Blockchain has evolved from the exchange of cryptocurrencies to various applications in public and private sectors. It has gained popularity among big companies and developers introducing new decentralized solutions that are transforming the traditional systems.
Hedera, a proof-of-stake (PoS) smart contract platform, stands out with its unique solutions from consensus mechanisms to innovative design. Hedera has been positioning itself as an alternative to Ethereum and other well-known networks. The foundation of Hedera is built on Hashgraph, an independent, quicker, low-latency, and more secure blockchain alternative.
With this, users don’t have to worry about fluctuating gas prices because Hedera sets affordable rates. According to a 2021 study by University College London, Hedera consumes the least amount of energy of any public blockchain.
HBAR, Hedera’s native token, has recently earned significant attention among traders, investors and developers. It is used for transaction fees, staking, and governance. This article explains the basics of Hedera, its working, features, and potential of HBAR coin as an investment opportunity.
What is Hedera Hashgraph?
Hedera Hashgraph, commonly known a Hedera, is a decentralized public network that ensures easy creation and operation of decentralized applications (dApps). The platform operates a proof-of-stake consensus created for cryptocurrency transactions without compromising on high performance and fast transaction speed.
The platform can deploy various characteristics through its Hashgraph- a unique distributed ledger technology that enables enhanced security, efficiency and user experience.
Hedera aims to create a decentralized ecosystem that offers trust, secure and quick transactions for individuals and enterprises. The platform supports use cases such as:
- Cryptocurrency Payments: Hedera facilitates instant and low-cost transactions.
- Smart Contracts: The platform provides innovative tools for deploying and applying decentralized applications.
- Tokenisation: It allows the creation and management of fungible and non-fungible tokens (NFTs).
Hedera’s Hashgraph Consensus
An alternative to blockchain is hashgraph. It encrypts and saves data like a blockchain. New transactions or data are added and hashed. While a blockchain is a ledger made up of data blocks.
To generate a block in blockchain, each block uses its data to link to the preceding block, which is then validated by a network of validators. A chain is produced by this procedure. But, hashgraph is not a single chain; the data is stored in an encrypted ledger. And all the users, not just the validators, participate in the validation process.
Features and Functionalities of Hedera
Hedera stands out in the blockchain ecosystem due to three important and distinct features. Three core services include:
EVM-Compatible Smart Contracts
The smart contracts on Hedera are compatible with the Ethereum Virtual Machine (EVM). This allows developers to write and deploy smart contracts using Solidity, one of the most used programming languages in the blockchain ecosystem. This compatibility helps Ethereum developers to operate smoothly.
The design of Hedera is highly-scaled and its low fees feature is crucial in building large-scale dApp systems.
Hedera Token Service (HTS)
Hedera Token Service makes it possible for users to create and control fungible tokens such as cryptocurrencies and non-fungible tokens (NFTs) without constructing complicated smart contracts. This functionality reduces the complexity involved in the tokenization process while maintaining a safe and efficient transaction process.
Developers can define token properties such as supply and transferability and can be customised with specific permissions. It makes HTS suitable for financial, gaming, supply chain management and other industries.
Hedera Consensus Service (HCS)
Hedera Consensus Service allows a decentralized system for application messages that act as a trust layer for any application that needs authentic timestamps and ordering of events. Supply chain management, decentralized security, identity, and communication systems are more reliable because of this service since it allows applications to add records on the Hedera ledger.
Moreover, the possibility of getting verifiable time stamps and fair ordering makes Hedera more advanced than usual blockchains.
Hedera: Governance Model
The Hedera network is managed by the Hedera Council, which consists of up to 39 recognized organizations globally such as Google, IBM, Boeing, Deutsche Telekom and many more. Thus, it guarantees a balanced decision-making process.
The governance structure encourages stability, accountability and trust as council members manage important elements of the platform like updating the software, legal compliance, and network economics. Unlike other blockchains, where we find controlled governance by a few miners or stakeholders, the distributed governance model of Hedera is based on council members that provide flexibility and consistency.
How does Hedera work?
The Hedera Hashgraph ecosystem is a decentralized network of nodes that adds transactions to the common ledger after verifying them. Rapid and efficient transaction processing is ensured via the public Hedera network’s Hashgraph consensus technique, designed for low latency and high speed transactions.
Hedera Hashgraph is based on a new consensus mechanism called “gossip about gossip.” Nodes provide details about who they spoke with and what sort of transactions they are aware of until everyone agrees. This consensus used Asynchronous Byzantine Fault Tolerance (ABFT), an algorithm that allows the nodes on a network to agree on the order of the timing. Hedera also provides developers with APIs to construct decentralized apps, manage smart contracts, and generate tokens.
The various elements of the Hedera ecosystem work together to construct the network. It includes nodes that keep track of transactions, developers who build dApps and smart contracts using the Hedera SDK, and companies and organizations that experiment with the technology such as IBM and LG. Businesses can utilize Hedera’s file storage and token services for more effective operations. Regular users can also stake, communicate with dApps, and make payments via HBAR.
What makes Hedera different from other blockchains?
Hedera is different from traditional blockchain platforms due to explicit innovations. Some of its unique characteristics are:
Innovative Consensus Mechanism
Hedera Hashgraph employs the Hashgraph consensus algorithm, which is its own technique. This approach is based on Directed Acyclic Graphs (DAG), allowing for a higher transaction throughput with low latency. Also, Hedera makes sure that it operates sustainably and does not burn through resources like Bitcoin.
Improved Security
Making use of Asynchronous Byzantine Fault Tolerance puts Hedera above other platforms and enables it to offer outstanding security. Users can assure themselves with fast-speed transactions that are almost impossible to be forged. Furthermore, participants have been ensured fairness with how their transactions are organized. Once the participants start broadcasting their transactions, it gets ordered for them, which guarantees equilibrium among participants.
Enhanced Functionality
EVM-compatible smart contracts- Hedera Token Service (HTS) and the Hedera Consensus Service (HCS) are the main services provided by Hedera, and these services are directed at more B2B-oriented consumers. HTS enables customers to create tokens easily by not writing unnecessary codes, and HCS facilitates smooth ordering and time stamping events; these operations are not usually provided by the majority of blockchains.
Fixed and Predictable Fees
Compared to Ethereum and other platforms, Hedera offers stable and low transaction fees, which are appealing to a wide range of businesses. Fees on different platforms vary, which makes businesses hesitant to adopt the technology.
HBAR Coin
At the core of the Hedera ecosystem is HBAR coin. In addition to serving as a governance token, the HBAR coin can be used as payment for network services. HBAR’s tokenomics is intended to promote stability and expansion over the long run.
With a well-thought-out tokenomics architecture that promotes the network’s long-term stability and growth, the HBAR coin is essential to the Hedera ecosystem.
The 50 billion fixed total supply of HBAR was pre-minted when the network was launched. Because of limited fixed supply, its value is expected to increase over time. About 85% of total supply is in use as of April 2024, with the remaining tokens being distributed according to a schedule monitored by the Hedera Governing Council.
As on April 29, HBAR’s price is trading near $0.188 with a market cap of $8.31 billion.
Future of Hedera
Hedera’s team has revealed an impressive roadmap. As the network moves towards a more decentralized governance, its potential applications in the financial, gaming, and supply chain sectors grow. With additional developments like mirror nodes for greater transparency and sharding for scalability, HBAR is expected to become even more beneficial. The rising use of Hedera for safe micropayments, tokenization, and identity management points on its bright future.
Conclusion
Hedera providing better blockchain security and consensus algorithm features make it special in the crypto world. Partnerships with major companies like Google and IBM demonstrate support for Hedera’s mission. If Hedera can work effectively with regulatory settings and continue to develop new concepts, it might play a significant role in Web3 infrastructure.
FAQs (Frequently Asked Questions)
What is Hedera Hashgraph?
Hedera Hashgraph is a blockchain alternative that allows one to launch or run decentralized applications (dApps) with relative ease on a public network. Hashgraph places data on a single point making it far more secure and efficient due to the fact that it has a distinct ledger technology as compared to that of other blockchains.
What makes Hedera special and different?
Hedera’s consensus mechanism uses Hashgraph that relies on Directed Acyclic Graphs (DAGs), that allows it to order transactions on a real time basis. It includes Asynchronous Byzantine Fault Tolerance (ABFT) that facilitates efficient transaction ordering and adds an extra layer of security. To add on, it brings sustainability and development-friendly options such as EMV-compliant smart contracts, Hedera Token Service (HTS), and Hedera Consensus Service (HCS).
What are the services offered by Hedera?
- EVM-Compatible Smart Contracts: Uses ‘Solidity’ as a supporting tool to develop and deploy contracts.
- Hedera Token Service: Allows for easy launch and development of both fungible and non-fungible tokens without the need of oral contracts.
- Hedera Consensus Service: Create efficient and strong timestamps
How is Hedera governed?
Hedera is governed by the Hedera Governing Council. The council comprises of up to 39 corporations including Google, IBM, and Boeing. These council members assist in managing network updates, compliance, as well as economic policies.
What is HBAR and its role in the Hedera ecosystem?
HBAR acts as a platform’s native cryptocurrency that is used for a variety of purposes such as transaction fees, staking, and governance. This crypto is required for the network to function properly and provides the assurance of its long-term stability. HBAR’s rarity is further enhanced by its supply of 50 billion tokens, adding potential value over time.
What use cases does Hedera support?
Hedera enables a number of use cases such as Cryptocurrency Payments, Smart Contracts, Tokenization and other various decentralized applications.
Also Read: Hedera Integrates Chainlink’s CCIP for Cross-Chain Apps
