By
Dimitar Bogdanov
March 25, 2021
4 Min Read
Blockchain has taken the world by storm, but the technology is hardly without any flaws. The technology is facing a number of challenges, mostly related to the need to balance between security, scalability and decentralization. And while different blockchain protocols propose unique solutions, nonone has yet been able to solve these problems, which seem to be inherent to the core design of blockchain technology.
Meanwhile, other projects have gone a different route, looking for ways to advance distributed ledger technologies beyond blockchain. One of the most promising projects in that field is Hedera Hashgraph. What makes Hedera Hashgraph unique is its innovative hashgraph consensus algorithm, which sets it apart from traditional blockchains by offering superior scalability, enhanced security, high transaction speed, and greater energy efficiency.
Hedera Hashgraph was born from the desire to find a better way to do distributed consensus at scale. This desire was what inspired Dr. Leemon Baird, co-founder and chief scientist of Hedera, to get involved with the fledgling DLT space in 2012, when he began working on solving the scalability limitations associated with early DLT platforms. The result of these efforts, the hashgraph distributed consensus algorithm, laid the foundation for what eventually became Hedera Hashgraph.
Following the launch of the Hedera distributed ledger and the Hedera Governing Council, the Hedera Hashgraph mainnet was introduced, providing a highly scalable, secure, and fast network that set new standards for distributed ledger technology. Hedera Hashgraph has become one of the most promising proof-of-stake DLT platforms. Hedera’s inventive design gives the network superior speed and scalability compared to traditional blockchain protocols. The Hedera Hashgraph system serves as a blockchain alternative, utilizing its proprietary hashgraph consensus algorithm and distributed ledger technology (DLT) approach. Hedera also boasts state-of-the-art security thanks to its asynchronous Bizantine Fault Tolerance algorithm. So let’s take a closer look at
At the heart of Hedera sits the hashgraph algorithm, invented by Dr. Baird in 2015. Unlike traditional blockchain-based ledgers, which rely on cryptographically-chained data blocks, hashgraph utilizes a type of data structure called a directed acyclic graph (DAG).
In mathematics and computer science, a graph is a collection of points (typically called vertices or nodes) and edges (also known as arcs) that represent connections between points. A directed graph is then a graph whose arcs have a direction associated with them, while a DAG is a directed graph that does not form a closed loop (as shown below).
Hedera utilizes this type of data structure to build a powerful consensus mechanism for its network and power its distributed ledger technology.
The description above gives us some idea about what makes DAGs so useful to decentralized systems. Comprising nodes and edges, these data structures are perfectly equipped for documenting the history of transactions between participants of a peer-to-peer network. Here’s how Hedera Hashgraph does it.
The Hashgraph consensus uses a so-called gossip protocol that facilitates the spreading and synchronization of transaction information across the Hedera network. Under the gossip protocol, when a member of the network becomes aware of new information, they relay that information to other, randomly chosen, network members. Every member that learns the new information starts relaying it to random members until the whole network knows about the transaction. These are known as Hedera transactions, and each transaction undergoes a validation process to ensure its authenticity and integrity before being added to the network.
A ‘gossip’ between two nodes is an event that has an associated message containing: transaction information; a digital signature; a timestamp to ensure that all events are recorded in the proper order and two-parent hashes.
Now, if we use vertices to mark different events and edges to express how these events connect to one another through hashes, we’ll be able to represent the entire history of the network as one ever-growing graph of hashes, or in other words, a hashgraph. And not just the transactional history, but also a shared record of how network members have been talking to each other. A gossip about the gossip, stored on every computer participating in the network.
All this is important, because it not only allows us to have an accurate shared record of the network’s history, but it also enables virtual voting. This means that by looking at the recorded history, network members can deduce what information other members would have known at any given time.
The three key properties of Hedera Hashgraph are Speed/Efficiency, Security, and decentralization. In addition, Hedera places a strong emphasis on network security, ensuring transaction integrity and protection against malicious activities. Its robust infrastructure and advanced consensus mechanism make it an ideal platform for enterprise solutions, offering scalable and secure distributed ledger technology tailored for business applications.
Thanks to gossip about gossip and virtual voting, Hedera can support a much higher transaction throughput than traditional blockchain networks. Basically, because the network participants perform all necessary computations on their own, the computational load on the network is greatly reduced. According to Hedera, its proof-of-stake public network has the capacity to process over 10,000 transactions per second. The Hedera Hashgraph mainnet is designed as an enterprise-grade public network, making it capable of supporting high transaction volumes required by large organizations and enterprise applications.
Hedera is able to achieve asynchronous Byzantine Fault Tolerance (aBFT), which is considered the gold standard when it comes to security of decentralized networks. The Hedera Hashgraph network is secured through an asynchronous Byzantine fault-tolerant consensus algorithm, ensuring robust protection and validated transactions even in the presence of malicious actors or false messages.
In general, Byzantine Fault Tolerance refers to the ability of distributed systems to function properly, even if some of its nodes have been compromised. In blockchain-based networks, consensus algorithms like proof-of-work are responsible for ensuring Byzantine Fault Tolerance. However they also typically have a limited tolerance for delayed messages, which makes them vulnerable to Distributed Denial of Service (DDoS) attacks.
In contrast, aBFT algorithms do not make timing assumptions. So aBFT means that finality of consensus will be reached with 100% probability if less than ⅓ of a network’s computational/voting power is controlled by attackers and messages from honest nodes get through, regardless of how long it takes them to do so.
Contrary to the popular belief, not all distributed ledger networks are highly decentralized. This is true for public, permissionless networks like Blockchain and Ethereum, but there are many platforms that do not support or, in fact, need such a high level of decentralization. Still, decentralization is one of the key elements of DLT’s value proposition and a highly desirable thing to have in any DLT platform. Most blockchain protocols only sacrifice decentralization to achieve gains in other areas, such as scalability (the so-called scalability trilema).
As mentioned above, Hedera Hashgraph has an impressive capacity for processing transactions, so how does the platform fare in terms of decentralization? Well, right now Hedera is a “public/permissioned” network, which means that it is open for anyone to deploy applications, but the nodes that constitute the network must be invited to join. In Hedera’s case, the nodes are operated by members of the Hedera Governing Council. Hedera operates as a public distributed ledger, providing an open-source, decentralized technology for secure and transparent consensus.
This model already provides some level of decentralization, but Hedera has plans to transition to a permissionless model in the future.
The three key features of Hedera Hashgraph are the Hedera Consensus Service (HSC), Hedera Token Service, and Decentralized Governance. In addition, Hedera technology powers a range of network services such as consensus timestamping, token management, and smart contracts, enabling secure, high-volume transactions. This robust infrastructure supports the development and deployment of decentralized applications, making Hedera a strong alternative to traditional blockchain systems.
The Hedera Consensus Service (HCS) allows applications and permissioned networks to take advantage of the hashgraph consensus algorithm. Using the service, clients can submit messages to the Hedera public ledger for time-stamping and ordering. Messages can include important actionable information and can be encrypted to ensure user privacy. Essentially, the HCS acts as a trust layer for any application or permissioned network.
As part of a larger collaboration with Hedera, LimeChain built an open source demo showcasing how the HCS could be utilized to integrate existing corporate systems together for a supply chain use case. In that case the HCS was used to facilitate synchronization between Microsoft Dynamics ERP and Google Sheets. The video below details the particulars of that project.
Developed by LimeChain as part of our ongoing collaboration with Hedera, the Hedera Token Service (HTS) enables applications to mint, configure, and manage tokens on Hedera, without having to write and deploy smart contracts. The HTS streamlines token creation, allowing users to easily issue and manage digital assets on the network. Tokens created with the HTS can represent anything from stablecoins to in-game reward coins.
The hbar token serves as the native cryptocurrency of the Hedera network and acts as a utility token, powering network operations and supporting tokenization. HBAR tokens are essential for network services, transaction fees, and securing the platform, making them a crucial digital asset within the Hedera ecosystem.
As mentioned above, Hedera is currently governed by the Hedera Governing Council, a body consisting of up to 39 leading businesses and organizations. The council makes decisions over software upgrades, network pricing, treasury management, and more. Council membership is term-based and members can serve up to two consecutive three-year terms.
The first fourteen Hedera Governing Council Members include Boeing, Deutsche Telekom, DLA Piper, FIS (WorldPay), Google, IBM, LG, Magalu, Nomura, Swirlds, Tata Communications, University College London (UCL), and Wipro.
Looking at the current DLT landscape, it’s clear that the pursuit of greater scalability will continue to drive development in the sector in the coming years.
The Hedera public network serves as a decentralized, enterprise-grade infrastructure supporting a wide range of decentralized applications and services. As a sustainable public network, Hedera is committed to environmental responsibility, achieving a carbon negative status by offsetting its emissions and maintaining low energy consumption per transaction. Since it launched open access, the Hedera mainnet has enabled broader participation from users and developers, accelerating ecosystem growth. Key metrics such as hedera price, market cap, and total supply reflect the network's increasing value and adoption. Users can easily buy Hedera Hashgraph (HBAR) on platforms like Kriptomat, and tools such as the Hedera calculator help estimate transaction costs. HBAR users play a vital role in the ecosystem by participating in staking, governance, and funding network services. Additionally, Hedera supports decentralized file storage, enhancing its capabilities for secure and scalable enterprise solutions.
Thanks to its clever design and robust consensus mechanism, Hedera Hashgraph is already capable of operating at an impressive scale, which puts the platform in a position to be a major part of the future of DLT.
