What is Hedera Hashgraph? HBAR Review (2024 Updated)
https://www.youtube.com/watch?v=5gqfUx9wgoI
Transcript:
Imagine Hedera as a public network, much like the internet or those blockchain systems we discussed before. But instead of relying on blocks, Hedera leverages a cutting-edge technology called Hashgraph. This approach to data management is like a fresh take on how things are verified, using a system called proof-of-stake to reach consensus.
I know that might sound like a mouthful, but don’t worry. By the end of this video, you’ll have a clear understanding of what it all means. Welcome to Whiteboard Invest, your number one go-to source for clear and concise investing knowledge explanation. Here, we break down complex financial concepts using a simple whiteboard format, making learning about investing accessible to everyone.
In this video, we’ll be diving deep into Hedera Hashgraph. We’ll explore what it does, how its HBAR token functions, and meet the minds behind its development. By unpacking these elements, including the tokenomics, we’ll equip you to make informed predictions about its future. Let’s hit the ground running.
The internet, like a giant public forum, allows anyone to contribute and share information freely. Most folks have a general grasp that the internet is essentially a platform for exchanging information. The inner workings of the internet might be a mystery to most users, and that’s perfectly fine. After all, you don’t need to be a mechanic to drive a car.
Just like enjoying a smooth ride, using the Internet doesn’t require a deep dive into its complex mechanisms. The Internet wasn’t always this user-friendly content creation platform. Thankfully, technological advancements have paved the way for smoother and easier building and sharing online. Hedera is crafting a set of tools aimed at simplifying the process of building on a novel type of decentralized network known as Hashgraphs.
So this brings us to the first big question, what is a Hashgraph? Delving into Hedera’s functionalities requires a grasp of Hashgraphs, the underlying information sharing technology that powers Hedera’s operations. For those acquainted with blockchains, you might be aware of the so-called blockchain trilemma, a conundrum involving decentralization, security, and scalability.
The blockchain trilemma essentially highlights the inherent challenge for blockchains to excel in all three aspects simultaneously. Typically, a blockchain can optimize two of these aspects at best, leaving the third one compromised. Hashgraph technology, however, claims to circumvent this trilemma.
Unlike blockchains, Hedera utilizes a unique technology called a directed acyclic graph, DAG, to order transactions on the network. This distinct approach supposedly allows them to achieve all three aspects of the trilemma. The inner workings might be intricate, but for those familiar with IOTA, Hedera shares some similarities.
Similar to proof-of-stake blockchains, Hedera leverages a network of nodes that anyone can participate in by running a node, contributing to the overall health of the network. By now you might be scratching your head. leverages a network of nodes that anyone can participate in by running a node, contributing to the overall health of the network. By now you might be scratching your head.
What exactly is a node? In simpler terms, a node is a software program that resides on a computer and is responsible for storing and updating both the network’s transaction history, the ledger, and its current state. So theoretically even you could contribute to the network by running your own node. Now the magic of Hashgraph lies in its ability to ensure every occurrence on the network, be it a transaction, a message, a smart contract, or any other form of data exchange, finds its way into the ledger. Each event recorded on the Hashgraph ledger
carries four crucial pieces of information. A timestamp, pinpointing the exact moment the transaction entered the ledger. The transaction details, the specific nature of the transaction itself. A unique fingerprint of the previous message. This fingerprint, called a hash, acts like a digital signature for the most recent message created by the node.
Another fingerprint, similar to the previous one, this hash identifies the latest message from the node that relayed the current transaction. These four elements work together to create a secure and transparent record of everything happening on the Hashgraph network. To simplify things, let’s imagine a phone call as an event on the Hashgraph. When you call your friend, the phone logs the time you receive the call.
During the call, you might tell them about a cool new video game you bought, transaction content. You might also mention you called your brother earlier to share the same news, linking to previous event. Just like this phone call analogy, every event on the Hashgraph ledger captures four key details – the time it happened, the content itself, and references to past events that tie everything together.
In essence, a Hashgraph operates like a meticulous record keeper, meticulously tracking all the information exchanged between each participant or node on the network. It maintains a comprehensive history of every message sent and received, ensuring that no event goes unnoticed.
This is essentially what a hashgraph does, but imagine there’s a little privacy involved. It tracks all the information for each person, or node, they interact with. So, let’s say you call your friend, just like before. The hashgraph logs the call, timestamp, and the content. You mentioning the new video game. But instead of mentioning you called your brother first, you might tell a white lie and say it was your sister.
Modified transaction content. The hashgraph would still record who you actually interacted with, your sister, but it wouldn’t expose the details of your conversation or the identity of the person you might be trying to keep private. This becomes a real sticking point, especially when dealing with money.
Imagine you’re trying to snag that limited edition sneaker online, but someone else swoops in and claims they bought it first. How do you know who’s telling the truth? Now, the beauty of the hashgraph lies in preventing that sneaker snafu. Here’s why.
Your sister, whoever she talks to next everyone they all get the same information each message carries a timestamp acting like a receipt this timestamp proves your call with your sister happened before you or she spoke to anyone else essentially every person on the network just like everyone in our phone call example receives a copy of these events This ensures everyone has the exact same information, eliminating any confusion about who gets the limited edition kicks.
While Hashgraph shares some similarities with blockchain, there’s a key difference. Unlike blockchains, Hashgraph keeps the actual content of messages under wraps. It uses a technique called hashing, which scrambles the message content into a unique code.
This way, everyone on the network knows a message happened, like seeing a call log, but they can’t decipher the details of the conversation itself, like the content of the call. This adds an extra layer of privacy to the network. We mentioned IOTA uses a similar technology called a DAG. Remember how I explained everyone gets a copy of events on a hash graph? IOTA takes a different approach.
They rely on a central figure called a coordinator to verify transactions and ensure there’s one smooth flow of information. Now, this coordinator is a bit of a hot topic. Some say it makes IOTA less decentralized than a true dream team. It’s like having a referee on the field, making sure things run smoothly, but some folks prefer a completely player-run game.
Hedera tackles this similar challenge with a twist. They call it the gossip protocol. Imagine a network of friends constantly buzzing with the latest news, just like middle school gossip. That’s essentially how Hedera’s nodes operate. Each node shares transaction data with others, spreading information throughout the network just like juicy gossip flies through the hallways.
This constant communication ensures everyone stays on the same page and prevents any misinformation from taking hold. All this juicy gossip gets scrambled into secret codes, similar to how we might whisper secrets in middle school. These codes are called hashes, and the way they’re connected forms a special kind of network, a directed acyclic graph. DAG for short.
That’s why Hedera cleverly named their system Hashgraph. It perfectly captures the essence. A network of whispers, hashes, forming a connected structure, graph. But what about those pesky lies and manipulations that could potentially spread like wildfire through this gossip network. Can Hedera handle fraudulent transactions or misleading gossip? Fun fact, in Hedera’s gossip world, only two-thirds of the nodes need to agree on the information for transactions to keep flowing smoothly.
That’s different from blockchains, where a whopping 51% majority needs to be on the same page. This 51% number is a big deal in crypto circles because folks worry about bad actors taking over the network. Luckily, no one’s managed to pull off a 51% attack yet. Now, let’s shift gears and meet the minds behind Hedera Hashgraph.
It’s not just a fancy technology. It’s a company headquartered in Dallas, Texas. The story starts with Lehman Baird, the genius who invented Hashgraph, and his partner in crime, Mance Harmon. Together, they brought Hedera Hashgraph to life. As I mentioned earlier, Hedera isn’t just the brainchild of two individuals. It’s a collective effort backed by 39 impressive entities. You might recognize some of these big names.
Google, Boeing, IBM, LG, and Ubisoft are just a few. These heavyweights have joined forces to support Hedera’s vision, bringing together their expertise and resources to fuel its growth. Unlike some shadowy organizations, Hedera operates with complete transparency. The board of directors and management team are all doxxed, meaning all their information is readily available for anyone to check out. No anonymity here. They play it straight up.
Hedera’s mission is crystal clear, to empower developers worldwide. They’ve built a toolbox of services on their core Hashgraph network, making it a breeze for anyone to create applications. Their goal? To fling open the doors and make this powerful technology accessible to everyone, everywhere. Hedera throws down the gauntlet at blockchain. They believe it’s too sluggish, too complex, and simply not secure enough for widespread use.
Hey, whether you agree with that critique is a whole other story. In their eyes, Hashgraph technology is the answer, offering the speed and security that blockchain seems to lack. Hedera’s services are like a magic wand, simplifying the use of their Hashgraph technology. They’re all about making it easy for anyone to jump in and start building on their network.
Hedera offers a developer toolkit with three key services. The Consensus Service. This acts like a digital notary public, permanently recording and ordering messages on the Hashgraph with timestamps. The Smart Contract Service This is a developer’s dream come true. It lets them build programs using familiar solidity code, making it easy to create powerful applications on the Hedera network.
The Token Service This service is all about transactions. It empowers applications to seamlessly handle all their financial interactions within the Hedera ecosystem. Hedera’s services are like a public park, open to everyone. You don’t have to be a tech guru or own a fancy computer to use them, and even if you wanted to run your own node, which isn’t possible yet, you wouldn’t need to.
Hedera is already buzzing with activity. Hundreds of applications are up and running, from dApps, decentralized applications, to cutting-edge stuff like stablecoins, decentralized exchanges, and even NFT marketplaces. The developer scene is hot, with some folks even building games on the platform. A major perk of Hedera’s EVM, Ethereum Virtual Machine Compatibility, is that it makes it a breeze to port Ethereum-based applications over to the Hedera network. This opens up a world of possibilities, allowing developers to leverage
the power of Hedera’s superior speed and security without starting from scratch. The HBAR token is the lifeblood of the Hedera network, powering both transactions and network security. It’s like the digital fuel that keeps things running smoothly. Users pay transaction fees in HBAR and those fees are then distributed to the network’s node operators who are responsible for maintaining and securing the system.
This process, called staking, ensures that the network remains robust and reliable. It all boils down to this. HBAR is the native currency of Hedera, just like you need dollars to shop in the US or Ether to use the Ethereum network. Think of it as the gas in your car. You need it to keep things moving on Hedera. Unlike some cryptocurrencies that rely on complex puzzles to secure their networks , Hedera takes a different approach.
They use a system called Proof of Stake, where users with more HBAR tokens have a greater say in validating transactions. It’s like having a vote on the network, and the more skin in the game you have through holding HBAR, the more weight your vote carries. Heads up for crypto veterans familiar with proof-of-stake.
Hedera’s version is a bit different. Unlike some systems where bad actors can get their tokens slashed, basically punished for misbehaving, Hedera doesn’t have that mechanism with HBAR. It’s an interesting point that big tech companies haven’t adopted slashing in their proof-of-stake systems.
Perhaps it’s because the idea of punishing misbehaving actors by slashing their tokens isn’t as effective as it seems in theory. After all, if the goal is to deter bad behavior, wouldn’t it be more efficient to focus on preventing it in the first place? That’s where Hedera’s approach, which emphasizes reputation and network governance, might have an edge.
Adding to the concern, Hedera’s own documentation suggests that it might only take a third of the network to pull off an attack. That’s a worrying thought, especially considering the potential consequences of a successful attack. Hold on. There’s another twist to Hedera’s staking system. Unlike traditional proof-of-stake, where you directly participate in validating transactions, Hedera uses a system called deleglegated Proof of Stake. Here’s the deal.
Instead of voting yourself, you delegate your voting power to one of the mainnet nodes, those big companies we mentioned earlier. Remember the 39? So, in essence, you’re trusting one of these major players to cast your vote on your behalf.
The key thing to understand here is that you don’t directly cast your vote on the Hedera network. Instead, you entrust your voting power to one of the 39 mainnet nodes. In other words, you’re essentially giving them the authority to represent your interests and make decisions on your behalf. When it comes to processing transactions and tokens, Hedera is a real speedster.
With its unique consensus mechanism, Hedera can handle up to 10,000 transactions per second. That’s blazing fast compared to many other blockchain networks. Now, let’s put Hedera’s impressive speed into perspective. Ethereum, one of the most popular blockchain networks, can only process around 12 transactions per second with its current infrastructure.
That’s a significant difference, highlighting Hedera’s ability to handle a much higher volume of transactions. Get this. Transaction fees on Hedera are unbelievably cheap and stable. They’re fixed at a mere 0.01 RON, regardless of the HBR price or network traffic. That’s unheard of in the crypto world.
This means you can transact on Hedera without worrying about crazy price fluctuations or skyrocketing fees. Even though transaction fees on Hedera are denominated in HBAR, they’re always pegged to a fixed value of zero to ozo on dollars this means you’ll never have to worry about unpredictable fee fluctuations regardless of hbar’s price movements the hbar token first hit the scene in 2018 through a private funding round here’s the kicker there will only ever be 50 billion HBAR tokens created, ever.
This limited supply is called a total supply cap. Right now, only about half, around 23 billion tokens are circulating. That means there will likely be some inflation for a while, as more tokens are gradually released into the market.
