The Guide to Hedera blockchain and its HBAR currency

Hedera is a curious blockchain that was released in 2019 to address the issues of scalability, fairness, and security. It's a good place to develop decentralized applications with multiple software development kits for various purposes. For instance, the latest stablecoin SDK allows institutions to mint their own stablecoins.

Hedera is a separate blockchain, independent from Bitcoin, Ethereum, and any other network. Moreover, it has several unique components that make it stand out from any other blockchain. These elements ensure increased security, transparency, and scalability when it comes to node operation.

So, how is it different?

Hedera history

Hedera entered development in 2017. In August 2018, an ICO was started to attract fundraisers. By 2019, enough funds were accumulated to release the project in full. As of now, it's one of the relatively big players in the crypto market. For instance, Hedera's HBAR token is in the top-30 currencies by market cap.

At the same time, the active population of the Hedera network isn't as big. There have lately been around 1200 daily active users on the blockchain, and it's not really a sign of obscurity. While it can be used by anyone, the primary benefactors of Hedera features have long been organizations.

The system is built in such a way that governance rights are more readily given to organizations. There are fewer participants in the consensus mechanism, and each candidate is selected manually based on their technical expertise, background, and technical capabilities.

Consensus and governance

One of the most striking differences of this blockchain from any other is its consensus mechanism, called Hashgraph. It can be explained in several key statements:

The node operators are picked based on their expertise and background.
Each transaction is given a timestamp, which is ordered in a sequence divided into 'events'.
'Events' can be anything, but they play a huge part in determining how and when the transactions are validated.
The node operators don't validate the transactions based on the proof-of-work or proof-of-stake technologies, which favor participants with more influence and give a lion's share (or all) rewards to them.
Instead, the consensus is reached by voting on an event that would represent the transaction, validating it almost by proxy via a chosen event.

As for rewards obtained by operating this consensus mechanism, Hedera's approach is even more unique. In proof-of-work (Bitcoin's mechanism), the entire reward for adding a new block is given to the participant with the most computing power. On Hedera, the participants aren't entitled to rewards on such a basis.

Instead, they are compensated by the system from the pool of pre-minted tokens and exactly in accordance with how much they've participated in the consensus. It ensures a fairer approach to distributing rewards, at least on paper. This principle more or less works, especially because it's additionally supplemented by Byzantine Fault Tolerance, which allows consensus even in the presence of malicious nodes.

Governance token HBAR

Hedera's primary token is called HBAR. It's been in free floatation since the platform was released in 2019. It was first introduced back in 2018 during Hedera's ICO campaign. That ICO determined the first wave of node operators, participants, and developers on the blockchain.

The rewards offered to node operators are given in HBAR, but it can also be purchased in many major exchanges, such as Coinbase. This token is needed to conduct development, pay transaction fees, and for many other use cases on the Hedera blockchain.

It's not really staked or mined in the same way Bitcoin is mined or Ether is staked. The users don't 'create' the new tokens: all tokens are already pre-mined and just distributed to all participants in a fairer-than-usual system.

Aspiring participants must still stake a certain amount of HBAR, which they can obtain through other means, to submit their candidacy. It's supposed to be a sign of commitment, but it also seems like a 'golden pass' situation, where less well-off participants have a harder time obtaining influence. It's not as harsh, but it's still a curious arrangement.

Hedera uses

Hedera runs on smart contracts, which ensures decentralization, scalability, and increased development flexibility.

Hedera is mostly meant for developers of decentralized apps, decentralized finance solutions, gambling platforms, and other projects. There are many features of Hedera that enable an easier understanding and implementation of many essential components of dApps, DeFi, etc.

There isn't really a single field, which Hedera focuses on in particular. However, a big portion of products created here are meant for finance, one way or another. The development and release of tokens and stablecoins are now a particular highlight of this network.

Since it works on smart contracts, you can expect an increased throughput. This, in turn, leads to higher processing speeds, lower fees, and better scalability. It's supplemented by other measures on Hedera, which ensures an incredibly scalable infrastructure with security, speed, and transparency at the forefront.

Advantages of Hedera

In short, there are several key advantages when it comes to the Hedera user experience:

Scalability and speed. It's what Hedera was partially created for in the first place. The smart contracts functionality, in addition to the streamlined consensus mechanism and low fees, make it an environment with a high potential for scalability.
Security. Security is the main highlight of the network, although it often goes unmentioned simply because you don't really see it in your day-to-day life. Security is upheld by several measures, including the aforementioned ABFT (asynchronous Byzantine fault tolerance) mechanism.
Development potential. There are plenty of ready-made SDKs (software development kits) that enable developers to start making things quick. Moreover, you can write your own smart contracts in great detail using the well-documented Solidity language.
Fairness. It's also one of the main points of interest on Hedera. By 'fairness,' they mean the act of distributing rewards and influence not by beating other participants but simply by taking part in achieving consensus. You're literally paid to vote, and that's unique and rather more fair than usual.

It's certainly not perfect or particularly better than other blockchains. It has a set of unusual and unique features, which make it an attractive network for a particular cut of users. It's also highly scalable, sustainable, secure, and friendly to developers. At the same time, it's not like it's two steps ahead of everyone else. It's neat, basically.