What is HBAR? An introduction to Hedera

Who created HBAR?

Hedera Hashgraph was built by computer scientist Leemon Baird, and tech executive Mance Harmon. The two initially founded a company called Swirlds in 2015.

After some time, the firm expanded into an entity called Hedera, which was subsequently renamed to Hedera Hashgraph. The goal was to develop and govern a live network using their core proof-of-stake technology.

Since 2018, the company raised $124 million from HBAR crypto sales through an agreement for future tokens offering (SAFT).

Hedera plans to gradually allow more entities and nodes to join in until it is finally made public at a later stage.

What is the “gossip about gossip” protocol?

The hashgraph algorithm works by spreading what Hedera’s inventor, Dr. Leemon Baird, calls “gossip about gossip”. 

So what is gossip? 

“Gossip just means when computers randomly call each other,” says Baird. He explains that any given node in a network can randomly communicate with another node all the information the latter doesn’t already know. The reason this method is so popular in computer science, he says, is because it’s incredibly fast and efficient. 

“How fast does a juicy rumour spread through the grapevine in a typical office?” he says. “That’s the gossip protocol.” 

Gossip about gossip essentially means that the information being gossiped about is the gossip itself. For example, whereas gossip is telling someone information you know, gossip about gossip is when that information is the fact that you talked to someone else information that can extend back to the very first conversation (or in Hedera’s case, the very first transaction).

One would assume that it would take a lot of time and energy for computers to share so much information with one another, but according to Baird “gossip about gossip” is incredibly energy efficient. In his 2016 paper introducing the concept, he writes that the protocol “​​uses very little bandwidth overhead beyond simply gossiping the transactions alone.” Each message just has to remember two other messages using cryptographic hashes, meaning that when a message is sent, all that’s being sent is two hashes. Add to the mix a list of transactions, and there’s a working protocol to transact HBAR, Hedera’s native token.  


What is the HBAR crypto?

The HBAR token is the native cryptocurrency of the Hedera public network. It is used to power dApp development and to protect the network from malicious activity.

HBAR started out as an initial coin offering (ICO) in August 2018, and first launched open access to its main-net a year later in September 2019. In the pre-sale investors were able to buy the platform’s native utility token (HBAR) at $0.12 per token, with 14,400,400 tokens being sold for $120 million.

The token distribution consisted of a 32.4% pre-mine and various other parties and stakeholders were allocated funds since the launch of the project.

  • Hedera Pre-minted Treasury: 32.4%.
  • Ecosystem Development: 24%.
  • Purchase Agreement: 17.4%.
  • Founders & Early Executives: 13.8%.
  • Swirlds: 8%.
  • Employees & Service Providers: 4.4%.

Tokens will be released over a period of 15 years, at which point the maximum circulating supply of 50 billion tokens will have been reached. Currently, 36% of tokens are in active circulation according to HBAR’s self-reporting.

The HBAR token has a dual role within the Hedera public network:

  1. Network and transaction fees: HBAR tokens are used to fund transaction fees and to compensate nodes for computer power and bandwidth.
  2. Governance: HBAR tokens are used to secure the proof-of-stake algorithm and for votes on transactions when reaching consensus.

The Hedera network performs around 6.5 million transactions per day, averaging its transaction time at 5 seconds.

How To Mine Hedera

The consensus behind the Hedera network comes from different high-powered nodes that communicate with the gossip protocol, pushing recent transaction histories from local nodes out into the network for extremely fast final settlement times.

Nodes that validate transactions on Hedera Hashgraph need to be invited to become a part of the network.

What Problem does Hedera Hashgraph Solve?

Hedera is a distributed ledger that resolves the factors that constrain the adoption of public DLT by the mainstream.

#1. Hedera is the lone public ledger solution available in the industry that uses hashgraph consensus, which is a quicker and more secured alternative solution to blockchain consensus mechanisms. The hashgraph mechanism works more efficiently to verify transactions while achieving the utmost possible level of security, even when there are malicious attacks on the network.

#2. Hashgraph is faster than Bitcoin or Ethereum blockchains, as it achieves high throughput with over 10,000 cryptocurrency transactions per second and low-latency. It benefits from its innovative gossip protocol and virtual voting.

#3. Their network is governed by a council of up to 39 leading global enterprises. These council members bring much-needed experience in business and process expertise missing in previous public ledger platforms. The council reflects a mix of industries with many well-respected brands being a part of it. Such a diverse mix of industry participants enables Hedera Hashgraph to receive unique perspectives to solve industry challenges. At the time of writing, Boeing, Chainlink Labs, Dentons, Deutsche Telecom, LG, Google, Nomura, and many other top brands are the council members of Hedera Hashgraph Network.

#4. The Hedera technical solution includes controlled mutability of the network state and the potential to request or attach additional data to transactions, like identity certificates. These features provide the capability of future functionality. This is optional and within the control of the end-users. As such, Hedera wants to work with regulators and encourage the development of tools to allow businesses to fulfill their consumer protection and regulatory compliance obligations.

The Architecture of Hedera Hashgraph

The Hedera Hashgraph platform is an enterprise-focused public Distributed Ledger Technology (DLT) that utilizes a Directed Acyclic Graph (DAG) for its architecture instead of a blockchain.

#1. Internet Layer- The network nodes of Hashgraph are all computers on the internet communicating with each other by TCP/IP connections and secured by TLS encryption. The hubs in the network are tended to by IP address and port, and hence any attacks on the DNS framework won’t influence the system.

#2. Hashgraph Consensus Layer- The nodes take exchanges from customers and distribute them through the system with a gossip protocol. At that point, all nodes run the hashgraph consensus algorithm to arrive at an agreement time stamp for every transaction and its consensus order. Every node, at that point, then applies the impacts of the transactions in agreement request to modify its replica of the shared state. By doing this, all nodes keep up an identical consensus state (inside any given shard).

#3. Services layer- the services layer consists of the following-

i) Cryptocurrency- It is intended to offer quick and low-cost transactions. Thus, it makes microtransactions practical and doable. Once the Hedera solution is operating at a scale, any customer will have the capacity to run a node in the system and receive crypto payments. Any customer can create an account by just making a key pair with no attached name or address. Alternatively, a user can also attach hashes of identity authentications that could originate from any third-party endorsement authority or identity authority that the customer picks. Its purpose is to allow regulatory compliance for crypto accounts. It will be used in conjunction with Know Your Customer (KYC) or Anti-Money-Washing (AMC) laws.

ii) File Storage- The section is where a user can store data, with consensus on what is stored and what is not. You shouldn’t worry about your records getting lost. It is because the file is stored on all the shards. The only person who can erase the data that is the one who has permission to do so.

The information stored can only be erased by those that were given permission. Along these lines, the file system can go about as a revocation service. Hedera Hashgraph’s whitepaper provides a perfect example of the use case:

Imagine a scenario. In the future, the Department of Motor Vehicles issues a license to a user. The department and the issue will sign the transaction. Once they sign, the hash will be stored in the ledger. Both parties can remove the hash if they want to. It makes sharing license very easy as the user can share the copy with anyone who wants to verify the driving license. Now, the person who wants to check if the license is valid or not can check on the ledger to see if the hash is in there or not. If it is, then the license is valid. If not, it is invalid and may have been removed by either the user or the licensing authority.

iii) Smart Contracts-  The Hedera supports smart contracts written in Solidity. At present, there are existing large libraries of Solidity smart contract code that can run unchanged on Hedera, allowing distributed applications to be effortlessly built on top of Hedera.

iv) Consensus- When it comes to creating distributed applications, Hedera Hashgraph’s consensus service will prove to be a perfect choice.

Here users need to submit messages to Hedera for time-stamping and ordering within specific topics. Next, the messages will join the consensus order after flowing out to mirror nodes. Later, the consensus service will give distributed applications straight access to the native security, speed, and fair ordering guarantees of the hashgraph consensus algorithm, with the full belief of the Hedera ledger.

Utility of Hedera Hashgraph in Third Party applications

If the Hedera network wants to be secure, it must provide utility to the businesses. So, how does a ledger make a user more secure? When the number of assets, applications, and transactions increases, it becomes an integral piece of the digital structure on which the universe depends. Providing a utility network allows the security of the network by making it even more complex and costly to centralize ownership of the native cryptocurrency, avoiding the consolidation of voting power for the transactions of the network.

Any applications that use Hedera’s network play a crucial role in Hedera’s utility. Everyone from an individual developer to a startup, a small business to a large enterprise company can build and run Hedera-powered applications.

Which Projects Utilize Hedera Hashgraph?

Some examples of projects built on Hedera Hashgraph are The Coupon Bureau, a coupon industry non-profit organization that has created a coupon tracking system. Then, a distributed ledger for tracking the drug supply chain created by Acoer also uses Hedera Hashgraph. Another use case of Hedera includes tracking and verifying solutions for advertising events and engagement created by AdsDax. Moreover, Indian telecommunications company Tata Communications is also exploring the use of the Hedera Hashgraph platform. They are looking to build secure user authentication and transaction logs, among other use cases.

HBAR – The Native Cryptocurrency of Hedera Hashgraph

HBAR is the native, energy-efficient cryptocurrency of the Hedera Hashgraph network. These tokens are mainly utilized to power decentralized applications and protect the network from malicious attacks. Moreover, developers can use HBAR’s for paying network services, such as transferring HBARs, logging data, managing fungible and non-fungible tokens, and more. The maximum supply of HBAR tokens is 50 billion, where its current circulating supply is above 8.5 billion.

What are the Functions of HBAR Token?

The native cryptocurrency of Hedera serves two main functions:

  1. Network Fuel – HBAR serves as a fuel powering the Hedera ecosystem. Users can use HBAR to pay for the services on networks. It is also used to incentivize nodes contributing to the computing resources of the network.
  2. Network Security – Once Hedera starts moving along the path to permissionless nodes, HBAR will guard the network against malicious attacks through the network’s coin-weighted and proof-of-stake consensus mechanism.

Hashgraph vs Blockchain

Hashgraph is the underlying consensus mechanism powering the Hedera public network – it’s what differentiates Hedera from any other public distributed ledger.

Hashgraph consensus is a DAG (direct acyclic graph) created in 2015 by Dr. Leemon Baird. A few months later, Dr. Baird and his longtime friend and business partner, Mance Harmon, form Swirlds, Inc. (a portmanteau of “shared worlds”) to develop proofs of concept and to commercialize hashgraph for private implementations. Their more extensive and longer-term vision is to use hashgraph to enable a truly decentralized, fast, fair, and secure public distributed ledger that could achieve mainstream adoption and serve as the “trust layer of the Internet” — later known as Hedera Hashgraph.

Hedera offers better performance than so-called 1st and 2nd generation blockchains like Bitcoin and Ethereum. According to their website, a cryptocurrency transaction or Hedera Consensus Service message takes between 3 – 5 seconds to settle with finality, costs USD 0.0001 (paid in HBAR cryptocurrency), and can reach 10,000 of these transactions per second.

For reference, Visa processes about 1,700 transactions per second on average, although the network can handle more traffic during peak demand. Hedera more than meets even the highest demands for transaction throughput.

Hedera transaction times and fees 
Hedera transaction times and fees 

Merchants can accept zero-confirmation transactions on the Bitcoin network. And while these transactions take just a few seconds to propagate through the network, they’re not finalized until thirty to sixty minutes later. By having sub-5-second finality, Hedera is exponentially faster than both Bitcoin and Ethereum.

The Future of Hedera Hashgraph

In February 2021, Hedera announced the launch of the Hedera Token Service on the Hedera mainnet, allowing anyone to create tokens on the platform. At the time of launch, more than 60 initial ecosystem partners had joined Hedera, and they had integrated or were in process of integrating or exploring the Hedera Token Service to aid applications issuing tokens across the supply chain, DeFi, payments, energy, and much more. Transferring tokens with HTS will just cost $0.001. Currently, there are a significant number of projects building tokens on Hedera. As per projections, this project will be completed in the next few months.

Simultaneously, a significant number of incoming upgrades are expected in the coming months to the Hedera Hashgraph mainnet. According to the future roadmap of Hedera, plans have been made to minimize the amount of downtime the network requires when maintenance is performed (unlike decentralized coins that work constantly even while being upgraded).

Additionally, the Hedera network will also introduce a feature known as scheduled transactions. It is a process where an individual can state the future time that they want the transaction to take place. Optionally, this can also be when someone wants a transaction to be signed by a specific number of people before sending it.

Furthermore, in the second half of this year, there are more upgrades on the plate including, enabling several stakeholders to make transactions as well as sharding, a path for the network to be divided into multiple shards to amplify the number of transactions it can process. With such crucial updates on the table, Hedera Hashgraph proves that it is going all out to secure a place among the leading cryptocurrency projects globally.