What is Hedera (HBAR)?

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The challenge in the history of blockchain networks has been finding the right equilibrium among decentralization, security, and scalability – commonly referred to as the "blockchain trilemma." Achieving this balance requires making design trade-offs and presenting challenges for enterprises, institutions, and governments seeking highly decentralized platforms with substantial throughput. This is where Hedera seeks to play a crucial role. In this article, we go over the Hedera ecosystem, HBAR, and its use cases.

What is Hedera

Hedera is a Proof of Stake (POS) smart contract platform created for cryptocurrency transactions and decentralized applications. This network stands out from traditional blockchains with its innovative use of a directed acyclic graph (DAG), offering exciting possibilities and potential for growth. Unlike conventional blockchains with a linear sequence of blocks, DAG employs parallel processing among groups of network computers (nodes). Using a randomized structure allows for the simultaneous verification of node connections, making it stand out from similar platforms.


The Hashgraph Gossip Protocol, a directed acyclic graph (DAG) developed by Hedera, is specifically designed to tackle various issues. Hedera's team aimed to create a versatile network suitable for real-world applications such as healthcare, financial services, supply chain management, decentralized finance (DeFi), and facilitating payments through central bank digital currencies (CBDCs) and stablecoins.


To support the ecosystem, Hedera utilizes the HBAR token. This token serves as a payment mechanism for various purposes, including dApp development, transaction and smart contract fees, and governance processes crucial in shaping the network's future.


Who created Hedera?

In 2017, Hedera was established by Leemon Baird and Mance Harmon, American technologists who also founded Swirlds Labs, the entity responsible for creating Hedera's foundational technology. Both founders bring extensive experience in software development and the tech industry, with expertise spanning AI, security, defense, identity, and more.

The HBAR Foundation oversees the development of Hedera, and its governance falls under the Hedera Governing Council, which comprises up to 39 enterprises, such as Google, Dell, and IBM. The Hedera Governing Council plays a key role in decision-making.


How does Hedera work?

The Hedera platform comprises three distinct frameworks known as Hedera Network Services, which play integral roles in the network's operation:


1. Hedera Token Service (HTS): Facilitates configuring, managing, and transferring native fungible and non-fungible tokens (NFTs).


2. Hedera Consensus Service (HCS): Enables the recording of transactions and other event data logs on the Hedera network, including governance decisions and the tracking of supply chain assets.


3. Hedera Smart Contract Service: Empowers developers to deploy smart contracts using diverse programming languages, including Ethereum's native Solidity language. This facilitates the creation of decentralized applications (dApps) on the Hedera platform.


At the core of Hedera Network Services is the Hashgraph Gossip Protocol, a consensus algorithm enabling seamless functioning of the three main components.

Hashgraph Gossip Protocol

Hedera's Hashgraph uses the Gossip Protocol, a distributed ledger tech based on DAG. It prevents any node or group from controlling the network or disrupting its consensus.

To ensure that all nodes in a network agree on the transaction history and the legitimacy of current transactions, they share information. This process is called "gossiping". Afterward, the shared information is checked for accuracy, called “gossip syncing.”

Timestamped events are generated on-chain by nodes to confirm the verification of gossip syncs. Once this is completed for each consensus round, representing a time-based segment of network procedures, the process resets and iterates, maintaining its balanced operation.

Hedera (HBAR): Use cases

Hedera provides enterprise solutions and network services for private closed blockchains, also known as Permissioned blockchains. It's important to note that the public blockchain utilizes the HBAR token, similar to prominent open public blockchains like Bitcoin and Ethereum.

Moreover, Hedera is designed to cater to applications associated with decentralized identity, remittances, and fraud prevention. It also serves as a platform for decentralized finance (DeFi) applications, play-to-earn (P2E) gaming, and metaverse functionalities.

How does HBAR work?

Directed acyclic graph (DAG) protocols, such as the one used by Hedera, utilize a graph-like structure where transactions are created simultaneously. In a DAG context, the term "acyclic" signifies the absence of cycles, preventing repetitions or looping during consensus. Instead of a linear progression like a traditional blockchain, DAGs are "directed," appending blocks in one direction.

Hedera's consensus model is built on a DAG, complemented by a Proof of Stake (PoS) staking mechanism. Unlike traditional PoS systems where stakers choose a specific amount of cryptocurrency to stake, Hedera's approach automatically stakes the entire account balance to the selected node or account. 

The Hedera validation process doesn't involve token "bonding" or "slashing." A minimum stake of approximately 460 million HBAR is needed to operate a validator node, with a maximum stake capped at around 1.85 billion HBAR. Currently, 27 enterprises are contributing to governance with a validator node, which could increase to 39.

Users can also delegate their HBAR to other nodes through proxy staking and receive a share of rewards based on the percentage of HBAR delegated."

HBAR serves multiple purposes within the network, such as serving as a payment medium for dApp development, covering transaction and smart contract fees, and participating in network governance.

Token distribution

The total supply of HBAR tokens is limited to 50 billion. All tokens were distributed with a vesting schedule that spans 15 years. Around 23.9% of these tokens were designated for ecosystem and open-source development, and 22.26% for purchase agreements from early investors. 14.77% was allocated for network governance and operations, and 7.74% for initial development costs and licensing. The remaining 31.33% is unallocated and will be used based on a voting process facilitated by the Hedera Council.

How to use HBAR in Tangem Wallet

You can transfer Hedera to your Tangem Wallet via your wallet address. 

Here's what you have to do:

1. Open the Tangem app by scanning your card.

2. Tap Manage tokens.

3. Enter Hedera in the search bar

4. Tap on the arrow next to the token name, and the list of available networks appears.

5. Enable the networks you want and tap Save changes. You may need to scan the card again.

6. Once HBAR has been added to the home screen, tap on it, and you'll see the public address below the "Copy" button.


Frequently Asked Questions (FAQ)

What is the purpose of the Hedera network?

The Hedera network is built for creating decentralized applications (DApps) across a wide spectrum of use cases. These include supply chain management, healthcare, decentralized finance (DeFi), payments, finance, banking, stablecoins, and central bank digital currencies (CBDCs).


How does Hedera differ from traditional blockchains?

Hedera uses a directed acyclic graph (DAG) structure instead of a linear blockchain. This technology choice enhances scalability, speed, and efficiency, providing a decentralized solution for private enterprises.


What is the HBAR coin?

HBAR is Hedera's native coin and serves various functions within the ecosystem. It is utilized for network governance, application development, executing smart contracts, and covering transaction fees.


What are the key use cases for Hedera (HBAR)?

Hedera's versatility extends to supply chain management, healthcare applications, decentralized finance (DeFi), payments, traditional finance, banking, stablecoins, and central bank digital currencies (CBDCs).


How is HBAR used in network governance?

HBAR is utilized for voting and decision-making processes in the governance of the Hedera network, allowing token holders to participate in shaping the platform's future.


Can I build decentralized applications on Hedera?

Absolutely. Hedera is designed to support the development of decentralized applications, providing a robust platform for developers to create innovative solutions across various industries.


What makes HBAR a valuable asset?

HBAR's value lies in its multi-faceted utility within the Hedera ecosystem. It is crucial for governance, incentivizing development, executing smart contracts, and facilitating transactions on the network.