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Blue Fox Notes

(ID: lanhubiji), the author of this article: Blue Fox Notes, reproduced by Odaily with authorization.

Someone recently tweeted that if Ethereum wants to go mainstream, it needs to solve the three problems of scalability, usability and privacy. V God, the founder of Ethereum, responded that a security needs to be added.

We all know that the blockchain has problems of efficiency, security, and decentralization. However, in order to truly realize the value of the blockchain and at the same time enter the mainstream crowd, all three are indispensable. Therefore, the efficiency of the blockchain has always been one of the problems that practitioners most hope to solve. If it cannot be expanded, the transaction speed cannot be increased, and the transaction fee cannot be reduced, then the blockchain cannot enter the mainstream population, nor can it support the larger-scale development of the industry.

At present, there are many explorations for expansion, including consensus algorithm improvement, sharding, layer2, side chain, cross-chain, etc., from on-chain expansion to off-chain expansion. In addition, in addition to the blockchain, there are other distributed ledger projects that are also seeking for decentralized expansion, such as Holochain, Hedera Hashgraph, etc. It needs to be mentioned here that neither Hashgraph nor Holochain is a blockchain.

Let's take a look at how the Hedera Hashgraph platform thinks about and solves this problem? How to achieve higher performance under the premise of ensuring decentralization and security? How to give it a chance to finally reach the mainstream crowd? Will it achieve mainstream adoption sooner than blockchain?

It should be noted that hashgraph is a data structure and consensus algorithm. This article describes the Hedera Hashgraph platform based on the hashgraph consensus algorithm. What scheme does it try to reach the mainstream crowd? The reason why the hashgraph is used in the title is because it is the core technology adopted by the Hedera Hashgraph platform, and it is also the technology with its own characteristics, and it is also a sharp tool for breaking through the efficiency barriers of the current blockchain.

Five Questions You Need to Solve to Go Mainstream

All distributed ledger technology projects are well aware that if they can only solve security and decentralization problems, then in the end, their value and impact will be limited, and they can only be used by relatively small groups of people. Therefore, they are all trying to find a path for trade-offs or a path for fundamental breakthroughs.

The Hedera Hashgraph network obviously has the same appeal. What is impressive is that Hedera Hashgraph not only considers performance and security, but also considers governance, stability and compliance. From this point of view, it has made more comprehensive trade-offs under the current reality. This has certain advantages for the current landing.

So, what are the five key issues that Hedera Hashgraph sees towards mainstream adoption? It includes performance, security, governance, stability, and compliance.

At present, Bitcoin can process about 7 transactions per second, while Ethereum can handle about 15. Compared with credit cards, there is still a big gap. If you compare it with Facebook’s transaction throughput, the gap is even further. There are hundreds of thousands of likes per second, which is currently beyond the reach of blockchain and other distributed ledger technologies. And Hedera Hashgraph tries to meet the performance requirements of mainstream adoption and achieve hundreds of thousands of tps.

In addition to performance requirements, it is also important in terms of security. At present, due to the natural bottleneck of blockchain expansion on the chain, it is necessary to improve performance through off-chain expansion, or to improve efficiency by balancing decentralization and security. But for the blockchain platform, it is a distributed ledger, which carries the storage and transfer of value. In the current bear market, Bitcoin still has a value of tens of billions of dollars. Basically, the top ten projects have more than one billion dollars. These platforms are all about the security of assets. With such a large value, once a security problem occurs, the consequences will be disastrous.

Therefore, a consensus algorithm that can guarantee security is needed. This is why some DPoS blockchains hope to make up for it through on-chain governance after sacrificing a certain degree of decentralization. For example, through community arbitration, property can be frozen and returned. Hedera Hashgraph hopes to ensure the security and reliability of its ledger through its hashgraph (hashgraph) consensus algorithm, ABFT, etc.

The third aspect is governance, which is what Hedera Hashgraph has been emphasizing. From the birth of Bitcoin in 2009 to the present, there have been many conflicts in history because of governance issues. Some forks may be the exploration of different development paths, and more forks are purely for profit. There is chaos here.

In order to avoid this kind of problem, Hedera Hashgraph has been committed to building a governance structure that can resolve conflicts, such as a governance committee, from the beginning. It tries to involve experts in different fields in governance, such as technical experts managing technology research and development routes, business experts in charge of business, market experts in charge of value promotion, economic experts in charge of incentive mechanism design, and legal experts in charge of regulatory compliance issues. It also imposes technical and legal restrictions on forks, which will be detailed below.

The issue of stability depends on technical effectiveness and governance structure. Therefore, in the view of Blue Fox Notes, stability itself is not an independent factor, but a natural result after solving performance, security and governance issues.

The last one is a compliance issue. This article will be valued by more and more distributed ledger projects in the future. Regardless of Bitcoin or other digital currencies, it is fine if it is only used in a small area. Once there is a dream to enter the mainstream crowd, it will inevitably face compliance issues. Because all these projects involve the transfer of finance and value, it is impossible to avoid regulatory attention. Hedera Hashgraph also proposes a balanced identity escrow system proposal here.

If Hedera Hashgraph can make breakthroughs in the above five aspects, especially in terms of performance and security, if there are substantial breakthroughs, then it has a great chance to enter the mainstream crowd.

According to Blue Fox Notes, there is another issue that needs to be taken seriously, which is the usability of users. At present, all blockchain projects have usability problems. Users have great confusion about the interaction of addresses, accounts, and keys. How to achieve a more user-friendly user experience is also an important issue. Of course, it may not be very realistic to fully apply the current interaction mode. I believe that there will be an interaction mode dedicated to distributed ledger technology projects in the future.

Performance improvement of Hedera Hashgraph: hashgraph consensus algorithm, fragmentation

The consensus algorithm of hashgraph was invented by LeeMon Baird, and its consensus mechanism is completely different from blockchain. The blockchain is like a tree with a trunk. It is necessary to constantly cut off the branches and forks to keep the trunk growing robustly. This is inherently related to the consensus mechanism of the blockchain itself, because only by cutting off the fork can the fork be prevented from getting out of control. The blockchain forms a single legal main chain through the linking of blocks. If there is a fork, such as two miners creating two blocks at the same time, the blockchain will eventually select one of the blocks and the other will be discarded. That is to say, cut off the branches and forks.

Hashgraph (hashgraph) is completely different, not only does it not prune, but it also weaves and interleaves back. The underlying data structure of the hashmap is different. Each event (similar to a "block") of the hashgraph is not discarded. All the subdivisions persist and eventually reassemble into a whole. From a hashmap perspective, this is a more efficient data structure.

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(Blockchain Vs Hashgraph)

From the perspective of hashgraph, this data structure can also avoid a problem with the blockchain data structure: the block time interval design. In the blockchain, in order to ensure safety, if the time interval between the generation of new blocks is too short, many branches and forks will be generated, so there is no time to prune them, and problems will arise. Therefore, Bitcoin uses the PoW mechanism to reduce the output speed of blocks at approximately every ten minutes. However, this inevitably creates a bottleneck in transaction throughput.

The solution of the hashgraph (hashgraph) is that the growth of the structure will not be limited without discarding events. Anyone can create a transaction, which greatly increases transaction throughput. From this point of view, the hash graph proposes a new idea, it does not need to be pruned, and tries to achieve a higher transaction speed with a new data structure and consensus algorithm.

The consensus mechanism of Hashgraph includes two main parts, one is Gossip about Gossip and virtual voting.

First of all, the gossip network protocol is similar to the gossip spread in the office. As long as two people gossip about information, everyone will know the information soon.

In a hashgraph, each node propagates new transactions and also receives transactions from neighboring nodes. After a node receives a new transaction, it may combine other transactions to generate a new event (transaction container, similar to a block) and spread it out. The event has two hashes, one pointing to the last latest event of the node, and the other pointing to the latest event of another node received by the node, and then timestamping and signing the entire event. After that, the broadcast is repeated continuously until all nodes get the same information.

The gossip algorithm cannot guarantee that the state of all nodes is consistent at a certain moment, but it can guarantee that at a certain moment in the end, all nodes can reach a consensus on the history before a certain point in time.

How is virtual voting initiated? The content of hashgraph node gossip includes not only new transactions, but also the history of gossip between nodes. Each node can maintain a hashgraph through gossip. Nodes will calculate how other nodes vote in a specific hash graph, without real voting, which can save a lot of communication.

Generally speaking, each node random gossips the information it knows to other nodes, and each node also receives gossip information from other nodes. After receiving the information, create a new event, and the event will point to its own last event and the last event of the information source node. Next, calculate the number of rounds created by all known events, determine whether it is a witness event in this round, and then vote for all witness events to calculate the well-known witnesses. Through well-known witnesses, the acceptance round of all events can be determined, and virtual voting can be performed through the timestamp of the acceptance round and consensus. The consensus order is determined by virtual voting.

The voting algorithm of hashgraph is called "virtual voting". This virtual voting does not require additional information to be sent, and the voting can be calculated virtually. From a theoretical point of view, the throughput of the hash graph is large, and its main limitation comes from the bandwidth. Given good bandwidth, hashgraph systems can theoretically handle very large throughputs.

In the view of hashgraph, with a fast home Internet connection, it has the opportunity to achieve the global transaction performance of VISA network level. Hedera Hashgraph has used Amazon AWS's m4.4xlarge to do an instance test to test its throughput (100 bytes per second transaction), using computer nodes in 1, 2 and 8 regions respectively. In the test, according to different situations, tps ranges from less than 50,000 to a maximum of about 500,000. The time to reach the final state is generally within 11 seconds, and the fastest time can reach 0.04 seconds (of course, it is unlikely in actual operation).

There are trade-offs between throughput, latency, number of nodes, and geographic distribution involved. For 32 computers distributed in 8 regions around the world, to reach 50,000tps, it takes 3 seconds to reach a final consensus. If the delay is controlled within 7 seconds (required by general credit cards), and 200,000 tps is to be achieved, then use 32 computers distributed in 8 regions, or 64 computers distributed in 2 regions, and 128 computers distributed in 1 region Any computer can meet this requirement. The final throughput depends not only on the distributed consensus algorithm, but also on the network speed, number of nodes, etc.

At the same time, it should also be noted that this is mainly from the perspective of transaction consensus and timestamp, and the event of processing transactions has not been included. If each transaction requires a digital signature, this also requires computing power to verify hundreds of thousands of digital signatures per second. In addition, if the transaction is to "store gigabytes" of files, then, at this time, due to bandwidth constraints, the speed of the system will also be greatly slowed down.

In short, considering the actual operating environment, the real tps will drop, but compared to the blockchain tps of less than 100, hashgraph has the opportunity to reach tens of thousands, or even hundreds of thousands of tps, which is a qualitative breakthrough .

In order to achieve better performance, Hedera Hashgraph also uses fragmentation technology. Sharding technology will become necessary as the Hedera Hashgraph network grows. Sharding enables not every node to process every transaction. Consensus reaching can be processed in parallel. It's like toll booths no longer have only one toll channel, but multiple toll channels.

The shards trust each other, which allows the multi-shard ledger to achieve asynchronous Byzantine fault tolerance as a whole, preventing double payment or other illegal states. Each shard has these properties, and messages between them contain proofs of consensus for their respective shards. Nodes are randomly grouped into different shards. Transactions are placed in consensus order within individual shards in the normal way. All nodes in a shard only contribute to the consensus of transactions originating from that shard. Communication between shards is achieved through message exchange between different shard members. Messages are exchanged via push. Each shard remembers the sequence number of the last message processed from every other shard.

Security of Hedera Hashgraph: ABFT, hash encryption and security standards

While reaching a consensus, the distributed ledger must also solve security issues, which can prevent double-spending attacks, DDoS attacks, Sybil attacks, etc.

ABFT (Asynchronous Byzantine Fault Tolerance) is the highest security standard for consensus algorithms. The hashgraph algorithm used by the Hedera Hashgraph platform is ABFT, which has also been rigorously proved mathematically. A professor at Carnegie Mellon University used Coq to complete a computer-tested mathematical proof, proving that the hashgraph algorithm used by the Hedera Hashgraph platform is ABFT. This is an outcome worth noting.

Anyone in the Hedera Hashgraph network can participate in running nodes, and it cannot be assumed that all nodes are honest. If some nodes are malicious, they can carry out DDoS attacks, sybil attacks, etc., and can destroy the consensus by delaying transactions and other methods.

What does ABFT mean? It means that no single or small group of members can prevent the eventual consensus from being reached. Because honest nodes in the Hedera Hashgraph network can guarantee a consensus on the time and order of transactions, even about 1/3 of the nodes are malicious nodes and cannot prevent the consensus from being reached.

In addition, the Byzantine Fault Tolerance (BFT) system can also achieve the finality of the consensus, which means that once the consensus is reached, it will not be tampered with by a few malicious members. Each member is mutually aware of the point at which they reach final consensus.

However, Byzantine fault tolerance also needs to consider the actual network operation. Due to the Internet's own reasons, if it does not receive the message it expects, it is difficult for the honest node to know whether it is due to the network loss (the honest node has sent it) or the reason why the dishonest node did not send the message.

In other words, the network itself has uncertainty in transmitting information, which poses a great challenge to consensus, and thus poses a challenge to the realization of Byzantine fault tolerance. Therefore, some consensus algorithms are considered BFT in theory, but they may face problems in reality. These consensus algorithms assume that information transmission is timely, but there are botnets, DDoS attacks, worms, firewalls, viruses, etc. in the Internet, reality and Theories cannot be equated.

Hedera Hashgraph's hashgraph consensus algorithm takes into account the reality of the network and implements Asynchronous Byzantine Fault Tolerance (ABFT), which admits that there is message delay or loss in the network. Of course, it is very challenging to implement ABFT, and it has been difficult to achieve large-scale scalability. The appearance of the hash graph algorithm of Hedera Hashgraph has changed this situation. Therefore, just from this point of view, the consensus algorithm of the Hedera Hashgraph platform is also worthy of attention.

In the blockchain, it does not have the complete certainty of consensus, it just becomes less and less likely to be tampered with as time goes by. The blockchain is also not Byzantine Fault Tolerant, it does not automatically handle partitioning of the network. If a group of miners is isolated from the rest of the network, it allows the growth of multiple chains, which can cause conflicts in the order of transactions on the chains.

In a hashgraph, it refers to Byzantine fault tolerance in the strong sense: 1) every member eventually knows that consensus has been reached 2) attackers may collude 3) attackers even control the Internet itself (with some limitations). This means that it can reach consensus even when malicious actors are able to take control of the network and delete or slow down messages of their choice. As long as more than 2/3 of the nodes execute the protocol correctly, the information will be sent repeatedly from one node to another, and finally the messages will be learned one by one.

Hashgraph is resilient to distributed denial-of-service attacks. It does not allow any single node or small number of nodes to have privileges when establishing consensus. An attacker might attempt to flood a community node or miner with packets, temporarily disconnecting it from the internet. However, the community as a whole will continue to function normally. For an attack on the entire system, it is more difficult to perform a packet flood attack on most members.

Different from leader-based or cycle-based schemes, some schemes try to avoid the cost of Bitcoin's PoW proof, but if the attacker attacks the current leader, it can also switch to attacking the newly elected leader, and the attacker can attack only A computer, thus freezing the entire system. Hashgraph avoids the whole problem while also not requiring PoW.

Finally, Hashgraph employs hash encryption and security standards. All communications in Hashgraph are encrypted with TLS1.2, all events are digitally signed, and Hashgraph is constructed using cryptographic hashes. In addition, the algorithm and key size of the hash graph conform to the CNSA Suite security standard. This is the standard for protecting the top secret information of the U.S. government.

Governance of Hedera Hashgraph: Council Governance Originated from VISA Model

The governance model is very important for every distributed ledger technology project. It directly determines the future development roadmap, including the evolution direction of software, token issuance mechanism and incentive model, etc. Here it is necessary to balance the interests of all parties, including nodes running the consensus, token holders, application developers, users, councils, regulators, etc.

Hedera Hashgraph adopts the governance model of the council, which is developed based on the original model of National BankAmericard Inc (later renamed VISA).

The Hedera Hashgraph Council itself is a for-profit limited liability company consisting of up to 39 businesses and organizations. It has strict requirements for these 39 members. First, they are required to be located in different regions and different industries. Second, they are required to be top brands or organizations. Third, they have diverse views and can provide different insights.

Hedera Hashgraph Council Governance is primarily the business of managing the Council. This includes the election of the governance committee, setting policy, regulating network tokens, approving changes to the platform codebase, and more.

Council members are elected. The Council Clause ensures that no single member can control the Council and that no small group of people can adversely affect the entire body. All its council members have equal management rights and a certain term of office, ensuring the decentralization of governance. Deliberation and debate are open to all and no one can control. The Governance Committee will elect and appoint members to subcommittees that exercise oversight of the Hedera Hashgraph business.

Subcommittees will include but are not limited to Technical Steering Committee, Finance Committee, Joint Marketing and PR, Legal/Regulatory Oversight Committee. Council members cover organizations from a wide range of business areas and are leading representatives in each field. Management members collect fees from operating nodes. The CEO of Hedera Hashgraph is appointed by the council, who will become a member of the council, but not the chairman of the council. The Chair is elected by the Council but has no executive or operational powers. The president is responsible for preparing the agenda for board meetings. Anything can be put on the agenda by any member of the board.

In addition to council governance, Hedera Hashgraph also has a group of advisory committees that provide advisory services but do not have voting rights. The open consensus model involves the process of nodes joining the network and reaching consensus on the order of transactions in the platform. It prevents some malicious nodes from colluding to attack the system, such as counterfeiting cryptocurrency, maliciously modifying the ledger, or affecting the consensus of the order of transactions. The way hashgraph suppresses collusion is: based on the interests of nodes, the hashgraph algorithm is used to implement voting weights. Generally speaking, one token per node represents one vote.

Ultimately, Hedera Hashgraph hopes to build a trusted, secure, and distributed network space. This is the ultimate goal of its governance model.

Stability of Hedera Hashgraph: Technical and Legal Control

Historically, the development route of distributed ledger projects has been full of disputes, and forks have brought instability to the platform itself. The stability of Hedera Hashgraph is mainly achieved by technical and legal control.

Hedera Hashgraph technology control includes two aspects. First, the hashgraph technology ensures that the software client verifies the lineage of the hashgraph before using the shared state mechanism. Network nodes cannot fork the official version of the hashgraph platform. Second, hashgraph technology allows Hedera Hashgraph governance entities to not only specify software changes to network nodes, but also ensure when those changes are adopted. When the Hedera Hashgraph governance body releases software updates, all honest network nodes will automatically update their software, and the updates will be completed almost at the same time. Anyone with invalid software cannot modify the hashgraph or get their version accepted by others.

Specifically, nodes of a hashgraph can have a set of signed copies of the state that can prove to third parties that this is the true consensus state. The proof also includes an "address book", which includes a list of all members' public keys and each member's rights and interests. Each address book comes from the previous address book member's signature. A series of address books can be traced back to the genesis address book, and the hash of the genesis address book can serve as a unique identifier for the ledger, with its own name.

If some members want to fork and create a new ledger, they can technically achieve a fork, and they can also make the initial state of the new ledger the same as the old ledger.

But the problem is that they can't create address book history to go back to the genesis address book, members of each address book sign the next address book, since most members will not sign the address book of few forked members, this will lead to new A fork of , can only have a new genesis address book, thus resulting in a new unique identifier and a new name.

Therefore, the created fork cannot convince others that it is a legitimate ledger. For example, if Alice wants to send tokens to Bob, they not only verify that the transaction transfer happened, but also verify that it was completed on the correct ledger. In the event of a 50/50 fork, neither party can prove that it is connected to the genesis address book. The result is a complete destruction of the ledger, equivalent to the creation of two completely unrelated ledgers. This is less valuable to nodes as they can no longer earn fees from clients accessing the original ledger. At the same time, all original tokens, in a real sense, will cease to exist. Such consequences create a great disincentive for forks. Nodes have no incentive to do this kind of forking.

From the perspective of legal control, the Hedera Hashgraph code base will be managed by the Hedera Hashgraph Council, and version 1.0. will be released for public review. The code base will be open for review, meaning anyone can read the source code, recompile it, and verify that it is correct. No license is required to use the Hedera Hashgraph platform, and no license is required to write software using the services of the Hedera Hashgraph platform. Building smart contracts based on the Hedera Hashgraph platform also requires no permission. Apps built on the Hedera Hashgraph platform can be open source or proprietary. They do not require any license or approval from Hedera Hashgraph.

Swirlds owns the intellectual property rights of the hashgraph consensus algorithm. The Hedera Hashgraph council has obtained permission from Swirlds to use the hashgraph consensus algorithm and related technologies, which can be used on the Hedera Hashgraph distributed ledger platform.

As part of the license, the Hedera Hashgraph Council will pay 10% of revenue to Swirlds (minimum monthly fee), and Swirlds will own 5% of Hedera tokens. Swirlds will continue to require the use of hashgraph technology in a permissioned network, but does not require permission for distributed applications running on the Hedera Hashgraph public platform.

Hedera Hashgraph and Swirlds will use the patent rights related to the hashgraph algorithm to achieve a legal defense against forking the codebase and creating competing platforms and currencies. It is free for developers to use the relevant native tokens to build distributed applications on the Hedera Hashgraph platform.

Compliance with Hedera Hashgraph: An Alternative Identity Escrow System

Hedera Hashgraph attaches great importance to compliance from the very beginning, which is also a problem that must be faced in order to enter the mainstream crowd under the current circumstances. Hedera Hashgraph believes that its platform must be able to achieve KYC and AML. The way it's implemented is an optional hosted identity system.

Hedera Hashgraph's identity escrow system allows users' real identities to be logically bound to their accounts, and the binding needs to be certified by a third-party authoritative certificate authority. Users who have passed KYC inspection and implemented AML protection can freely transfer funds in their accounts. At the same time, users can also explicitly choose whether to use this identity hosting system. If not, the user's account transactions will remain anonymous. However, once you choose to remain anonymous, some financial transactions may be restricted.

Specifically, similar to creating a new bank account, ID is required. The Hedera Hashgraph system lets users add hashes of digital certificates, created by recognized identity providers, to their accounts. At the same time, the attachment is sent to the network in the form of a transaction. Transactions require the signature of the user's private key and the signature of a third-party identity provider.

When real-world financial services are needed, for example, when a user transfers funds from a Hedera Hashgraph account to a real-world bank. The user needs to provide the bank with the account address and identity certificate. The bank confirms the identity with the account address and credentials before authorizing the transfer transaction and receiving the funds. Banks do this for compliance, for example, regulators may need to check the details of transactions. 

The compliance program of Hedera Hashgraph is mainly to take into account the balance between regulators and user privacy, to ensure the review of regulators, and to ensure a certain degree of user privacy requirements.

The architecture of Hedera Hashgraph: Internet layer, algorithm layer and service layer

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(Hedera Hashgraph network overall architecture diagram)

From a large-scale perspective, Hedera Hashgraph includes the Internet layer, the hashgraph consensus algorithm layer, and the service layer (incentive mechanism, file storage, and smart contracts).

The nodes of Hedera Hashgraph are computers on the Internet, and they are connected through TCP/IP protected by TLS encryption for perfect forward secrecy. Its nodes are addressed by IP addresses and ports rather than symbolic names, so an attack on the DNS system will not affect the network.

The second layer is the consensus layer. All nodes of Hedera Hashgraph run the hashgraph consensus algorithm. Nodes obtain transactions from customers and use the gossip protocol to broadcast it to the entire network. Through the hashgraph consensus algorithm, it is possible to reach an agreement on the consensus timestamp of each transaction and its historical consensus order.

The service layer includes incentive mechanisms, file storage, and smart contracts. Any user and organization that runs a node can be paid in cryptographic tokens. Any user can create their own account, just need to create a key pair. The file system of Hedera Hashgraph allows users to store information, and the nodes in its shards store the same files without loss. Stored information can only be deleted by authorized persons. The file system also acts as an undo service. For example, a service to revoke a driver's license. A user obtains a driver's license through a license-issuing agency, and both the user and the license-issuing agency digitally sign the transaction. Once signed by both parties, the user can prove to others that he or she has a valid driver's license. If the user violates the traffic regulations and the driver's license is revoked, the driver's license granting agency can delete the hash of the license at this time, thereby making the driver's license invalid.

Files are actually stored as Merkle Trees. In order to facilitate developers to operate files, Hedera Hashgraph provides developers with Java codes to operate Merkle trees. Developers can see directories, subdirectories, files, they can change file contents, directory names, move files, copy and paste. In addition, users can also store entire directories in the Hedera Hashgraph file system.

A file can be accessed by its hash and cannot be tampered with. But it also has a file ID. Its owner can create new files and can associate a file ID with new files. This way users can find the latest version of the file. They just access the file ID not the hash. If it is accessed by file ID, then the latest version can be found.

In terms of smart contracts, the Hedera Hashgraph ledger can run smart contracts written in Solidity. This is also to take care of the current reality. There are currently a large number of Solidity smart contract code bases that can remain unchanged on Hedera Hashgraph, which is more convenient for developers.

Incentives for Hedera Hashgraph: PoS Mechanism

The token mechanism of Hedera Hashgraph is to serve the purpose of its eventual mainstream adoption, and in this process, it tries to meet the needs of all parties, including nodes, end users, developers, councils, etc.

Hedera Hashgraph uses a PoS mechanism. Any individual can become a node of the network. The influence of a network node on the consensus is proportional to the amount of all its equity tokens, and is related to its weight in the hashgraph virtual voting. At the same time, for nodes, it is more important to be proportional to the rewards obtained. Of course, from the perspective of the system itself, this proportional design can effectively resist Sybil attacks, and is also conducive to realizing the performance advantages of transparency and sharding.

In order to encourage more people to become nodes or entrust tokens to nodes, in Hedera Hashgraph's PoS mechanism design, node tokens can be spent at any time, so that there is no need to worry about losing liquidity.

Hedera Hashgraph's PoS also has a mechanism of proxy delegation. Users can authorize their own tokens to certain nodes to exercise their rights and interests, and at the same time obtain corresponding interest income. Nodes get paid in direct proportion to their rights and interests, and the distribution ratio of the rewards is determined through negotiation between the token holder and the proxy node.

Currency holders can withdraw or entrust funds to other equity proxy nodes at any time. At the same time, token holders can also spend tokens at any time. This flexible mechanism can ensure the enthusiasm of currency holders to participate.

All nodes participating in the consensus need to keep some tokens in their accounts in order to affect the consensus or receive rewards for operating nodes, or pay for related transactions.

Judging from the design of the PoS mechanism of Hedera Hashgraph, its operating node threshold is relatively low, and at the same time, it can entrust its own tokens to equity proxy nodes, which can encourage token holders who do not personally run nodes to entrust their tokens with equity Proxy nodes participate in the consensus. Firstly, it can allow token holders who do not participate in running nodes to obtain interest income. At the same time, it also raises the threshold for some actors to try to obtain more than 1/3 of equity influence.

So, who gets paid for what on the Hedera Hashgraph platform? Who pays for it? How is it designed?

First of all, on the Hedera Hashgraph platform, users need to pay fees to use the platform's services, such as making transfers or adding files to the ledger. However, because it is not a PoW mechanism and has higher throughput, fees are currently expected to be relatively cheap.

For nodes, they need to consume computing, bandwidth and storage resources to run services, and get paid for it. It can get node fee, service fee, network fee.

The service fee is what the client pays for any Hedera Hashgraph service. For example, if a customer wants to store files on the ledger, the fee will be calculated according to the charging plan set by Hedera Hashgraph. For example in terms of each file and the number of bytes per second stored per file. When a transaction is validated on the consensus book, in case of insufficient funds in the client's account, the file will not be stored and the client will not be charged.

The network fee refers to the payment required for each transaction processed in the network, which is used to cover the cost of node gossip propagation, the cost of temporarily storing it in memory, and the consensus computing cost of including it in the event. The fee calculation is mainly based on the amount of each transaction and the amount per byte in the transaction. Once a node includes a transaction in an event it creates, and consensus on that transaction is reached, the node is charged a network fee. And if the transaction is from a customer, then the customer will bear the network fee for the transaction.

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(flow of expenses)

In addition to the income earned by nodes, Hedera Hashgraph will also earn income. Hedera Hashgraph charges service fees and network fees on behalf of all nodes that process transactions and perform services. It then uses the collected fees to pay incentive and dividend payments.

The incentive reward is issued once a day, and the reward is transferred from the Hedera Hashgraph account to the node account, with the purpose of incentivizing the node to provide services. There are also requirements for nodes to get paid, such as being online all day, requiring nodes to contribute at least one event for 90% of the rounds within a 24-hour period, etc. At the same time, the reward received by the node is proportional to the equity tokens it holds (own + proxy).

Dividend compensation means that Hedera Hashgraph will regularly pay the members of the governance committee to reward their contributions in governance.

At present, the PoS reward section of Hedera Hashgraph does not mention the incentives for newly issued tokens, and is more based on service fees, which means that only when the transaction service fee is large enough, the node will have enough income. Of course, since it is not a PoW mechanism, the specific service expenditure is relatively small.

Landing of Hedera Hashgraph: Progressive Advancement

Hedera Hashgraph adopts a gradual approach and has a cold start process. First of all, Hedera Hashgraph's central treasury has a large number of tokens, and it gives these tokens to the members of the Hedera Hashgraph Governance Committee in the form of equity proxy. These members run nodes with treasury tokens as a stake.

Individuals can also delegate their token delegation to governance committee member nodes using Hedera Hashgraph's software wallet. During this step, part of the tokens flow from the Hedera Hashgraph treasury to the general public.

Afterwards, Hedera Hashgraph will expand the scope of nodes, and consulting members or other credible subjects can also become nodes and obtain proxy rights. Interested individuals who pass the KYC process also have the opportunity to receive equity proxy tokens from the Hedera Hashgraph treasury.

So, here comes the question, why did the Hedera Hashgraph treasury hold the vast majority of tokens in the early days? This is mainly to consider security issues. As long as more than 2/3 of the token equity nodes verify the transaction, the transaction is final. Attackers who own or exceed 1/3 of the tokens have the opportunity to disrupt the network. However, Hedera Hashgraph held most of the tokens in the early days and entrusted the tokens to trusted nodes. These nodes were members of the governance committee in the early days, so that the network is not vulnerable to attacks. Judging from the rhythm of its token circulation, it is expected that in the past few years, the proportion of the total token circulation will not exceed 50%, and the Hedera Hashgraph treasury has the right to control the rhythm. If the platform can be used by many people, then this means that the demand for tokens will increase significantly.

epilogue

In this way, the tokens are defaulted to members of the governance committee from the initial Hedera Hashgraph wallet software, and as time goes by, the distribution of tokens and proxy revenue will be wider, gradually moving to millions of nodes and accounts. Of course, the final evolution depends on the subsequent development. So far, except for Dash, the Gini coefficient of most cryptocurrencies is very high. Whether Hedera Hashgraph can take a new path is worth looking forward to.

epilogue

Will hashgraph be better than blockchain? This needs to be landed to get a definite answer. However, from the current point of view, at least one thing is worth looking forward to, it is not some small optimization based on the blockchain. This is significantly different from some public chain projects last year. A public chain project that is only slightly optimized will not have much value in essence. Without its own characteristics and foundation, there is no place to settle down. Unless there is a qualitative breakthrough in the later stage, it is doomed from the beginning that it will not go too far.