Hedera Hashgraph: a «foundation» for payment services

    27 Sep 2021

    You don’t often see this technology featured in crypto news. But it works and allows you to create quite efficient distributed services, especially when it comes to payment systems.

    It was recently revealed that the USDC token, previously launched on Ethereum, Algorand, Stellar, and Solana, would soon also be available on Avalanche, Celo, Flow, Hedera, Kava, Nervos, Polkadot, Stacks, Tezos, and Tron. Of all mentioned on this list, Hedera Hashgraph deserves a closer look. It is a blockchain platform specifically designed to run decentralized applications. The HBAR token is used as “fuel” within the network, capable of conducting up to 10,000 transactions per second with a $ 0.0001 commission per transfer. This is not the highest throughput of all modern blockchains, but it fully meets the payment services’ requirements.

    The Hedera Hashgraph project was founded by Dr. Leemon Baird and Mance Harmon. Prior to joining the project, Dr. Lemon Baird had spent over ten years working in various IT industries (including cybersecurity) and as a senior research scientist at Cyberspace Research Academy Center before that. He is also the co-founder and CTO of Swirlds Inc., a DApp-building platform. In the crypto community, Lemon Baird is known as an investor in Hashgraph distributed consensus algorithm and Chief Scientist at Hedera.

    In turn, Mans Harmon (Hedera CEO) has more than twenty years of experience holding leading positions in renowned IT companies. Like Dr. Lemon Baird, Harmon also works in Swirlds Inc. as a co-founder and CEO.

    Notably, when Hedera Hashgraph was just being created as a corporate blockchain network project in 2018, its Governing Council included such corporations as the aerospace company Boeing, FIS Global, Tata Communications, Nomura Holdings, IBM, and others. Even before the launch of the testnet, all of them had put up $ 124 million in three rounds of fundraising through Hedera selling simple agreements for future native HBAR tokens. After the start of the main network, the Council members were able to join it as nodes and use the Hedera consensus service to connect their closed networks to public ones.

    From the outset, the project has also been supported by two large American associations, uniting a total of 6,000 banks – the Credit Union National Association (CUNA) and the Mountain West Credit Union Association (MWCUA).

    The creators have always presented Hedera Hashgraph as the “trust layer of the internet”. In essence, it is a public network that allows individuals and companies to build powerful decentralized applications (DApps). Primary features include smart contracts, file storage in a distributed network, micropayments, and the ability to connect private and public networks.

    Hedera Hashgraph was supposed to be a fairer and more efficient system, capable of overcoming some of the limitations faced by early blockchain platforms, such as poor performance and volatility. It is due to a new type of distributed ledger technology known as Hashgraph, which Hedera uses instead of the standard blockchain. In this distributed ledger with a decentralized system, information is recorded non-linearly rather than as a precise chain of blocks sequence. Hashgraph utilizes a directed acyclic graph (DAG) to store data. Simply put, the technology keeps information in blocks, randomly distributing it among users’ devices and periodically switching them.

    The Hedera Hashgraph developers claim that their network can process more than 10 thousand transactions per second (TPS) – compared to 5-20 TPS for the most popular proof-of-work (PoW) blockchains.

    There is also a new consensus system known as the Hashgraph consensus used to keep the network secure. The system achieves asynchronous Byzantine Fault Tolerance (ABFT) – that is, it can guarantee both timing and order of transactions, even if some data is delayed or lost.

    The constantly changing project Governing Council is made up of 39 organizations across 11 different industries. They manage the Hedera codebase, vote on platform-related decisions, and operate the seed nodes on the Hedera public network.

    Hedera uses a type of PoS algorithm that allows HBAR token holders to stake their assets for network protection. At this point, all Hedera nodes are managed either by Hedera itself or by the Council members, but there is a planned move to a permissionless system in the future.

    The HBAR token supports Hedera services such as smart contracts, file storage, and recurring transactions. And as was already mentioned, HBAR users can also stake their tokens to maintain the platform’s integrity.

    The full offering of Hedera Hashgraph tokens is 50 billion, of which 9.63 billion have been put into circulation so far. The HBAR capitalization is currently $ 2.46 billion at $ 0.255 per token. Both project founders own a 2 billion HBAR coin grant (4% of the total). Other top Hedera executives (those who joined before 2018) have grants ranging from 250 million to 300 million coins.

    Nothing in the world, however, is perfect, and Hedera Hashgraph is no exception. Critics of the project point out that the network nodes cannot maintain a copy of the blockchain, which is stored separately, and the blockchain code is patented and closed. It makes it so that third-party auditors cannot verify the code, which they have to trust blindly. As a result, it is difficult to judge the prospects of Hedera Hashgraph. On the one hand, the company has strong support from big business. On the other hand, other new blockchain projects (such as Solana) provide equal performance and are optimized for the DeFi requirements. At the same time, they have open source and large communities of independent developers.

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