What Is Hedera (HBAR)?
|— Speed and scalability are two of the limitations faced by blockchain – and this is due to how transactions are processed.|
— Hedera is a distributed public network capable of performing the same tasks as blockchain, and doing so more efficiently. But there’s one key difference – Hedera is not a blockchain.
— Hedera network uses Hashgraph, an alternative system to blockchain that achieves autonomy and security via the innovative Hashgraph consensus algorithm.
— You can now secure and manage your HBAR seamlessly from your Ledger device, using Ledger Live and Hashpack
Hedera is the distributed ledger that doesn’t use a blockchain – and it’s just been supported within Ledger Live! Interested? You should be. Let’s take a deep dive into Hedera and its currency, HBAR.
You might think we’re blockchain junkies here at Ledger – and you’re not wrong. But block or no block, we always have a close eye on the wider crypto space.
When you strip back all the jargon, blockchain is just a distributed, digital ledger that enables transactions. What if we could achieve that same thing – faster, and cheaper and just as securely – in another way? We have news for you: This is the core value proposition of crypto network, Hedera and its coin, HBAR. In fact, it’s the first non-blockchain cryptocurrency to join the Ledger Ecosystem.
So what exactly is hashgraph consensus, why is it so special — and why should you care about it anyway? Buckle up, because today we’re taking a closer look at the Hedera network that uses a totally unique consensus mechanism, and what our recent integration of its native HBAR cryptocurrency means for you.
What is Hedera?
Hedera serves as the layer 1 network for a powerful ecosystem of NFT, DeFi, Privacy, and Sustainability-focused applications. The network supports EVM-based smart contracts, written in Solidity or Vyper, which allow the development of decentralized applications.
But there’s a bit more to it than that.
To understand the Hedera ecosystem, it’s important to note that it’s not a blockchain. Instead, it’s something called a hashgraph. But what is that exactly and why do we even need it in the first place?
The Limitations of Blockchains
Blockchain is probably the most important technological innovation of our generation. It single-handedly disrupted the centralized financial system, not to mention bringing an entire ecosystem of new options and services. But despite its audacious entrance, blockchain is not without its faults.
Blockchains are slow and expensive
No matter which network you’re using, the mechanics of blockchain make it cumbersome, slow and often expensive to use. This is largely down to the way it processes transactions.
They operate by putting bundles of incoming data into blocks, and adding those blocks to the official “chain” when they’ve been verified. . But this makes for slow transaction times, as each block waits to be confirmed by a majority of nodes before being added.
Blockchains Often Prioritize Their Richest Participants
Beyond that, it also prioritizes participants willing to pay higher fees. This quickly pushes up the cost of the whole network, and leads to favourable treatment for those paying more.
So in short, despite performing well as a secure, distributed ledger, the structure of blockchain means it suffers from inefficiencies and flaws. This led developers to search, not just for improvements and iterations, but for entirely different systems that might offer an alternative. Enter Hedera with Hashgraph consensus.
Hashgraph Vs Blockchain: What’s The Difference?
Hashgraph is an alternative system to blockchain. It takes the task of managing a distributed ledger securely, and tackles it in a completely different way. Firstly, the Hashgraph system reaches consensus extremely efficiently, using something called gossip-about-gossip protocol, and virtual voting.
As you may already know, blockchain nodes need to agree on the validity of incoming transactions, and they do this by checking new blocks against the network’s transaction history – that’s no mean feat, considering the history is constantly growing.
But Hashgraph adopts a different approach. For each new transaction on Hedera, any node in the network can receive the incoming information directly. From there, it ‘gossips’ the transaction to another node, who then sends it to another, and so forth. This process goes on for every transaction — coming to consensus once ⅔ of the network nodes have received this information.
The history of how these events are related to each other through their parent hashes is called gossip about gossip. This history expresses itself as a type of directed acyclic graph (DAG), a graph of hashes, or a hashgraph. The hashgraph records the history of how members communicated. All members keep a local copy of the hashgraph which continues to update as members sync with one another.
The hashgraph algorithm does not require any votes to be sent across the network to calculate the votes of each member. Members can calculate every other member’s votes by internally looking at each of their copies of the hashgraph and applying the virtual voting algorithm.
You can learn more technical details about hashgraph in this presentation by Hedera Co-Founder and inventor of hashgraph consensus, Dr. Leemon Baird.
Hedera’s Unique Features
So now you know what hashgraph is, but what about what it means for the Hedera ecosystem?
Hedera’s main technical differentiation for users is faster, cheaper transactions. To give an idea of scale, the Bitcoin blockchain can currently process around 7 transactions per second with finality on those transactions in 30+ minutes. Hedera, on the other hand, has a capacity of 10,000 transactions per second (throttled) and reaches finality of consensus on those transactions in 3-5 seconds. This means the network’s potential to be scaled and offer real-time application experiences is far greater than many blockchains.
In addition, its governing model is unique — the network is open source, and built by members of the developer community through core contributors implementing Hedera Improvement Proposals (HIPs) but governed by a fully decentralized body of up to 39 global organizations. These organizations are called the Hedera Governing Council and includes web3 projects, such as Chainlink Labs, enterprise organizations, such as Google, LG Electronics and Shinhan Bank. It even contains universities, such as University College London.
What Is HBAR?
Hedera offers similar utility to Ethereum, with more advanced functionalities at a lower operational cost. Of course, HBAR serves as the fuel that powers the ecosystem: Users pay a small, fixed transaction fee based in USD, and paid in $HBAR. And because Hedera is a proof-of-stake network, HBAR holders can stake their HBAR to network nodes to contribute to the network’s security and earn rewards.
The Hedera Ecosystem
Hedera also offers services native to the network. The Token and Consensus services are seamlessly integrated into Smart Contracts for full programmability. The Token service allows you to mint fungible and non-fungible tokens that map to interoperable ERC-20, 731, & 1155 standards. Furthermore, it also lets you perform configuration, like royalty fees, in just a few lines of code.
To follow, the Consensus Service lets you stream data quickly and inexpensively to the ledger. Also, it includes native consensus timestamps for every transaction. This supports auditing, supply chain, and IoT applications that require high-throughput use cases with fair ordering.
Hedera and HBAR: The Future of Hashgraph?
If you like the sound of what Hedera is doing, we have great news for you. You can buy HBAR and even sell and manage your coins from the security of your Hedera wallet in the Ledger Ecosystem.
How do you do that? Simply create an account in Hashpack and import it into Ledger Live. From there, you’ll be able to manage your HBAR with ease.
Distributed ledger technology has already disrupted the way we manage value, relationships and information. Even now, that technology is constantly evolving to bring you new options. As the space grows, Ledger is here to inform you about the most important new arrivals. And of course, Ledger also helps you secure crypto assets using crypto platforms yourself.
So keep on learning! When it comes to getting the most out of the crypto space, knowledge is power!
If all this talk of hashgraph has left your brain feeling fried, we have just the tonic for you – let’s take a step back and talk blockchain basics, before you continue your crypto exploration. Thanks, School of Block!