summary: Hedera is a decentralized public ledger using the Hashgraph consensus algorithm to maximize speed and security. It facilitates transactions and the release of D...
content: Hedera is a open-source, decentralized public ledger that uses the Hashgraph consensus instead of blockchains in an attempt to maximize speed and security simultaneously. The platform is also eco-friendly and facilitates transactions and the release of decentralized applications (Dapps) while providing transparency, enabling organizations to overlook movements on the network. Overview Hedera Hashgraph was established in 2017 after Founder and former Chief Scientist Leemon Baird invented the Hashgraph consensus algorithm in 2015. After the invention of an alternative to blockchains, Baird put together a team of executives and secured crucial investment to work on Hedera. The company made its public debut in March 2018, presenting its offerings to a live audience in New York City and a virtual audience of 50,000 people. At launch, Hedera introduced its website, cryptocurrency, governing body (the Hedera Governing Council), and a whitepaper outlining its vision and plans. Hedera Hashgraph is described as a public distributed ledger technology (DLT) network that simply allows its users to relate and carry out online transactions efficiently and securely without the need for third-party companies, which often collect and sell their users personal information. The purpose of Hedera is to offer a stable, trustworthy network for a wide variety of decentralized, enterprise-grade applications. Hedera also utilizes a native token, $HBAR to power the Hedera's ecosystem. Hedera Hashgraph operates on a system known as asynchronous Byzantine fault tolerance (aBFT), which provides high levels of security even in the presence of compromised users. It boasts faster processing compared to Bitcoin and Ethereum, due to its parallel transaction processing pattern instead of the typical serial method used by blockchain technology. !image The network reaches consensus through the exchange of information between nodes, called gossip. Unlike mining in Bitcoin and other altcoin networks, nodes communicate and verify network transactions. The consensus protocol is overseen by a council of 39 leading businesses and organizations, who make decisions regarding software upgrades, network pricing, and treasury management. Hashgraph Consensus Algorithm Hedera Hashgraph uses the Hashgraph consensus mechanism to maintain agreement on its transaction history across its distributed network. This mechanism is supported by two types of nodes - consensus nodes and mirror nodes. Consensus nodes are moderated by the Hedera Governing Council and is responsible for determining the transaction ordering and history, while mirror nodes are permissionless and serve to disseminate this information throughout the network to other participants. !image Hedera's approach is distinct from traditional blockchains that rely on a larger number of users to propose and add blocks to the chain through open competition. By utilizing a limited number of nodes to determine its history, Hedera's model provides greater security and stability of its transaction records, avoiding potential changes or reversals. By blending the benefits of both public and private blockchain networks, Hedera Hashgraph aims to offer an improved consensus mechanism. Governance Hedera Hashgraph operates through a governing body called the Hedera Governing Council. The council is responsible for managing the consensus nodes, which decide the order of transactions on the network. The council comprises 39 members, including renowned companies such as Google, IBM, and Boeing. The primary functions of the council are to vote on changes to the software, ensure that funds are utilized correctly, and protect the network's legal status across different jurisdictions. It's worth mentioning that council membership is limited, with each member allowed to serve a maximum of two three-year terms, during which they hold equal voting rights on network and platform decisions. As of now, the Governing Council members run the mainnet nodes, but Hedera intends to open this up to any interested party in the future. Hedera Governing Council The Hedera Governing Council was established in the first quarter of 2019. Hedera made their first announcement of the initial five members on March 7th 2019, introducing, Deutsche Telekom’s T-Labs, DLA Piper, Magazine Luiza, Nomura Holdings and Swisscom Blockchain as their first council members. On August 12th 2019, Hedera announced the addition of IBM and Tata Communications as members of their governing council, stating that the two organization "expands the Council’s diversity; it now includes leading enterprises from the telecommunications, technology, financial services, law, and retail sectors". “The addition of IBM and Tata Communications to the Hedera Governing Council is a powerful endorsement of the hashgraph consensus mechanism, and further decentralizes the governance of Hedera Hashgraph. Our governance model, which includes a robust system of checks and balances, ensures power can’t be consolidated, while at the same time providing a stable and scalable platform on which developers can build.” - Mance Harmon, CEO On September 16th 2021, The Hedera Governing Council announced their plans to allocate 10.7 billion hbars, worth approximately US$5 billion at the time, to develop the Hedera ecosystem. The HBAR Foundation aimed to provide grants to startups and other organizations for developing the Hedera network's applications, including non-fungible tokens (NFTs), decentralized finance (DeFi), Central Bank Digital Currencies (CBDCs), and gaming. The remainder of the allocation was said to be used for partnerships and other initiatives to strengthen the ecosystem. “Our mission is to fund a future where entrepreneurs form digitally-native economies and ecosystems, controlling their own assets, identities, data, marketplaces, and more. We are excited to engage with and support organizations and teams that share this vision.” - Shayne Higdon, Executive Director and CEO On July 12th 2022, The Hedera Governing Council replaced all previously permanent executive voting directors on the Board with elected representatives from the Council and the industry. These voting directors were responsible for maintaining enterprise-grade corporate governance, including financial oversight and the appointment and oversight of all corporate officers. The newly adopted governance process included an annual election where the Governing Council elected half of the seven voting directors to two-year terms, ensuring continuity of oversight. The Board of Directors consisted of six directors from existing Council members and one independent director. On February 7th 2023, Dell joined the Hedera Governing Council, with plans to develop decentralized applications for its customers' blockchain and Web3-related projects. The council has up to 39 members, including Google, IBM, Deutsche Telekom, Boeing, DBS, and Nomura Holdings. Hedera aims to attract big businesses to build on its public distributed network, offering security and stability. Dell's first public blockchain-related move in some time is to explore developing applications on the Hedera network for decentralized environments such as edge computing. $HBAR HBAR is the official currency of the Hedera Hashgraph network. It serves multiple purposes within the network, including facilitating transactions for decentralized applications, enabling peer-to-peer transactions, and maintaining network security against potential malicious actors. It is also used for paying transaction fees and can power energy-efficient cryptocurrencies. Network fuel Developers use $HBAR to pay for network services, such as transferring HBAR, managing fungible and non-fungible tokens, and logging data. For each transaction submitted to the network, HBAR are used to compensate network nodes for bandwidth, compute, and storage. Network protection Hedera’s Proof-of-stake public network uses $HBAR, which are staked or proxy staked (coming soon) to a network node, to weight votes on transactions when reaching consensus. Weighted voting with hbars makes it difficult and expensive for a bad actor to maliciously affect consensus — it would require them to own and stake over one-third of the network’s total supply of HBAR, which will not be possible for the first 5 years. Tokenized Asset With the opportunity to access Digital assets like never before, Hedera Hashgraph allows asset tokenization on its ecosystem, by employing Native fungible and non-fungible assets on Hedera with performance, security, stability, and low, predictable fees. Tokenomics The distribution of HBAR tokens are shown below: !image Staking The Hedera public ledger operates using a proof-of-stake consensus mechanism, where a node's influence on the consensus is proportional to the amount of HBAR cryptocurrency it has staked. For a transaction to be validated and placed into consensus, it must be validated by nodes representing over two-thirds of the total HBAR staked. The staking feature has been rolled out in four phases, with the first three already completed at the time of writing. Phase 1: Technical Availability The technical availability phase enabled the staking functionality to be live on both the Hedera Testnet and Mainnet as of July 21, 2022. In this phase, users were technically able to stake their accounts to mainnet nodes, but this did not contribute to a node's consensus weight (voting power). The goal of this initial release was to provide a level p