Hedera Hashgraph Brief Overview


7 min read
Hedera Hashgraph Brief Overview

Spoiler Alert: We're going to refrain from diving into this one for the time being (and more than likely for the future, in the long-term going forward).

There was a hefty external analysis that we published on Hedera Hashgraph a little while ago (will be found and re-published here following this piece).

But in the meantime, let's take a look at Hedera Hashgraph and what they have to offer us currently.

Fundamental Analysis

This won't be an overview of the project, but rather a peripheral look at the 'what's going on' for the project at the time of writing.

Twitter Page For Hedera Hashgraph

The link to Hedera Hashgraph's Twitter Page = https://twitter.com/hashgraph

Below are some screenshots showing the most recent tweets from Hedera on Twitter:

Conclusion on Social Media Activity

There is absolutely nothing worthy of note going on, on Hedera Hashgraph's Twitter page.

No impending additions, launches, etc. - just general information about the project being shared around.

It is worth noting that Hedera's Twitter account is verified...for what its worth. So it seems that the team isn't shy about spending money where it matters in order to ensure 'social proof'.

This may also be due to the fact that Jack Dorsey seems to be much more concerned about the promotion of the blockchain space for the sake of his own personal investments in Lightning Network + Bitcoin via Cash App, but that's another story.

Hedera Hashgraph Leaves a Bad Taste in My Mouth

"Why?"

Its nowhere near a blockchain protocol.

Promised that we wouldn't dig back into all of the 'ills' of Hedera Hashgraph at the beginning of this piece, but it seems inevitable at this point.

What is Hedera?

Per their website:

"Hedera is a decentralized public network for you to make your digital world exactly as it should be – yours. Whether you're a startup or enterprise, a creator or a consumer, Hedera goes beyond blockchain for developers to create the next era of fast, fair, and secure applications."

This description is opaque to say the least - but its what Hedera has decided to give everyone to work with on the front of their website.

Purposeful Mischaracterization of Bitcoin to Elevate an Inferior Model (Hedera's Proof of Stake)

See below:

The most problematic statement is the idea embodied in the following excerpt:

"Bitcoin pioneered decentralized infrastructure and Ethereum brought programmability. But earlier proof-of-work blockchains consume massive amounts of energy and process transactions slowly in order to achieve acceptable levels of security."

Bastardization of Original Concepts and Motivations

To be clear, Proof of Work (as implemented in blockchains) does not consume "massive amoutns of energy", in order to "achieve acceptable levels of security".

Massive Energy Consumption is a Byproduct of an Expanding Ecosystem

The reason why the cumulative Proof of Work endeavors of all miners on Bitcoin's protocol generate so much energy is because there are so many of them.

However, Proof of Work, by itself, does not dictate that there be a finite number of miners on the protocol.

For instance, there could be...only three miners mining blocks on the Bitcoin protocol and that would be sufficient, in itself, to ensure that the protocol continues in perpetuity (as long as those miners are mining).

One can imagine that the energy consumption from those miners would be negligible, at best. Moving forward from that fact alone, it should be evident that Proof of Work, by itself, is not the cause of massive energy consumption but rather the consequence of an ecosystem the size of Bitcoin's (miner-wise), leads to an enormous amount of energy being consumed daily by the aggregate efforts of any and all miners on the Bitcoin protocol performing 'work' toward solving any given block height in that 24-hour period.

Mining's Purpose is Not to "Achieve Acceptable Levels of Security"

To begin with - there is no 'acceptable level of security'. This is an imaginary benchmark that was not iterated as a goal by Satoshi Nakamoto at any point in time during the inception, presentation or rollout of Bitcoin.

Additionally, the purpose of mining itself is to serve as a trustless means of validating transactions on the protocol by providing a 'timestamped', chronologically numbered appeneded block to whatever existing blockchain possesses the greatest Proof of Work.

By making this process a 'competition' (via Proof of Work), Satoshi created an open ecosystem where any and all ecosystems are able to participate in this 'mining' process.

The 'coinbase' (AKA block reward) that miners receive serves as the protocol's organic incentive to motivate the continued mining of blocks for the protocol.

Proof of Work Provides a 'Hedge' Against Attack

Proof of Work ensures that there is a cost for "attacking" the blockchain. This 'cost' in combination with the following facts is what not only protects the blockchain from attacks, it 'hedges' it by making it an illogical / financially averse decision in the following ways:

Providing an ever-increasing cost associated with the failure of an attacker to reorganize the blockchain on each additional block height that they fail to reorganize the main chain (no reward for mined blocks if those blocks cannot be appended to the blockchain with the greatest Proof of Work).

Opportunity cost forfeited by the attacker for choosing to work in competition with the 'main network', rather than in concert with the main network. This opportunity cost is steep when considering the attributes of an entity with the requisite resources to successfully 'attack' / 'reorganize' the blockchain (i.e., erect a competing, alternative version of the blockchain that possesses a greater Proof of Work than the 'main network' blockchain). An attacker that possesses such resource, also possesses the ability to outright win blocks.

Hedera's Fill-in Proposal of a 'Proof of Stake' Chain is an Outdated Model

Plenty of projects adopted this pseudo-improvement over Bitcoin's consensus mechanism, such as:

  • Solana
  • $NEO
  • Ontology
  • Cardano
  • EOS
  • Cosmos / Tendermint-based protocols
  • Truechain

Plenty others.

Nobody is Buying This Idea Anymore

After the proposal has been iterated over again in a million different ways (with the same disingenuous argument of providing an inherent benefit over PoW protocols via an inferior PoS model), the 'illustriousness' of such an idea has receded greatly.

Hedera Hashgraph Does Have the Benefit of Multiple Large Organizations Behind it (It Appears)

Again, this is not a novel concept - but $HBAR pushes the concept of validators for the protocol that are, in essence, large multi-national corporates with highly visible brand names.

Each of the names above are allegeldy a part of Hedera's "Council" (https://www.hedera.com/council).

Meaningless Additions

Again, there are enough people in the blockchain space (at this point in time), that seem to at least understand that the core benefit of blockchain (if a project is to posit itself as an improvement in this space) is that it allows one to transact with other users of the protocol without being forced to route decisions through large, corporate conglomerates (which is the antithesis of what Hedera Hashgraph proposes).

Hedera's Value Offering is Simple

Its clear to most that what Hedera is building is something that isn't even remotely similar to 'blockchain'.

However, that's not the point.

Hedera is Proposing a Social Proof Investment

The idea if or users to visit their site and be impressed by the names of large corporates / highly visible organizations that have allegedly hopped on board to be a 'node' / 'validator' / 'governor' / whatever on Hedera's protocol.

This social proof is meant to assuage any and all fears that investors may have by virtue of the age-old argument that says:

"Well surely if ____ is involved with these guys, then there's no way that they can't be legitimate. Also, since ____ is involved with them and supposedly helping them out behind the scenes, these guys probably have a really legitimate idea. Sure, I may not be able to understand the nuances of what they're proposing, but that's simply because this stuff is over my head. These companies are way too legit to affiliates themselves with bullshit - so there's really no reason for me to worry about it. This is guaranteed money."

Don't laugh - because that logic holds a lot of weight and not unreasonably so when considering the number of fraudulent, nebulous blockchain projects that have passed through this space over the past years, scamming an unspeakable amount in user funds during their short tenure.

Surely You're Overstating This 'Council' Thing Right?

Nope.

See below:

As you expected, those on the 'council' essentially call the shots on everything that happens on the protocol. And this isn't even a hidden fact.

In fact, its one of the attributes of the protocol that Hedera markets the hardest.

Conclusion

In a brief follow-up to this piece, we're going to go ahead and look at the price action for Hedera Hashgraph (spoiler alert: nothing to write home about).

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