Introduction: Cryptocurrency is not an easy thing to explain to friends, family and non-technical individuals without referencing a strong and pertinent use case in their lives. When Bitcoin debuted to market in 2009, an incredibly small innovative group of people envisioned a future of censorship-resistant peer-to-peer electronic currency. Building on this idea, the Ethereum network opened to market in 2015 with the additional value addition of Smart Contract to the digital currency space.
In the ensuing time since Bitcoin and Ethereum’s release, many challenges confronted the blockchain movement. The three-fold difficulty of achieving global scale, while maintaining the highest security and the most decentralization have still not been overcome. This is called the Trilemma and despite the 1000’s of competitive blockchain projects since the original Bitcoin, none have resolved it.
Hedera Hashgraph is a novel distributed ledger technology that overcomes the majority of pitfalls of blockchain design and fully resolves the Trilemma with high speed of transactions, while maintaining bank-grade security and global decentralization. This was achieved by the invention of the Hashgraph consensus algorithm, which uses an alternative data structure called a DAG, or a directed acyclic graph. This is not like a blockchain in design, but similar in network effects.
Hedera Hashgraph uses a utility token called an hbar coin, or cryptocurrency like Bitcoin and Ethereum. The hbar token fuels all transactions in order to confirm user intentions and provide security. Each internet request of the Hedera Hashgraph network incurs a cost that is one of the lowest in all of cryptocurrency, amounting to nearly 1/1000th of a US penny. Despite this tiny cost, hbars are necessary for powering Smart Contracts and Secured Files stored on the network. Many possibilities begin to appear when the combination of a high-speed and secure network allows all kinds of use cases in commerce with hbars.
Hbar Speed: Unlike blockchain distributed ledgers, Hashgraph technology is capable of amazing throughout and speeds in the range of 100,000 transactions per second (TPS), faster even then the Visa Payment network at peak usage (57k TPS). With this speed, hbar coins are able to secure the network from internet assaults, such as distributed denial of service (DDoS) and botnet attacks (one or few hackers using multiple accounts to stop consensus). The hbar coin acts as a security measure on the network so that DDoS and botnet attacks incur a high cost to attackers, thereby reducing their frequency.
Hbar Security: Hashgraph technology also permits the first-in-class achievement of a mathematically-proven level of security in decentralized networks that is fully equivalent to the protection of international banks. This property of the Hashgraph public network is called asynchronous Byzantine Fault Tolerance, or aBFT. The majority of blockchain networks have only achieved BFT or practical BFT (pBFT) security which means that decisions about the network never perfectly reach full finality but an approximation of it with each additional confirmation block.
The hbar coin in this case is used as a transaction device that confirms that the user is invested in the network and has good intentions to utilize the platform. Hbar tokens are used with every transaction with perfect finality in seconds, not in minutes or hours. Having 100% finality of hbar coin transactions allows some amazing and unique benefits to Hashgraph. A multitude of use cases are possible with the fully-featured Hedera Hashgraph pubic platform including hbar cryptocurrency, smart contracts and secured distributed file storage.
Hbar Decentralization: The lack of no central authority is the simplest definition of a ‘decentralized’ network, but still requires further elaboration to gauge the full degree of distributed power in a cryptocurrency. In the design of the governance of the hbar token are many innovative ideas that may be misunderstood by the current digital currency community.
Hedera Hashgraph is a limited liability company, or LLC, that was organized around a permanent and irrevocable license to use the Hashgraph algorithm. In order to further distribute controls, The Hedera founders decided to use a system of governance that has been successful for decades in the Visa Payment network. The public platform of Hedera will be held in stewardship, but not ownership, by 39 globally-distributed, multinational mega-cap trusted companies and organizations. These Governing Council members will have 3-year terms, must be elected and can only serve two total terms.
Having governance distributed regionally by geography, business sectors and time-limited terms is a novel idea in cryptocurrency. Hashgraph believes strongly that a digital currency without governance is not preferable to mass market adoption. Appealing to large enterprises that can rapidly scale decentralized solutions is the route that Hedera has chosen to go to market. How the market will react to this approach is to be determined.
Nevertheless, with blockchain still not reaching the general user and mass market it has hoped for, a certain allowance to experiment is certainly reasonable. Governance is a major issue in cryptocurrency where de facto or default groups end up controlling a massive amount of wealth for others without any written constitution, enforcement or revocation services for errors. It seems that cryptocurrency is due for a change in this regard since insider critics have recently spoken about the failures of network governance in Ethereum and Bitcoin in social media.
Hbar Coin: The predominant use case of the Hashgraph token is fundamentally the same as the original intention of the Bitcoin Whitepaper, to create a censorship-resilient, peer-to-peer electronic form of cash. This network should have no central monetary issuing authority, it should maintain a fixed supply of hbar coins and use a decentralized peer mesh network to avoid being dismantled by any one entity. Bitcoin has brilliantly proven that this is achievable and has avoided all kinds of network attacks with no reported hack or double-spend in nearly ten years. This is in strong contradistinction compared to gross and miserable daily hacks of credit cards as well as personal data in central servers of banks, businesses and social media giants.
Hbar cryptocurrency is truly set apart from the pack in functionality in regards to speed of finality and the lack of needing multiple confirmations to complete a spend. In a high-speed, mobile phone era where attention-span is limited to seconds, not minutes or days, a cryptocurrency has to perform at a level at least equivalent, or even better than current payment technology to gain market share.
Let it be known, that with the hbar coin, a new set of disruptions is about to hit the market in regard to the multi-billion dollar credit card industry and their decades long control of instant payments. The use case of cryptocurrency instant payments is the next most fundamental improvement that could occur next to peer-to-peer electronic cash: p2p electronic credit.
Credit Cards: It may seem a stretch to think that cryptocurrencies could ever rival the modern credit card (CC) industry. However, when all the facts of the credit card industry are exposed, including the delay in final remittance, the high fees for the smallest transactions and the blatant fraud that occurs on an annual basis in the billions of USD, it may seem much more plausible.
Currently, the credit card industry garners nearly $60-80 billion USD annually in fees that range between 2-3% per transaction. Visa and Mastercard are some of the top earners for investors such as Warren Buffet and large institutional fund holders. However, what is less spoken about in the credit card industry is the underlying technology used to create the “instant” credit card transaction.
Visa Credit Cards: When a person uses their Visa credit card, a magnetic strip is swiped or a chip accessed to confirm a private key that allows for an encrypted message to reach the Visa network within a few seconds. When this data is received, the Visa servers respond to the transaction by returning an approval if the funds are considered available, and a denial if not. However, what is not confirmed is the remittance of the transaction.
A remittance is a formal term that refers to a finalization of payment that can not be reversed. In the Visa network, no credit card is ever finalized to a distributed ledger with 100% finality in seconds. Instead, a shortcut is used to support real-time commerce with fast transactions, but by compromising security of double-spends. When the Visa network finalizes a credit card payment, it has to confirm that all global ledgers are in sync, match without error and then on a daily or more basis are finalized to a centralized ledger, or account balance. This process is hidden from the consumer and only shows up in monthly billing statements.
What also happens in a traditional credit card transaction is the hidden fee of insurance that all payment providers have to incur to counter fraud. Credit card fraud is one of the largest uncontrolled scandals in finance and amounts to countless billions of dollars per year in losses. To counter these losses and to maintain market share, corporations like Visa and Mastercard have to insure themselves. This insurance cost is then deferred to the user in the “bundled” transaction fees that they are charged. It is yet another mechanism by which credit card fee inflation can occur.
Finally, in traditional financial payment systems like the credit card industry, there is yet another layer of hidden cost that is deferred to the user. The other cost buried in a credit card transaction fee is the administrative cost to support the network. Any major CC company must hire a large amount of agents in order to facilitate the amount of paperwork, credit verification and monthly transactions that occur in a network.
In the case of Visa, a large amount of human labor is spent in creating statements, mailing or emailing billing statements, confirming payments, and many other duties that update ledger information. It is in this critical difference between the modern credit card industry and the efficiency that hbar cryptocurrency provides that could provide the next major financial tech disruption in payment systems.
Hbar Credit Cards: The Hedera Hashgraph network is a distributed ledger technology (DLT) that can be used to form a common ledger of accounts, just like a credit card industry, without any individual agent or middleman. The Hashgraph ledger is able to record every transaction within seconds with full remittance, meaning that no further human action is necessary to confirm that the transfer took place. That fact translates into real-time efficiency that does not currently exist in the modern fintech market.
The absence of a human middleman or go-between means amazing cost-savings for the average user. The absence of unnecessary and costly human labor as well as low overhead allow the Hedera network to rival the entire fintech market. In the hbar coin economy, transactions can occur at the speed of commerce (in seconds) with full finality and never need another human to tell your account that it is correct. Hashgraph technology takes care of all of the middleman steps performed by legacy credit card institutions by using a distributed ledger.
The fact that Hashgraph technology can maintain a common referential statement of accounts, without any human assistance and with proof that it is incorruptible should give all legacy financial administrators pause. Hashgraph is able to manage a multibillion dollar financial system while cutting out billions of dollars in unnecessary expenses. Moreover, the fees of the hbar coin are literally miniscule, nearly 1/100th to 1/1000th of a US cent. This critical difference between the CC industry fee schedule and the revolutionary low fees of the Hedera network will allow for a major disruption in payment providers yet to come.
Hbar Micropayments: A fundamental limit to all current payment providers is the inability to process payments below $1 US dollar without incurring a large relative percentage fee. Although this is discussed in other articles in detail, the basic infrastructure of human administrative cost, hidden insurance fees for CC fraud and baseline costs of these networks just cannot support any payment lower than $1 USD.
Because transaction fees are so incredibly low compared to conventional payment options in the Hashgraph network, hbar coins can be transferred in some of the smallest fractions in real-time. For instance, if a person wished to send another peer a small tip for an article or video on a website in the amount of $0.10 US cents, the hbar fee would be nearly $0.007 US cents to do it. The hbar coin is divisible to a 100 billionth of an hbar and is capable of being sent in the tiniest amounts without incurring a prohibitive cost like with traditional payment providers.
The feature of incredibly low fees while still sustaining top speed, security and decentralization allows the hbar token the ability to be used in all kinds of new payment methods. Tipping YouTubers for interesting content, even as low as $0.05 US cents is completely feasible. Paying only $0.05 US cents for a Wall Street Journal article, without having to pay for a full monthly subscription is another amazing application of the digital currency network. Many other applications are possible from online gambling, penny lotteries, and even sub-penny charities with full transparency of operations and fund usage.
The internet was never designed with a security layer nor with a feasible online payment solution. Many ideas have come to market with PayPal, Venmo and Square in the digital payments sector, however, none have fully resolved the problem of micropayments in a practical manner. The hbar coin may be able to create this innovative micropayment industry that could create all kinds of spin-off industries and applications. An exciting potential use case could be in the form of social media rewards and a peer-to-peer micropayment economy that finally gives back to content creators on places like Facebook, Reddit and Twitter.
Micropayment Tips: The Bitcoin network received a boost from the likes of Twitter when it was announced that Bitcoin tips could finally be offered on the social media site. Many Twitter followers applauded the development and praised the p2p nature of tipping and rewarding original content creators for their efforts. What’s more is the fact that tipping through media outlets like Twitter also forms a proxy voting system through monetization for the creators that the public wants to hear from.
However, the downside to the Twitter tipping application using Bitcoin is not exactly as it seems to be. If one investigates the exact mechanism by which a Twitter handle is ‘tipped’ for a comment, it will become clear that ‘under the hood’ the benefits of cryptocurrency are not fully present. In the case of the Twitter tipping app, an elaborate third-party circuit has been created that facilitates delivery of Bitcoin to a Twitter member by using traditional methods of payment delivery.
Bitcoin Tips: The function of the Twitter Bitcoin tip app uses a gift card service through a third-party custodian to buy and later deliver Bitcoin in an off-chain solution. This unseen transaction does not offer the security nor scale of a high-speed distributed public ledger. Instead, the app leverages traditional payment systems in a delayed, complex and slow method to buy, swap and finally deliver Bitcoin to a Twitter account user. It does not offer the on-chain irrefutable and directly secure transaction in the ledger that many have come to trust in the Bitcoin network.
The Lightning Network is no different in design, by using legacy payment solutions off-chain to help Bitcoin bypass the Trilemma. Bitcoin simply cannot meet consumer demand through micropayments and rapid p2p transactions without incurring high fees ($0.50-0.60 USD), even with low network usage. Instead, what is needed is a public secure network that can match the speed of the internet, tweets and text messages while still improving on the payment systems of today.
Hbar Coin Tips: With hbar cryptocurrency, the speed of transactions fully parallels the internet and maintains bank-grade security with aBFT finality. If an hbar coin tip is sent to a Twitter handle, the settlement of that hbar coin is directly delivered to the intended person’s wallet within seconds with no third-party risk. What’s more, is that Hashgraph technology is also able to let Twitter run a Mirror Node that copies the entire Hahsgraph in real-time and can be used to confirm reception of all tips. In this scenario, Twitter could create a ‘confirmation’ of tip reception in real-time to demonstrate the validity of the transaction.
The future of peer-to-peer financial transactions will require a robust and secure network capable of global throughout while maintaining the highest level of security to prevent hacks and data breaches. There are few cryptocurrencies that can even boast to accomplish this, but based on the published performance specifications of the Hedera Hashgraph public network it is clear that hbar coins could be at the center of this new economy.
Hbar Smart Contracts: Smart Contracts (SC) are a novel term in internet culture, but the concept is quite simple. Using a small software program to add features to a digital payment, or what is called, ‘programmable money’ is the essence of a Smart Contract. Ethereum was the first network to add this innovative feature to cryptocurrency at its debut. Many public digital currency networks have also attempted to offer this service, but to date, have not been able to deliver a useable, real-time solution that could easily be adopted by simple users and major enterprises.
The Hedera public DLT built on the Hashgraph algorithm has also attempted to create the ‘programmable’ currency of the internet but with a new offering. Instead of having a long latency of Smart Contract transactions, Hedera has the performance specs to expedite these network interactions with lightning speeds to match real world commerce expectations.
As a background, it is important to note that a typical cryptocurrency payment transfer from p2p typically uses on a few hundred bytes of data to execute in Hashgraph (~140 bytes). This is the usual transaction size that is sited in order to discuss performance characteristics of any public digital asset network. However, when it comes to Smart Contracts, this data size can be significantly higher and demand much more time and cost in network fees to finalize.
With Hashgraph technology, the upper limit of transaction file size is 4 kilobytes and requires an hbar coin fee with each sending transfer. If a Smart Contract has to execute code regarding an hbar payment that requires more than 4 kb of data, it will simply send the total file in packets of 4 kb, each with a tiny hbar fee until fully executed. This is a fundamental limit to all SC platforms and will require high throughout and low latency of transactions as well as low fees in order to be practical in everyday use. Fortunately, Hashgraph was designed with all these demands in mind in regard to functionality and has been optimized to support one of the fastest Smart Contract platforms to date.
Hbar Smart Contract Use Case: In order to understand the use of Smart Contracts in the age of ‘programmable money’, an interesting application can be imagined with the improved ability to escrow funds without a third party. Escrow is a financial term referencing when a third-party holds funds between two parties that wish to exchange valuables for currency in a three-way transaction. In this traditional process, a buyer and a seller agree to use a ‘trusted’ additional person, or third-party to facilitate the transfer of the purchase.
If all is executed without a problem, the buyer receives the goods after depositing the funds with the escrow agent and then the seller receives the funds after the goods are fully delivered. The escrow agent earns a fee for the service and acts as the arbiter of the trade. In today’s economy, escrow agents make up a billion dollar industry for their services and incur a middleman fee to many industries including residential and commercial real estate, financial services, stock and bond equity markets and many more.
With the innovation of the Hashgraph Smart Contract function on the Hedera network, the entire escrow industry could be upended. Instead of paying a high fee middleman industry, a small software program built into the hbar coin transaction between buyers and sellers could completely eliminate the need for human escrow. What’s more is that the fee for the process could be dramatically reduced since only the network cost is required in the Smart Contract service. Since no human intermediary is required, less cost is incurred, speed of transactions are much faster and no ‘third-party’ risks are undertaken in the process.
Hbar Decentralized Exchange: A fantastic example of the hbar Smart Contract functionality could be in a globally Decentralized Exchange Server for real-time hbar exchange transactions. Current cryptocurrency exchanges rely entirely on ‘third-party’ custodians that have been hacked, stolen from and even embezzled funds from users by exchange management in the range of millions to billions of US dollars. A solution to this madness is the use of a completely Decentralized Exchange (DEX).
In the design of a DEX, a user is able to interact with an open marketplace for a digital asset through the internet with no middleman or intermediary. In this arrangement, someone that wishes to buy hbar or sell hbar could make bids or asks for the coin without ever having to trust a single custodian, exchange or escrow agent. Instead, a Hashgraph Smart Contract could facilitate the escrow of funds, while a
buyer initiates a trade and a seller accepts. The hbar coin or other tradable digital asset would be delivered at the exact same time the funds were in an even and fair trade if all conditions are met.
The push towards a complete Decentralized Exchange solution has been initiated by many influencers in the cryptocurrency ecosystem, even by the largest crypto exchange, Binance. Although Binance is the largest ‘centralized’ exchange and would lose revenue to such a system, its CEO CZ has actively endorsed the process. Additionally, many believers in the movement towards fairer exchanges with less custodial risk feel that this is the natural progression of the marketplace and that the future will be dominated by popular demand. An hbar DEX built completely on the Hashgraph algorithm with fairness, low fees and fast Smart Contract execution is one more strong use case for the Hedera DLT.
Hbar File Storage Use Case: An additional feature of the Hedera Hashgraph network is the ability to store and delete files in a novel way than with legacy database systems. Because the Hashg