Skip to main content

Solving Blockchain’s Scalability Problem: A Deep Dive into Hedera Hashgraph

Scalability is one of the major concerns for enterprises transitioning from Web2 to Web3. Solutions that cannot adjust during network congestion face decreased adoption, making users suffer from delayed transactions, high fees, and poor experience. 

While traditional blockchains provide security and data transparency, scalability challenges in the face of heightened transactions are a major friction for new and existing players in the Web3 space. 

As a solution to these challenges, Hedera Hashgraph offers a robust, more reliable alternative to businesses that need a scalable and evolving solution as needs and requirements grow. Keep reading to learn more about Hedera, how it solves blockchain’s scalability problems, and how you can successfully transition from Web2 to Web3 using Hedera Hashgraph.


What Is Hedera Hashgraph

Developed in 2018, Hedera Hashgraph is a decentralized, open-source distributed public ledger technology (DLT) providing a fast, scalable, secure, and fair platform for digital transactions and decentralized applications (dApps). 

Hedera Hashgraph utilizes a directed acyclic graph (DAG) data structure to record and validate transactions. The key innovation of Hedera is its consensus algorithm, known as the hashgraph consensus algorithm. This algorithm enables high throughput, low predictable costs, and fast processing speeds without sacrificing security.

Hedera also leverages the gossip about gossip protocol, where each node in the network shares information about transactions and events with each other, and they use this information to determine the order and validity of transactions collectively. The algorithm achieves consensus on the order of transactions ensuring that all nodes in the network agree on the ledger’s state.


Who Is Behind Hedera Hashgraph, and What Is Their Background in the Technology Industry?

Hedera was the brainchild of Swirlds Labs, a team of experienced individuals with technology, academia, and business backgrounds. Founded by Dr. Leemon Baird and Mance Harmon, Swirlds Labs created Hedera Hashgraph in an attempt to overcome the limitations of existing distributed ledger technologies. Here is a short background on the founders:

  • Dr. Leemon Baird: Dr. Baird is the Co-founder and Chief Scientist of Hedera Hashgraph. He has a strong computer science and mathematics background, with a Ph.D. from Carnegie Mellon University. 

Dr. Baird has previously co-founded several successful technology companies and has been involved in various research and development in artificial intelligence, cybersecurity, and computer networking.

He invented the Hedera consensus algorithm and holds several patents related to distributed ledger technology and cryptography.

  • Mance Harmon: As a co-founder of Swirlds Labs, Mance Harmon brings a wealth of experience as a technology executive and entrepreneur. With a passion for business strategy and operations, he complements Dr. Baird’s technical expertise. 

Harmon’s leadership and vision have been instrumental in the success of Swirlds Labs and the development of the Hedera Hashgraph platform. Prior to Swirlds, Harmon held high-ranking positions in various technology companies, such as Ping Identity and RSA Security, showcasing his extensive industry knowledge. 

His strategic mindset and ability to bridge the gap between technology and business have made a significant impact on the adoption and recognition of Hedera Hashgraph in different industries.

In addition to the founders, Hedera has assembled a team of engineers, researchers, and business professionals to support its development and adoption. The team members come from various backgrounds with experience in cryptography, distributed systems, software development, finance, global technology, and marketing.

Nevertheless, Hedera Hashgraph operates as a decentralized public network governed by the Hedera Governing Council. The council comprises prominent organizations from different industries, and they have a say in the governance and direction of the Hedera network, ensuring a distributed and diverse decision-making process.


Why Choose Hedera Hashgraph Instead of Blockchain

Hashgraph and blockchain technologies like Ethereum provide decentralized and secure systems for recording and validating transactions. However, some differences may make Hedera Hashgraph a preferred choice for certain use cases. Here are reasons you may want to choose hashgraph over blockchain technology:

  • Scalability: One of the main advantages of Hedera Hashgraph over traditional blockchain systems is its scalability. Hedera uses a directed acyclic graph structure, which allows for fast and parallel processing of transactions.

The system’s performance can improve as the network grows, whereas blockchain networks often face scalability challenges as more participants join the network.

  • Low and Predictable Cost: Hedera Hashgraph provides users with the advantage of low and predictable fees. By employing an efficient consensus algorithm, transactions on the network remain cost-effective and predictable, allowing businesses and individuals to budget their expenses accurately and avoid unpredictable fluctuations in fees.
  • Speed and Efficiency: Hedera can achieve consensus on transactions faster than blockchain. The Gossip about Gossip protocol enables it to achieve fast and efficient transaction ordering and validation. This high throughput and low latency make Hashgraph suitable for applications that require near real-time transaction confirmation.
  • Fairness and Security: Hedera provides fairness and security through its consensus algorithm. It uses a virtual voting mechanism that prevents certain attacks, such as Sybil attacks, where a single participant creates multiple identities to manipulate the network. 
  • Lower Energy Consumption: Hashgraph is more energy-efficient than traditional proof-of-work (PoW) blockchain systems. PoW blockchains require much computational power to solve complex mathematical puzzles to validate transactions. 

In contrast, Hedera Hashgraph uses a proof-of-stake consensus that relies on a set of trusted nodes, who hold and “stake” their HBAR cryptocurrency to validate transactions on the network. This PoS mechanism offers advantages such as energy efficiency, scalability, and reduced centralization risks.

While blockchain technology has been around for much longer than hashgraph and has a larger developer community and a more extensive ecosystem of applications and platforms, hashgraph has a growing community of developers and users, and it is the better option for enterprises that require scalable and fast solutions.


The Unique Perspective of the Hedera Governing Council

The Hedera Governing Council is responsible for overseeing and guiding the strategic direction of the Hedera network. The Council members are chosen to represent different geographical regions to ensure global representation and avoid concentration of power. 

Some of the 29 organizations that make up the Hedera Governing Council include Google, IBM, LG Electronics, Nomura Holdings, Dell, and FIS Global. Here are some key perspectives and benefits that the Hedera Governing Council brings:

  • Diverse Expertise: The council comprises well-established and respected organizations, including financial institutions, technology companies, and other enterprises across varying industries. Each member brings unique industry expertise, insights, and experiences, allowing for a more comprehensive decision-making process considering different use cases and requirements.
  • Consensus-driven Governance: Decisions related to the platform’s development, upgrades, and policies require a majority vote from the council members. This approach ensures that decisions are made collectively, considering the interests of the participating organizations and the broader community.
  • Stability and Trust: The involvement of reputable organizations in the council adds stability and trust to the Hedera network. These organizations are famous for their commitment to compliance, security, and responsible business practices. Their participation helps build confidence among users, developers, and enterprises looking to adopt the platform.
  • Network Development and Roadmap: The Hedera Council provides strategic guidance, offers input on key technical decisions, and prioritizes features and improvements based on their industry perspectives and needs. This approach ensures that the Hedera evolves in a direction that aligns with real-world requirements and market demands.
  • Balancing Decentralization and Efficiency: Hedera Hashgraph balances decentralization and efficiency, and the council’s role is central to achieving this goal. By involving diverse organizations in governance, Hedera prevents dominance by any single entity while maintaining an efficient decision-making process.

The tech giant, Dell is the newest member of the Hedera Governing Council. John Roese, Dell’s Global Chief Technology Officer emphasized the role of Dell in offering its customers the best technological infrastructure.

“Our customers rely on us to both maintain and help secure their existing infrastructure as well as advise them on technologies they are considering to assist them in achieving their goals, whether it is in process optimization, new business models or meeting their ESG standards.

By gaining hands-on experience with distributed ledger technology, we’re able to serve as a rational, holistic voice for customers considering incorporating DLT into their digital transformation.”


Hedera Coin or HBAR?

HBAR is the Hedera native token powering various applications on the Hedera network. It facilitates transactions within the Hedera network and allocates vital resources, such as storage and computation, allowing developers to access the necessary resources for their dApps and promoting efficient network infrastructure utilization.

This token, which some crypto enthusiasts call Hedera coin, also serves as a means to participate in the consensus mechanism of the Hedera Hashgraph. By staking HBAR, users contribute to the security and stability of the network. This mechanism encourages active participation from the community, reinforcing the trust and reliability of the network.

Furthermore, HBAR facilitates fast and low-cost micropayments within the Hedera ecosystem. Its efficient transaction processing capabilities make it suitable for various use cases that require small-value transactions paving the way for innovative applications and business models that can leverage the scalability and cost-effectiveness of HBAR.


How Will Hedera Integrate Rising AI Technologies Like ChatGPT? 

Integrating AI technologies like ChatGPT into a decentralized network like Hedera has various potential benefits. ChatGPT, or similar AI models, can enhance user experiences within dApps built on the Hedera platform. It can enable more natural and interactive communication between users and dApps, improving user engagement and satisfaction.

Recently Hedera released a technical paper on the integration between Hedera and ChatGPT. The paper focuses on how to create a ChatGPT plugin that can obtain HBAR and other token balances on a Hedera account.

Such innovation is forward-thinking, leveraging new and trending technologies toward the advancements of DLTs. It paves the way for many other solutions that could be developed through the integration of Hedera with other AI technologies.


Cross-Chain Technology: Hedera and Ethereum

Cross-chain technology refers to the capability of hashgraph or blockchain networks to interact and exchange information. It allows for the transfer of data and other resources between disparate platforms. 

Blockchain networks are often designed as separate and isolated ecosystems, each with its own set of rules, consensus mechanisms, and native tokens. However, as the number of DLT platforms increases, there is a growing need for these networks to interoperate and share information.

Cross-chain technology enables this interoperability by establishing protocols, standards, and mechanisms that facilitate communication and data transfer between decentralized networks. It allows users to move assets or data from one blockchain to another, expanding the possibilities for decentralized applications, asset transfers, and other use cases.

Recently, Blade Labs rolled out a Blade Wallet update with dual-network support, allowing users to manage HTS (Hedera Token Service) and ERC-20 tokens in one app.


Common Applications of Hedera Hashgraph 

Hedera is growing fast, penetrating new geographical locations and recording adoption milestones. For instance, Blade Wallet announced it had recorded over one million accounts within 13 months of operation, showing how enterprises are quickly joining the Hedera network owing to its numerous benefits. Hedera hashgraph technology can be applied to various industries and use cases. Here are some common applications of Hedera hashgraph:

  • DApps and DeFi: Hedera Hashgraph can be used to build dApps and decentralized financial applications. It provides the necessary infrastructure for creating secure and transparent financial systems, including stablecoins, lending platforms, decentralized exchanges, and more.
  • Supply Chain Management: Hedera Hashgraph’s distributed ledger technology can enable transparent and traceable supply chain management solutions. It helps enterprises track and verify goods at every stage of the supply chain, ensuring authenticity, reducing fraud, and enhancing efficiency.
  • Gaming: Hedera Hashgraph provides a high-throughput and low-latency network, making it suitable for gaming applications and the creation of NFTs. NFTs can represent unique digital assets such as in-game items, virtual real estate, or digital artwork. Hedera offers a secure and scalable platform for their creation and trading.
  • Identity Management: Hedera can be utilized for identity management and authentication systems. By leveraging the decentralized nature of the network, it offers increased security and privacy, reducing the risk of identity theft and fraud.
  • Asset Tokenization: Hedera Hashgraph can be used for tokenizing real-world assets, such as real estate, art, or intellectual property. This enables fractional ownership, increased liquidity, and easier transferability of these assets on the network.
  • Auditing: Hedera’s transparency and immutability make it suitable for auditing and compliance. It can provide a secure and verifiable record of transactions and data, enabling efficient auditing processes and ensuring compliance with regulations.


What Is the Hedera Token Service (HTS), and How Does it Enable the Creation of Custom Tokens?

Hedera Token Service (HTS) is a decentralized tokenization platform provided by Hedera Hashgraph. HTS allows users to create and manage custom tokens on the Hedera hashgraph network. Here’s an overview of its key features:

  • Token Definition: You can define the properties and behavior of your custom tokens, including token name, symbol, supply, decimal places, and whether the tokens are fungible or non-fungible (NFTs).
  • Token Configuration: You can configure various token parameters, such as token transfer rules, token ownership, and token metadata. This allows for customization of token functionality based on specific requirements.
  • Token Mint: Token minting creates new tokens and adds them to the token supply. Once the token is defined and configured, you can mint it and specify the initial supply. 
  • Token Management: HTS provides tools for managing tokens, including the ability to transfer tokens between accounts, check token balances, and query token-related information.
  • Token Transfers: Tokens minted via HTS can be transferred across different wallets on the Hedera network. Transfers can involve any number of tokens, and the ownership is updated accordingly.
  • Token Auditing: HTS provides transparency and auditing capabilities, allowing users to verify token transactions, track token movements, and ensure the integrity of token ownership.


What Is the Hedera Consensus Service (HCS), and How Does it Enable Decentralized Applications?

The Hedera Consensus Service (HCS) is a decentralized, public, and permissioned network that provides a trust layer for applications built on top of it. HCS enables developers to create and deploy dApps with strong consensus guarantees and the ability to verify the order and timestamps of events within the application.

HCS solves the problem of ordering and consensus in distributed systems. It achieves this using the hashgraph consensus algorithm, enabling fast and fair ordering of events in the network, ensuring that all participants agree on the order of events and their timestamps.

HCS offers several benefits for decentralized applications, including:

  • Trust and Consensus: HCS ensures that all participants in the network agree on the order and timestamps of events, providing a trust layer for dApps. This consensus mechanism helps prevent fraud, double-spending, and other malicious activities.
  • Fast and Scalable: Hedera Hashgraph is designed to achieve high throughput and latency. It can process thousands of transactions per second, making it suitable for applications that require real-time updates and responsiveness.
  • Security: HCS utilizes cryptographic techniques to secure the network and prevent tampering or unauthorized modifications of events. It leverages the hashgraph algorithm’s properties, such as the asynchronous byzantine fault tolerance, to ensure the integrity and security of the consensus protocol.
  • Fairness: HCS ensures all participants have an equal opportunity to participate in the consensus process. It prevents any single entity from dominating the network and provides fairness in event ordering.
  • Public and Permissioned: HCS combines the benefits of public and permissioned networks. It is public in the sense that anyone can read the events and their order, but permission in that participants are known and governed by a set of rules and policies defined by the network.


What Is the Hedera Identity Service, and How Does it Support Identity Verification and Management?

Identity verification is the process of confirming the identity of an individual or entity, usually to grant access to certain services or resources. It involves validating the authenticity of the information provided by an individual and confirming that they are who they claim to be using various forms of identification, such as government-issued IDs, passports, or biometric data.

Identity management refers to the technologies used to administer and control resource access based on an individual’s identity. It encompasses creating, maintaining, and terminating digital identities, including user provisioning, authentication, authorization, and access control. Hedera Identity Service is built on top of the Hedera hashgraph platform. 

Hedera Identity Service leverages the capabilities of Hedera Hashgraph to provide a decentralized and tamper-proof identity verification and management system. Utilizing the distributed nature of the network enhances security, privacy, and control over personal data. 

In addition, it offers features such as secure digital identity creation, verification, and management, enabling individuals and entities to establish and control their identities in a trusted and transparent manner.


How to Choose a Hedera Wallet

When choosing a Hedera wallet, a few key factors must be considered to ensure you select a secure and reliable option. Here’s a step-by-step guide to help you make an informed decision:

Step 1: Research Available Wallets

Start by researching the available wallets that support Hedera Hashgraph (look for wallets specifically designed for Hedera hashgraph or multi-currency wallets that include support for HBAR. Consider factors such as security, features, and community reputation.

Step 2: Security Features

Security should be a top priority when choosing a wallet. Look for wallets with robust security features such as two-factor authentication (2FA), encryption, and hierarchical deterministic (HD) wallet structure. HD wallets provide a unique seed phrase that can be used to restore your wallet on another device if needed.

Step 3: Wallet Type

Choose the type of wallet that suits your needs. There are different types of wallets available:

  • Hardware Wallets: Consider using a hardware wallet like D’CENT, Ledger, or Trezor. These wallets store your private keys offline in a secure hardware device, providing the highest level of security. Ensure the hardware wallet you choose supports Hedera Hashgraph.
  • Software Wallets: Software wallets can be categorized into desktop, mobile, or web-based. Web-based wallets are accessible through a web browser. Evaluate the security features, ease of use, and compatibility with your devices for each option. A good example of a software wallet is Blade Wallet. It’s a security-audited Web3 wallet on Android and iOS devices and Chrome web browsers.

Step 4: Community Support and Reputation

Check the wallet’s reputation and community support level within the crypto community. Look for wallets with an active community of users, as this indicates ongoing development, support, and a lower risk of abandonment.

Read user reviews, participate in forums, and check social media platforms to gauge the community’s experience with the wallet. Additionally, consider the wallet’s track record and its development team. A well-established team with a history of maintaining and updating the wallet is generally a positive sign.

Step 5: Additional Features and Ease of Use

Consider any additional features provided by the wallet. Some wallets, like Blade Wallet, offer integration with dApps, portfolio tracking, NFT gallery, staking options, and easy-to-understand how-to guides fostering Web3 adoption. 

Evaluate if these features align with your needs. Furthermore, assess the user interface and overall user experience of the wallet. A wallet with an intuitive and user-friendly interface can make managing your HBAR tokens more convenient and enjoyable.


How Does Hedera Hashgraph Offer Enterprise-Grade Security?

Hedera Hashgraph is a DLT platform that offers enterprise-grade security through several key mechanisms:

  • Asynchronous Byzantine Fault Tolerance (ABFT): Hedera hashgraph uses a consensus algorithm known as ABFT, which ensures the platform’s security and guarantees the integrity of transactions. ABFT allows the platform to withstand malicious attacks and maintain consistency even in the presence of a certain number of malicious nodes.
  • Gossip Protocol: Hedera Hashgraph employs a gossip-about-gossip protocol to disseminate information across the network. This protocol ensures that each node in the network quickly receives information about transactions and events. By propagating information efficiently, the gossip protocol reduces the risk of attacks and enhances the network’s overall security.
  • Hashgraph Data Structure: The core data structure of Hedera hashgraph, known as the hashgraph, provides a tamper-proof record of the order of transactions and events. It stores a DAG of all transactions, enabling efficient verification and validation of the entire transaction history. This data structure enhances security by preventing tampering and enabling transparent auditing.
  • Cryptography: Hedera hashgraph employs various cryptographic techniques to secure transactions and communications within the network. These include digital signatures, cryptographic hashes, and encryption algorithms. These cryptographic measures ensure the authenticity, integrity, and confidentiality of data on the platform.
  • Council Governance Model: Hedera hashgraph operates under a council governance model, where a diverse set of global organizations collectively govern the platform, ensuring decentralization and avoiding single points of failure. The council members oversee network operations, security, and other critical aspects to maintain the integrity and security of the platform.
  • Regular Security Audits: Hedera hashgraph conducts regular security audits to identify vulnerabilities and enhance the platform’s security posture. Independent security firms assess the platform for potential weaknesses, and necessary measures are taken to address any identified issues promptly.


Are Hedera Hardware Wallets Safe?

The safety of a hardware wallet depends on its design, implementation, and security features. Generally, hardware wallets are one of the most secure cryptocurrency storage methods. They provide an isolated environment for generating and storing private keys, which is essential for accessing and managing digital assets.

Hardware wallets typically offer multiple layers of security, such as encryption, tamper-proof designs, and the requirement of physical confirmation for transactions. These features make it significantly more challenging for hackers to gain unauthorized access to your private keys.

Choosing a reputable and well-reviewed wallet from a trusted manufacturer is important when considering a hardware wallet for Hedera or any other DLT-based asset. It’s noteworthy that Hedera doesn’t have a native hardware wallet, but supports hardware wallets from various vendors like D’CENT and Ledger.

Before you choose a preferred hardware wallet, research the security features, read user reviews, and ensure the wallet has undergone independent security audits. Also, consider factors such as ease of use, device compatibility, and the ability to recover your funds if the wallet is lost or damaged.


How to Transition Enterprises From Web2 and Web3 Using Hedera Hashgraph

Transitioning from a Web2 company to a Web3 company involves embracing decentralized technologies and adopting new principles of trust, transparency, and user ownership. As a C-level executive member of your company, here are some steps you can take to navigate this transition:

  • Educate Yourself and Your Team: Gain a deep understanding of Web3 technologies, including blockchain, smart contracts, dApps, and tokenization. This knowledge will help you make informed decisions throughout the transition process.
  • Define Your Vision and Goals: Determine how Web3 aligns with your company’s mission and values. Identify specific objectives you wish to achieve through the transition, such as enhancing user privacy, enabling decentralized governance, or leveraging token economies.
  • Assess Your Existing Infrastructure: Evaluate your current technology stack, business processes, and data management systems. Identify areas that can be decentralized or improved by leveraging Web3 technologies. Consider the scalability, security, and interoperability of different blockchain platforms.
  • Engage with the Web3 Community: Connect with experts, developers, and projects within the Web3 ecosystem. Attend conferences, join online communities, and participate in hackathons to build relationships and stay updated on the latest developments. 

Blade Labs is a leading Web3 project development company that has seamlessly helped several businesses and enterprises migrate from Web2 to Web3. You can collaborate with them to explore potential partnerships or investment opportunities.

  • Develop a Web3 Roadmap: Working with experts like Blade Labs, you can create a feasible and strategic plan outlining the steps, milestones, and timeline for transitioning to Web3. Define the scope of each phase, starting from pilot projects and gradually scaling up. Consider the impact on your existing user base, revenue streams, and operational processes.
  • Foster a Culture of Innovation: Encourage your team to explore new ideas and experiment with Web3 concepts. Establish a culture that values learning, adaptation, and risk-taking. Create internal incentives or innovation programs to motivate employees to contribute to the transition process.
  • Embrace Decentralized Governance Models: Transition towards decentralized decision-making processes within your company. Consider incorporating community feedback, empowering token holders, or exploring decentralized autonomous organizations (DAOs). Engage users in the decision-making process and empower them to have a voice in shaping your company’s future.
  • Communicate with Stakeholders: Communicate your company’s transition plans to your employees, investors, and users. Address any concerns or misconceptions and provide educational resources to help stakeholders understand the benefits and implications of Web3. Seek feedback and support from your community throughout the transition.
  • Iterate and Adapt: Recognize that transitioning to Web3 is an ongoing process. Continuously evaluate your progress, learn from successes and failures, and adapt your strategies accordingly. Stay updated on emerging Web3 trends, regulatory changes, and evolving user expectations to ensure your company remains at the forefront of innovation.