By Dušanka Seratlić

Blockchain is one of the ways you can implement distributed ledger technology (DLT). However, it’s not the only one. 

Hedera is a public network and a governing body for building decentralized applications that uses a different type of DLT called hashgraph. (Don’t worry - we’ll explain what DLT is in a moment!).

So, although Hedera and its currency HBAR are often lumped together with blockchain networks like Bitcoin or Ethereum, Hedera is a different beast. 

Dive in as we learn more about Hedera Hashgraph and its potential to leverage DLT in a unique way.

What Makes Hedera Different?

DLT represents software and infrastructure that enables distributed ledgers to be shared and verified across different locations or stakeholders. 

For example, when data is stored in a single location or there’s a central authority managing that data, the system is considered centralized. In distributed systems, data is stored on different computers or servers, which may or may not be familiar to each other. DLT enables these unknown stakeholders to still have trust in each other and manage the data together.  

The Hashgraph Consensus

The hashgraph data structure and consensus algorithm were patented and developed by Dr. Leemon Baird in 2017. In 2022, the Hedera governing council bought the IP rights to the hashgraph from Baird’s company and is committed to making this technology open-source. 

Although both blockchain and hashgraph work towards similar goals (distributed consensus, payments settlement, an open network), the way they get there is quite different. 

Blockchains: Data is stored in blocks arranged in serial order. Miners and validators work on expanding the chain and approving and verifying the data that gets added to it. Some blocks get discarded to prevent chain forks.

Hashgraph: All data gets included. There is no chain - at most, we can talk about a column-like structure. Data is added to the ledger and approved through a system called ‘gossip about gossip’.

This system makes hashgraph faster and more efficient than most blockchains. Nodes can achieve deterministic finality faster and data is considered immutable within seconds. 

Hashgraph is also asynchronous Byzantine Fault Tolerant (aBFT). This is one of the highest guarantees of security in distributed networks. This means that the Hedera network can resist attacks from malicious nodes that aim to disturb or change consensus. As long as 2/3 of all network nodes remain honest, the network remains protected.

The Role of HBAR

Hedera’s native cryptocurrency is called HBAR (ℏ). It serves two roles in the network: fuel and protection.

As fuel, HBAR is used to pay for network services and fees. As protection, HBAR is used as stake within Hedera’s proof-of-stake setup. The only way for malicious actors to influence the Hedera network would be to own and stake over 1/3 of the total HBAR supply. However, due to the scheduled release of HBAR, this won’t be possible for at least the first five years. 

The total supply of HBAR is fixed at 50 billion coins. At the moment, the circulating supply of HBAR is approximately 21 billion. 

Fixed Fees

Service fees on Hedera are fixed in USD, meaning they do not fluctuate with the price of the HBAR utility token. 

This means that enterprises can accurately forecast their expenditures - an essential feature for large-scale deployments like Avery Dennison’s atma.io for the carbon emission tracking of billions of unique items, DLA Pipers TOKO platform, or the Hedera dedicated Ubisoft Entrepreneurs Lab.

Path to Decentralization

In the hashgraph consensus, there’s no leader nor miner who chooses the next block. Instead, the entire community of nodes collectively agrees on data additions.

At the moment, all Hedera nodes are run by its governing council. The council secures the network and votes on different network matters such as updates, pricing, and treasury. The council consists of 39 distributed global organizations representing different industries and geographies. All council members have an equal vote and are term-limited. Currently, Hedera’s nodes and governance are run by companies such as Google, Chainlink Labs, LG, and IBM and universities such as University College London and the Indian Institute of Technology Madras. 

However, developers and the wider community are free to submit suggestions and proposals regarding network features and functionalities through Hedera improvement proposals (HIPs). 

Permissioned vs Permissionless 

With this setup, Hedera is considered a public but permissioned network. That means that the network code and operations are public but the ability to run a node or take part in governance is invitation-only. In other words, you need permission. Distributed ledgers can also be private and permissioned, or public and permissionless, like Bitcoin or Ethereum.  

Hedera is on a path to becoming a permissionless distributed ledger. According to the network roadmap, community mainnet nodes will be introduced in late 2022. As a Hedera community member, you would still need to apply to become a node. However, Hedera’s future plans include fully permissionless access as the network scales and matures. 

What You Can Do on Hedera

The Hedera hashgraph consensus allows for fast, secure, and energy-efficient transactions and services. With the claimed 10,000 transactions per second and immediate finality, Hedera seems to be building towards a network that can support true mainstream adoption. 

As the network grows, Hedera will also be able to support sharding - dividing the network into separate groups that validate transactions in parallel and are able to communicate their reached consensus to each other.

So, with these capabilities, what can you do on the Hedera network?  

Smart contracts

Hedera supports smart contracts, which means you can build all kinds of dApps and deploy them on the network. 

Hedera uses the Ethereum Virtual Machine (EVM) adjusted for the specificities of the Hedera network and enables developers to code in Solidity. 

With the launch of Hedera smart contracts 2.0, the smart contract service on Hedera has been upgraded to have transaction speeds that are “13x faster than on Ethereum Mainnet.” These hashgraph capabilities give EVM Solidity developers powerful tools to build a vibrant DeFi ecosystem on Hedera. 

Tokens

Hedera is fully programmable, meaning that you can use its token service to build, manage, or mint both fungible and non-fungible tokens. With the immediate finality, incredibly fast transaction speed, and stable, low fixed fees ($0.0001 USD paid in HBAR), tokens on Hedera have a lot of room to grow.

Creating a token on Hedera gives you all the necessary controls and functionality, plus, you can integrate Hedera tokens with Solidity smart contracts. 

Consensus Service

Hedera also offers a consensus service to companies, enterprises, or clients who need a verifiable and immutable ledger of information. Stakeholders can use the Hedera hashgraph consensus to log, settle, and store information about their services (eg. supply chain), all while enjoying the speed and security Hedera offers. Read more about the consensus service here.

Hedera’s network services are a key part of its utility and one of the ways the Hedera native cryptocurrency HBAR comes into play. Hedera can be used to build dApps, NFTs, and DeFi. It also offers enterprise-level use cases such as decentralized identity and documentation, digital currencies, or audit logs. Check out applications being built on Hedera today. 

The Hedera Roadmap

Hedera is a public network representing a new generation of DLT. It’s described as fast, secure, stable, fair, and energy-efficient. Hedera is also committed to its path to permissionless nodes, full open-source, and decentralization.

Considering its deliberate rollout of features and capabilities, as well as its global partners, it’s clear that Hedera is taking a slow and steady approach to building a Web3 future. 

Curious? Learn more here or start building on Hedera as a Surge Passport NFT holder.