticipated decentralized public ledgers in 2018. While Hedera is a decentralized public ledger, it is not based on the typical blockchain architecture. Instead, Hedera is built on the hashgraph consensus algorithm developed by Swirlds. Applications built on the Hedera platform do not require any license or any approval from Hedera. No license will be required to use or build smart contracts on the Hedera platform.
Oh yes, and Hedera promises no forking, and plans on undertaking a token sale in the near future.
Mance Harmon, co-founder and CEO of Swirlds, was in Singapore on 24 March 2018 to present a keynote on the Hedera Hashgraph. Mediumfork braved the afternoon storm that day to attend, and will now share with you the insights from that event.
Hashgraph – the engine of Hedera
If this is the first time you have heard of hashgraph, you should know that hashgraph is not new in the market. In fact, it was developed in 2016 and is currently being adopted in the credit union industry.
A patented decentralized public ledger technology, hashgraph is the only bank-grade consensus in the market. Hashgraph is a voting-based consensus that makes use of virtual voting to reduce the amount of bandwidth associated with votes and receipts required to process transactions. As a voting-based consensus, consensus timestamp for transactions is calculated through a voting process - there is no leader or miner given exclusive rights to determine consensus timestamp.
To replicate voting without actually sending votes over the network, hashgraph utilizes a gossip protocol. When Node A receives a transaction, Node A will choose a random node (Node B) and tell Node B all the information it knows. Node B will then repeat the process with another random node, and so on. The gossip protocol allows new information to be spread through the community of nodes quickly. As each node will have the same flow of information, any node can simply refer to the previous hash to infer the vote.
You should check out this useful information deck on hashgraph that has excellent detailed examples.
Apart from adopting the tried-and-tested hashgraph, Hedera has several features that makes it a potential game changer. Some of the key features of Hedera are summarized below:
Performance – Hedera is fast and is limited only by internet connection bandwidth. Hedera conducted tests on a variety of computers and the results are fascinating. Mance mentioned that the network can handle 100,000 transactions per second at latency in about 3.5 seconds. In comparison, Visa transactions need to be completed within 7 seconds at 2,000 transactions per second.
It is important to note that these figures are in relation to achieving consensus on transaction order and timestamps only. The digital signatures on the transactions still need to be verified – these require a huge amount of processing power. Mance explained that Hedera can now do one (1) million verifications per second.
Sharding – As the Hedera network grows, the nodes will be randomly grouped into multiple shards. Sharding allows increased performance as not every node needs to process every transaction. Nodes within a shard will contribute only to the consensus for transactions originating from that shard. Each shard and its members will maintain a queue of outgoing messages to and communicate with each of the other shards. Mance noted that nodes may be grouped into shards based on their resources (such as computing power and internet connection speed) to accommodate the needs of different clients. Transactions processed by high performance shards could be costlier as a result of market forces.
Security – Unlike blockchain, hashgraph is asynchronous Byzantine Fault Tolerant. In other words, no single node or group of nodes can prevent the community from reaching a consensus or change the consensus once it has been reached. This is however based on the assumption that more than 2/3 of the nodes are not malicious. To mitigate this, Mance explained that Hedera will retain 2/3 of the native token at the public launch of Hedera. Hedera will gradually release the tokens it holds when token distribution gets broader which makes it practically impossible for malicious actors to own 1/3 of the native token.
Governance – The governance model of Hedera is designed to mirror that of Visa. Up to 39 renowned enterprises and organisations will form the Hedera Hashgraph Council - the decision-making body of Hedera. To prevent centralization of control, each governing member will have equal governing rights and, with the exception of Swirlds, can only serve for a limited period. The governing members will elect a governing board and various sub-committees that provide oversight of Hedera operations. Governing members receive fees for their contribution to the network.
Staking and proxy staking – Hedera will use proof-of-stake. Nodes will be paid proportional to the amount of cryptocurrency in the node’s account. Apart from staking tokens owned by a node, a node can also stake coins proxied to it. The proxy staking mechanism allows a non-node person who owns coins to stake those coins and earn interest by “proxy staking” their account to a node.
More details on Hedera can be found in the whitepaper.
Token Sale and more
Yes, Hedera will be undertaking a token sale of the platform’s native token. Despite the apparent high level of interest in Hedera, there isn’t much publicly available information on the token sale for now. ICOdrops reports that US$18 million has been raised. Word in the market is that that Hedera is actively sourcing funds from accredited and institutional investors, with an intended token market capitalization exceeding USD 1 billion. The ICO fund-raising market has not been great in the recent months, perhaps investors are waiting for a credible and proven project like Hedera. Time will tell.