What is Hedera Hashgraph? (HBAR)

The Beginner’s Guide

Hedera Hashgraph is a cryptocurrency network seeking to serve as a platform on which anyone can transact and deploy applications, but where a group of businesses oversee the software.

Toward this goal, Hedera makes notable design trade-offs differentiating it from other platforms. For example, the network supports high transaction speeds for its HBAR cryptocurrency, but allows only approved nodes to participate in determining transaction history.

By restricting the number of nodes involved in key functions like timestamping and transaction ordering, Hedera Hashgraph is able to quickly achieve finality, reducing the likelihood changes to the state of transactions might later be made.

The Hedera team argues this gives businesses a needed guarantee, as they can be confident when making decisions based on this data.

As of 2020, there appears to be traction for the idea, as the model has succeeded in attracting dozens of big companies such as LG, IBM and Boeing to act as nodes within the network.

For more information on the project, you can bookmark its official blog, which includes updates on the status of its network and evolving technology.

What is hedera hashgraph hbar

Who Created Hedera Hashgraph?

Hedera Hashgraph was created by Leemon Baird, a computer scientist, and Mance Harmon, a technology executive. Together, Baird and Harmon formed a company called Swirlds in 2015.

Swirlds, in turn, spun out an entity called Hedera, which was renamed Hedera Hashgraph, to develop and govern a live network, Hedera, using its technology.

Since 2018, Hedera Hashgraph has raised $124 million from sales of its HBAR cryptocurrency through a simple agreement for future tokens offering (SAFT).

Launched as a private network, Hedera Hashgraph plans to gradually allow more entities to join the network until it is finally made public at a later date.

How Does Hedera Hashgraph Work?

Hedera Hashgraph’s most unique feature is its data structure for grouping transactions called a hashgraph, which claims to process more transactions more cheaply than existing blockchains.

The Hashgraph is a patented algorithm where all nodes are constantly communicating their information with each other, and was originally designed for private use.

The Hedera Hashgraph is the first iteration of the algorithm that is used in a public network.

Hashgraph Consensus Service

To ensure all the computers in its distributed network agree on its transaction history, Hedera Hashgraph uses the Hashgraph consensus mechanism, powered by two types of nodes.

Consensus nodes determine transaction ordering and history, while mirror nodes relay this information to other stakeholders throughout the network.

By using a limited number of nodes to determine its history, the Hedera model ensures that the transactions won’t later be undone. This differs from how most traditional blockchains achieve consensus, in which the state of the blockchain is determined by users who propose blocks to be added to the chain in a market competition open to anyone.

As a result, Hedera Hashgraph claims to offer features that combine the advantages of both public and private blockchain networks.

Hedera Governance

Hedera Hashgraph is governed by a body known as the Hedera Governing Council, which is charged with running the consensus nodes that determine transaction ordering.

As of 2020, a total of 39 members sit on the council, including Google, IBM and Boeing. The council’s role is to manage the software, voting on changes, ensuring funds are allocated correctly and safeguarding the network’s legal status in various jurisdictions.

Of note is that space on the council is limited. Each member can have up to two consecutive three-year maximum terms. During this time, members have an equal vote on the network and platform decisions.

While the Governing Council members run mainnet nodes today, the Hedera team intends to open that up to anyone who wishes to operate nodes in the future.

Why Does HBAR have Value?

The HBAR cryptocurrency is used to power the Hedera Hashgraph network, meaning users need to buy this asset to perform transactions and operate applications.

Of note for investors is that the supply of HBAR tokens is fixed at 50 billion, the entire supply of which was created when the network launched in 2018.

Some HBAR tokens will be distributed through a process called “proxy staking,” in which any HBAR holder will be able to lock their cryptocurrency in special contracts, allocating those funds to one of the approved nodes on the network

By staking HBAR with another node, users would gain the ability to earn a slice of the rewards and fees these computers receive from processing transactions on Hedera Hashgraph.

Lastly, the HBAR cryptocurrency is used to pay the transaction fees in the network.

Why Use HBAR?

Hedera Hashgraph may be of interest should you believe its design offers a more secure, stable and efficient platform on which major companies can build blockchain applications.

However, Hedera is not alone in seeking to build a software it believes will entice corporations, with Ethereum (ETH), Algorand (ALGO), Ripple (XRP) and others also competing in this market.

Of interest for investors is that owners of the HBAR token can gain exposure to the transaction fees and rewards offered by the network, which may grow in value with use and demand.