Is Hedera Hashgraph Secure, Fast and Fair?
Summary: The ‘trilemma’ is a three-fold conundrum that describes the largest problems with the current state of technology of the leading cryptocurrency platforms. The three issues that are not currently solved in the proof-of-work designs of coins such as bitcoin, ethereum and litecoin, involve problems with speed, scale and security. In this trilemma, each of the three variables of the distributed database systems cannot be equally optimized without one or two of them being degraded. In example, for the bitcoin core network to scale to a global level, security must be degraded by design through a third-party, custodial-risky ‘lightning network’ that merely smuggles in old legacy based database architectural systems in order to ‘speed’ up the network.
Scaling issues are even more tantamount to failure by their elaborate sharding, or database dividing strategies, that sacrifice on interoperability by subdividing database domains into smaller and smaller fragments in order to achieve higher speeds in transaction times. Finally, speed of finality of settlement is also degraded by the overly recursive nature of blockchain which requires multiple confirmations in order to probabilistically achieve consensus and secure the network in a delayed and non-enterprise ready manner (non-aBFT). There is no absolute finality of transaction with these systems, which consequently leaves a lingering sense of doubt with any cryptographic transfer of real world value.
Unfortunately, the underlying mathematical structures in the design of blockchain are not formally proven nor are optimized to bandwidth requirements at scale. However, a rival network with asynchronous byzantine fault tolerance (aBFT) and high transactional throughput has been achieved by an ingenious design in metadata communication after an initial gossip protocol to all network nodes. This Hashgraph network is able to achieve complete (100%) finality without any inefficient use of energy or bandwidth requirement in deference to its peer platforms.
Finally, the Hedera Hashgraph distributed database design allows an optimization in all three variables of speed, scale and security without degrading a single feature. This three-fold uncompromising winning strategy is nothing but extraordinary in the world of decentralized networking.
It will behoove the reader or potential investor to fully grasp the nature of these claims and the real-world demonstration of these features in the successful community test phase of the Hedera network in Q2 of 2019 in order to verify how remarkable this ‘trifecta’ truly is. Hashgraph even defeats the global VISA network in all three major variables. The informed investor that realizes the moat that HH will have in the cryptocurrency market will much more likely be able to predict hbar price swings and future hbar market cap value.
Introduction: Long before the advent of any decentralized, or distributed database architectural system, a common set of international servers was positioned throughout the world allowing an instantaneous network for data communications in finance. One kind of communication within this global network, was the aggregate sum of financial transactions between individuals, commercial institutions and the international banking system. Even before the advent of the modern credit card system, financial transactions took a snail’s pace to deliver transfers of currencies in a deliberately slow, controlled and centralized system.
Visa Network: In the mid 1970’s the Visa network appeared with a solution to the difficult problem of commercial and international financial settlement. Before this time, few transfers of wealth occurred due to the enormous security risk and uncertainty of sending value overseas. The entire credit card financial system did not exist before this and was fully invented by this amazing network. In the Visa principles of design were speed, security and scale. They were able to achieve all of these to a reasonable enough level that the world began an international exchange network that remains unrivaled to this day.
Also, in this financial technological (fintech) development was the development of a governing council to assist, direct and manage the complexities of regulating the technology and sociopolitical ramifications. It helped establish trust between institutions in a new order of credit transactions that has lasted to this day. An entirely new sphere of credit distribution allowed for an even larger expansion of synchronized global economic prosperity in the process.
However, as with many legacy systems, the Visa network left out some important details in the infrastructure of their technology. Even though the credit card industry went on to create unimaginable realtime forms of commerce in the decades to come, it left a critical variable out of the equation in its development. Visa never solved the trilemma that blockchain has tried to in its prolonged success since the 1970’s. Even though it was able to create a lightning fast credit system with human-acceptable transactional latencies of 3-7 seconds, it was unable to create a system with immediate and absolute finality. This would be left for another innovation in fintech.
PayPal: PayPal is arguably a contender to the Visa network but has also not been able to solve the difficulty with the micropayment model economy. All purchases through either the Visa or PayPal networks, requires fees well in excess of the underlying payment, thereby precluding payments below the nominal value of 1 US dollar.
Founders of PayPal, including Peter Thiel and Elon Musk, believed that their unicorn could create the global network of simple, frictionless payments via the internet and in the process made even more progress than the Visa network. In their design, PayPal created a privacy layer in the internet of payments that was not present before, allowing users to use one middleman layer to avoid exposing personal information to any other internet commercial organization by going through them.
Although this allowed PayPal to achieve wild success with internet based commerce as well as peer-to-peer payments, it did so with a hidden cost. That cost is the fee system that must insure each transaction and confirm its ledger in the legacy system of synchronization. Settlement still took days and cost more than necessary because of the multitude of middlemen industries involved in the transaction.
However, in the current state of technology, many improvements in system design have occurred that will effectively remove these unnecessary and superfluous services between peers with payments. What’s more is that the insurance fees and delayed settlement costs will be completely obviated. This may seem impossible but is only achievable in a distributed system of finance that is entirely unique to the Hedera Hashgraph ecosystem. The current CEO of PayPal has even gone on record recently stating that credit cards will not even exist in the next 20 years.
However, his viewpoint is self-interested and not respective of the much greater technology about to debut in the Hashgraph algorithm. “Dan Schulman said that as the popularity of PayPal and its mobile payments platform Venmo grow, traditional methods of payment will be replaced by digital alternatives.”
It is assured that digital payments, with privacy measures in a frictionless manner will dominate the future of internet commerce. Although PayPal has helped further the digital payment sector into the 21st century, it did so with several compromises. Those deficits in service include non-real time settlement, costly insurance for financial errors and custody as well as multiple legal hurdles of KYC (know-your-customer verification) and AML (anti-money laundering measures).
The most important of these limitations is the fact that when purchases are approved, and PayPal processes transactions, it does so without knowing for absolute sureness that the accounts are accurate and does not even update the common ledger in real time to assure that the next transaction will not also be false. This is a failure of the best security and is non-ideal.
Distributed Ledger Technology: PayPal may believe that they are the top performing digital financial technology in the world, but their ignorance to security and finality of settlement by relying on legacy systems will only be usurped by the burgeoning technology of Hedera Hashgraph. In this 21st century distributed ledger technology, not only are transactions settled in real time, they are also done without an insurance fee or needless middlemen fee and do not suffer from lack of finality. The network of distributed computers charges a minimal fee, 100’s of times lower than any legacy system.
The finality is referred to as asynchronous Byzantine fault tolerance and is unparalleled in the field of finance. That means that ALL accounts throughout the world are finalized in seconds, not days, and are available for another round of transactions with zero risk of double-spend errors. Both PayPal and VISA have this inherent and widely unspoken risk of double-spend. If one occurs they simply pay for the error and file to their insurance for recuperation. That is why they charge such outrageous fees on a daily basis. Because their technology is inherently faulty. They act like they are superior in security to any form of financial transaction, but they actually hide the true fact that they rely on countless other systems to provide the service they provide through counterparty reducing insurance and settlement agencies.
Hedera Hashgraph: Hedera Hashgraph (HH) achieves an amazing set of features well above and beyond the VISA and PayPal financial platforms. As described, HH allows for absolute finality with each and every transaction with no sense of insecurity and is referred to as aBFT. No current or conceivable blockchain is even capable of this feature.
Speed: Even more, HH can do these transactions nearly as fast as the speed of light, completing them within 3-7 seconds of latency due to the breakthrough development of the Hashgraph algorithm and network.
Security: The security of Hashgraph is unquestionably above the traditional payment systems as described. The speed is also comparable or even better than the current global payment system. In fact the speed of Hashgraph is literally only limited by bandwidth requirements and the number of nodes in the network. This achievement is nothing but remarkable. As an investor, the pending supplanting of legacy credit and debit card systems, as validated by the current CEO of PayPal is clearly imminent.
Scale: Lastly, the scale of the Hedera network is also unprecedented in cryptocurrencies and should propel the hbar to a price well above its peers relatively speaking, based on these three critical metrics. Scaling to a global real time payment settlement is inherent in the design of HH, easily on par with any legacy payment system.
This ‘trifecta’ or trinity of technological innovation in Hashgraph is unparalleled in modern financial technology (fintech). It achieves the impossible by providing these three vital elements of speed, scale and security without compromising any single one of those variables. This is verily untrue of the VISA network, PayPal and any contemporaneous blockchain design. Hedera allows for a totally new payment model where nothing is compromised for the user except in the positive by the transaction fee which is estimated to be less than one 1/1000th of a US penny.
Focus Point: For those interested in this new global real time settlement payment system, capable of doing what no other fintech organization has ever been able to perform, it is helpful to understand the leap of this technology. The prediction of future coin market cap of hbar will be directly reliant upon it. Without understanding the quantum leap in fintech improvement, an investor could easily be misled to sell at an inopportune time. Grasping the advantage in this new economic model of financial transfer system, with less fees, greater security and equal if not greater performance will enable one to make cogent investment decisions in the next cryptocurrency bullrun.
Hedera Hashgraph is fast, fair and secure, improving on all technological levels in a way that other payment systems have not. Hashgraph usurps the past legacy systems, offering new services not previously possible in a way that was previously thought impossible. It would be wise to understand all principles in this discussion in order to predict marketcaps and hbar prices. Moreover, an astute believer would also align themself with a product or service that improved upon legacy or traditional systems of finance. It is only a matter of time before HH fully validates these beliefs in the marketplace.