Some would argue that the powerful blockchain technology which underpins cryptocurrencies like bitcoin and ethereum is more valuable than these crypto assets this has certainly been the opinion of many governments and corporations around the world who’ve been actively adopting blockchain.
Over the past decade as its advantages become ever more apparent many cryptocurrency projects have consequently decided to cater specifically to private and public institutions in the hope of securing some of their lucrative tech contracts one cryptocurrency project that is hoping to crack this enterprise blockchain space is hedera hashgraph which has taken a completely different approach to distributed ledger technologies over the past year hedera hashgraph has made incredible strides in institutional adoption and has secured multiple head-turning institutional partnerships this has many wondering whether hedera hashgraph is on track to become the leading enterprise oriented project in the crypto space by the end of 2021.
So today i’ll be examining this possibility and what effect it could have on the price of the h-bar token could h-bar become one of the top performing alts in this bull market stay tuned to find out the story of hedera hashgraph begins with swirls a texas software company founded by computer scientists and former airmen mance harmon and dr lehmann baird in 2015 baird is the mastermind behind hashgraph a novel consensus mechanism for distributed ledgers from which hedera takes its surname i’ll elaborate on hashgraph in a moment the hedera consensus white paper was released in may 2016 after months of testing and swirls went on to raise millions of dollars in funding in 2017 for what would eventually become hedera hashgraph now although hedera hashgraph is a limited liability company registered in delaware under the name hashgraph consortium llc hedera is technically a governing body consisting of 16 corporations including google ibm lg and boeing this conglomerate called the hedera governing council includes swirls which holds the patent to the hashgraph consensus mechanism and licensed it out to hashgraph consortium llc when it was incorporated at the end of 2017.
Hedera’s council members run the core network nodes of hedera hashgraph and are the only ones able to vote on any changes or upgrades to the network that said anyone can table a hedera improvement proposal or hip for hedera’s council members to review i imagine that these are also reviewed by lehman baird who serves as hedera hashgraph’s chief scientist and possibly even mance harman who currently holds the ceo seat in case the patent stuff didn’t make it obvious hedera’s core technology is not open source instead it is open review which means that quote the code is available only for reviewing compiling and testing but not for any other use this is to protect against any possible forks of hedera hashgraph as is repeatedly stated on hedera’s website in their documentation and in their blog posts these concerns around forking are a bit strange when you consider how hedera hashgraph actually works in contrast to cryptocurrencies like bitcoin and ethereum hedera hashgraph does not use blockchain technology instead it uses another distributed ledger technology called a dag which is short for directed acyclic graph now without getting too technical a dag allows all network nodes to freely share information with one another as they please and time stamps all these messages to keep them in order this sending of messages between nodes is called gossiping and gossiping is the basis of the hashgraph consensus algorithm which uses something called asynchronous byzantine fault tolerant or abft this fancy acronym on a set of transactions in other words abft is a proof-of-stake consensus mechanism where there is no block time and that’s because there is no blockchain in the hashgraph consensus nodes gossip messages to each other about transactions at random like gossiping in real life this information travels fast and makes it possible for all the nodes on the hedera hashgraph network to achieve consensus about a transaction in roughly three to five seconds.
I’ve obviously watered down hedera’s consensus now with this unique architecture hedera hashgraph is reportedly able to process around 10 000 transactions per second i should also probably mention that hedera is smart contract compatible and even though its base code is closed source.
Anyone can create a smart contract on the hedera hashgraph network there is just one small problem and that’s that hedera’s claims about the efficiency of its network do not appear to be entirely accurate two weeks before hedera hashgraph opened its doors to the public in mid-september 2019 chief investment officer at arcane assets eric wall published a lengthy medium post about hedera hashgraph and it was the sort of smackdown you normally see on pay-per-view tv the ultra tldr is that hedera hashgraph claims about 10 000 transactions per second are limited to wallet to wallet transactions on the network this was and still is noted in the first disclaimer under hedera’s efficiency infographic on the home page of their website according to hedera’s own documentation the tps for all other transactions is 10 that’s it 10 tps to be fair the screenshot of this documentation in walls medium posts is over a year old and though i haven’t been able to find the updated tps for other transactions i reckon it’s gone up since then however wall also notes in his medium post that a 10k tps is impossible for smart contracts on hedera hashgraph because hedera leverages the ethereum virtual machine and the evm itself can only take in a maximum of 300 transactions per second due to how it interacts with computer hardware in response to walls medium post hedera hashgraph’s technical lead paul madison fired back with his own article titled quote counterfund the tldr on that one is basically no you’re wrong now.
I would take more time to unpack madison’s reply were it not for the fact that wall struck back with another medium article titled quote counter counter fud where he eats through just about every counter-argument matson served up in all seriousness though if you have the time i do recommend reading through all three articles and making your own decision as to who is right i’ll leave links to those in the description if you’re up for it if you’re already convinced that hedera has been stretching the truth with its tps claims you might be wondering if the sum solace to be found in the tokenomics of hedera hashgraph’s native cryptocurrency hbar there really isn’t allow me to explain h-bar has a maximum supply of 50 billion and i’ll just pretend i didn’t see the documentation that suggests swirls could increase that limit whenever it feels like it hedera hashgraph sold 17 of hbar’s total supply in a series of simple agreement for future token sales to accredited investors around the world now in case you didn’t know accredited investor is code for rich people there were apparently three saft sales which took place in 2018 which saw the h bar token sold for anywhere between one-tenth of a cent to 12 cents apiece so congrats to the early investors on that one.
Although there are not many details about the earlier saft sales the final round of soft sales is detailed in a hedera blog post from august 2018 the blog post reveals that no more than about 800 investors participated in the final round of saft sales now while i was not able to find any information about how many investors participated in the earlier hbar shaft sales i suspect there were not very many this is because hedera hashgraph revealed in december 2019 that the poor price action of the h-bar token was due to saft investors constantly dumping their h-bar tokens on the market hedera’s solution to this was to give even more h-bar tokens to saft investors who agreed to delay receiving the tokens they’d been allocated an update about this quote saft exchange offer from october 2020 seems to note that over 1.4 billion bonus hbar tokens would be distributed to saft investors in q4 of 2020. this suggests two very troubling things firstly it suggests the substantial portion of saft investors took hedera hashgraph up on the offer meaning that they did not see any value in the project secondly this offer also works out to a release of nearly three percent of hbar’s total supply in just a few months to make things worse that same blog post notes that hedera’s governing council had voted unanimously that the tokens allocated to hedera’s founders should not be subject to a lock-up because quote the board ultimately determined that a formal lock-up would not provide any benefit that could not be equally achieved through public notice and ongoing transparency.
Hedera hashgraph’s economic incentives are quite frankly some of the worst i’ve ever seen hedera hashgraph knows this too they actually hired an economic consulting firm in 2019 to improve their network incentives here are a few pain points i’m sure that consulting firm has already identified even though hedera hashgraph is a proof-of-stake cryptocurrency it does not have any slashing for those unfamiliar slashing is when a validator node loses some of its staked crypto because it engaged in malicious behavior such as attempting to manipulate transactions