Hedera is a new blockchain platform that offers an alternative to conventional blockchains. Blockchain transactions are currently validated by a consensus mechanism. The Proof-of-Work (PoW) mechanism is used in older blockchains such as Bitcoin and Ethereum. To access and authenticate transactional data, each node (or miner) uses the computing power at its disposal to solve complex mathematical equations.
However, newer blockchains like Hedera Hashgraph use the Proof-of-Stake (PoS) mechanism, which is more energy-efficient. The Ethereum network is also undergoing an upgrade to PoS right now. A blockchain’s native cryptocurrency is pledged by miners to qualify as a transaction approver in PoS.
With the rise in cryptocurrency devoted to blockchains, there is a greater chance of becoming a miner. A person who dedicates 10 Hedera to the blockchain will be more likely to become a miner than someone who dedicates only seven.
The Hedera (HBAR) cryptocurrency is similar to the blockchain, but faster, more efficient, and more secure. It is the native cryptocurrency of the Hedera Hashgraph system.
What makes Hedera Hashgraph different from other blockchain technologies?
The Gossip Protocol
‘Gossip’ is a revolutionary protocol developed by Hedera. The nodes of the network record and authenticate transactions by communicating with each other. Communication becomes explosive as a result.
Directed Acyclic Graphs represent the network of individual transaction data connected to one another and form the basis of Hashgraph Consensus Mechanisms.
As a result of the Hashgraph consensus mechanism, a graph is created that maps every node’s communication with every other node. Each node in the network keeps a graph of the communication history that grows continuously. A node records the sender and the time of receipt for every communication it receives. Computers spread across the network store a massive graph of communication history – ‘gossip about gossip’.
Accessing this graph reveals the transaction history, the identities of the parties involved, and the exact moment of the transaction. In a network, the two hashes represent when a node sent out its communication and when it received its last communication – a record of the authentication of the transaction itself.
Each ’round’ captures a certain number of communications. There is always a “famous witness” to corroborate the transaction history recorded in each round. An example of a famous witness is a node that receives communications before the other nodes communicate in that round. Data is then verified through communication or ‘gossip’ between the selected nodes.
The Hashgraph consensus mechanism differs from PoW in that each block is initiated by a different miner, whereas PoW relies on a single miner to add collectively verified data to a block. Upon completion of this verification process, the data is added to the ledger with 100 percent ‘finality,’ which means it cannot be tampered with, modified, or reversed.
Public Distributed Ledger
Furthermore, as opposed to blockchains, Hedera stores data on all connected systems on its network – a distributed ledger – rather than storing it in blocks. The question is, why?
When two blocks are created simultaneously, one is discarded from the ledger according to blockchain rules. It is up to the nodes on the system to decide which block to add. A fork in the blockchain is prevented by this method, i.e., one chain splits into two chains, and each time it happens, it grows infinitely.
A blockchain can also become defunct if it produces new blocks faster than it can discard them. This is due to the fact that the branches of the tree are still forming before they can be trimmed. PoW consensus is also used to artificially stunt the growth of some blockchains.
In contrast, Hedera Hashgraph uses everything and discards nothing. After consensus, all transaction data is added to the ledger, and nodes can retrieve it by communicating with each other. Therefore, it cannot be forked.
Fully Decentralised Governance
There is a completely unique governance system for Hedera Hashgraph. The Governing Council is comprised of 39 industry leaders from 11 different sectors and geographies. As a whole, the Governing Council is responsible for all decisions pertaining to the network, wealth management, software upgrades, etc.
A Governing Council member does not receive any profits from the network’s revenue and has a fixed term of 3 years. In addition to the hashgraph creator, Swirlds, who has a permanent seat on the Governing Council and an equal vote, the maximum tenure for a member of the Governing Council is two consecutive terms.
How do end users benefit from these capabilities?
A key aspect of Hedera Hashgraph is its ability to address five critical issues associated with other technologies: performance, security, governance, stability, and regulatory compliance (KYC is required, and AML compliance is checked).
According to Hedera, the network processes over 10,000 transactions per second (TPS), compared to 5 TPS and 13 TPS for Bitcoin and Ethereum, respectively.
As a result of ‘gossiping’ rather than actual mining on the network, this speed is achieved. Rather than executing complex mathematical calculations, the nodes are simply comparing notes on the network.
The Hedera blockchain charges a transaction fee of just $0.00001 since it consumes less energy than other blockchains. Currently, only 18.09 billion HBAR have been issued, with the limit set at 50 billion.
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