Frequently Asked Questions

Dr. Leemon Baird is the inventor of the hashgraph distributed consensus algorithm, and is the Co-Founder, CTO, and Chief Scientist of Hedera. He had been thinking about the problem of distributed consensus for many years. This was driven from a desire to be able to carve out your own piece of cyberspace, to share with those who you want to share with, and not have to be dependent on the whims of a big technology company to host your data or collaborations. As a mathematician and computer science PhD, Leemon looked at the problem and thought it was unsolvable for a long time, but kept coming back to it until he found the answer.

Hashgraph is a new kind of consensus mechanism, based on gossip about gossip and virtual voting. Previous generations of voting systems go back decades and achieve definitive consensus, but are very slow. Hashgraph’s innovation is in virtual voting, which gives you all the guarantees that voting has (which proof-of-work (PoW) doesn't), but is incredibly efficient because we don’t actually send any votes over the internet. 

The Hedera Hashgraph Platform is based on a gossip protocol, in which the participants don’t just gossip about transactions - they also gossip about gossip. By adding information about their previous gossip to every current gossip message, participants are able to jointly build a hashgraph reflecting the history of all of the gossip events. Participants then analyze that shared history in order to determine a consensus timestamp for all transactions. The Byzantine agreement mechanism participants use is called virtual voting. Alice's computer does not send Bob's computer a vote over the internet, about what order the transactions were received. Instead, Bob calculates what vote Alice would have sent, based on his knowledge of what Alice knows, and when she learned it, according to the history in the hashgraph. This yields fair Byzantine agreement on a total order for all transactions, with very little communication overhead beyond the transactions themselves.

Hashgraph is asynchronous Byzantine Fault Tolerance (aBFT) - the highest degree of security a consensus algorithm can provide. ABFT means that a) finality of consensus will be reached with probability 1, if b) attackers control less than 1/3 of the participants and c) we assume only that messages from an honest node will eventually get through, but make no assumptions about how long that takes. Specifically, the attacker must control less than 1/3 of the stake in a proof-of-stake system, or less than 1/3 of the nodes in a system without proof-of-stake. The attacker can control the entire communication network in the sense that the attacker can delete messages, or delay messages for arbitrary amounts of time, with the only limitation being that if honest node Alice repeatedly tries to send messages to honest node Bob, eventually one will get through. The system is resilient to attacks on both network nodes and the communication network itself, as long as both types of attacks are within the limits above. Finality of consensus can be contrasted with the probabilistic confidence of proof-of-work systems, where there is always a chance (even if small) of a transaction being retroactively rolled back.

When a transaction is given a consensus timestamp, the community as a whole generates the timestamp. No single node is allowed to generate it by itself. The hashgraph shows the time at which each node first received the transaction. The consensus timestamp is defined to be the median of those different times. Virtual voting is the Byzantine agreement mechanism that determines which nodes contribute a time to the median calculation.  If more than 2/3 of participating nodes are honest and have reliable clocks on their computers, then the timestamp itself will be honest and reliable, because it is generated by an honest and reliable node, or falls between two times that were generated by honest and reliable nodes. In Hedera's proxy staking system, the criteria is that there be nodes with more than 2/3 of the stake rather than more than 2/3 of the nodes.

There are multiple aspects to the question of hashgraph's efficiency.

In proof-of-work (PoW) blockchain, some blocks are mined and are later discarded. In hashgraph, every event that is gossiped to the community is kept so the efficiency is 100%. No resources are ever wasted on discarded blocks because no blocks are ever discarded.

We can also consider hashgraph's efficiency in terms of bandwidth, storage, and CPU.

Hashgraph adds only minimal overhead in bandwidth - it sends the minimum amount of data to represent an event (transaction payload + timestamp + signature), then adds a tiny overhead of two hashes (node's hash and parent event's hash). 

With respect to storage burden, hashgraph allows nodes to collectively establish a signed state and discard earlier portions of the hashgraph used to establish that state - with no need to maintain it since inception. For example, if Bitcoin were to be implemented on a hashgraph (as opposed to PoW blockchain), then signed states would reduce the storage to less than 1GB (compared to the current 170GB).

In relation to CPU (or GPU) cycles, PoW is extremely intensive on memory for the purpose of calculating the hash puzzle. Conversely, hashgraph doesn't require PoW and only uses the necessary CPU and memory to update the state.

No, the theorem by Fisher, Lynch, and Patterson (FLP) proved that a consensus algorithm has to make random choices in order to be aBFT. That’s why hashgraph makes random choices within the algorithm. As do all aBFT consensus algorithms. 

The Hedera Hashgraph Platform provides a new form of distributed consensus; a way for people who don't know or trust each other to securely collaborate and transact online without the need for a trusted intermediary. The platform is lightning fast, provides the best level of security possible in a distributed consensus algorithm, is fair, and, unlike some blockchain-based platforms, doesn’t require compute-heavy proof-of-work. Hedera enables and empowers developers to build an entirely new class of distributed applications never before possible.

The hashgraph algorithm is highly decentralized - there are no leaders, miners, coordinators or block producers with special influence towards consensus. Separately, the Hedera governance model is also decentralized. All Governing Members of the Hedera Hashgraph Council will have equal voting rights and all except Swirlds, Inc. will be limited to a three year term with a limit of two consecutive terms. Swirlds, Inc., the owners and licensor of the hashgraph technology, will retain a permanent seat on the council. The council membership will be decentralized across sector and region - with no one vertical or country having undue representation. The highly distributed network will eventually expand to millions of nodes voting on the order of transactions across at least five continents. This separation of governance from consensus is designed to ensure continued decentralization over time.

Both delegated proof-of-stake (DPoS) and Hedera's proxy staking model are motivated by the desire to allow those network participants not running node software to nevertheless use the coins they have to influence consensus.

In DPoS, such stakeholders are able to elect witnesses or delegates from a pool of candidates - only the successful candidates in this election are entrusted with acting as a consensus node. Stakeholders thus influence consensus indirectly in DPoS through their stake-weighted votes towards the election of the actual consensus nodes. As DPoS relies on human actors electing businesses into a privileged role, it has been suggested that it may be vulnerable to the standard issues of political elections - including bribery, cartel formation & poor voter participation.

In Hedera's proxy weighting model, stakeholders can directly influence consensus by proxying their stake towards a consensus node. The relative weight of that node towards the virtual voting algorithm will reflect the sum of the stake the node controls and that proxied to them by various stakeholders. This is logically similar to how individuals lend their money to a bank when they create a savings account - the expectation is those funds will be "put to work" (as loans to others, etc.) and the depositor compensated accordingly.

The Hedera Hashgraph Platform will have a native cryptocurrency - utility token used for the fees that grants token holders access to distributed applications on the platform. Nodes will be compensated for their costs in contributing towards consensus through the same tokens. Additionally, the token will also be used in the proxy staking model in order to provide the network security. A nodes votes in the virtual voting mechanism will be weighted by the amount of coins they have staked - thereby inhibiting Sybil attacks. We expect the token to act as a unit of value to motivate responsible use and governance of the platform.

We expect fees on the Hedera Hashgraph Platform to be tiny; that is, fractions of a cent. Consequently, small value transactions, or micropayments, will be made viable for the first time. Micropayments will open up new business models around content delivery and the Internet of Things.

The Hedera Hashgraph Council will be the governing body of the Hedera Hashgraph Platform, and provides distributed governance of the organization. The council will consist of up to 39 leading organizations and enterprises in their respective fields, with membership designed to reflect a range of industries and geographies, to have highly respected brands and trusted market positions, and to encourage a wide variety of perspectives. This is far more decentralized than a single foundation with a few people making all the decisions.

Hedera’s governance terms ensure no single member will have control, and no small group of members will have undue influence over the body as a whole. When it comes to consensus, the network will expand to millions of nodes, all of which will vote on consensus.

The Hedera Hashgraph codebase will be governed by the Hedera Hashgraph Council, and will be released for public review with Version 1.0. The codebase will be open review, meaning that anyone will be able to read the source code, recompile it, and verify that it is correct. So the council cannot change the codebase without everyone seeing those changes. This ensures transparency.

The nodes that the Hedera Hashgraph Council members run will have no special role in consensus - their influence, like all others, will be weighted only by stake.

In addition, Hedera is fair because there is no leader or miner given special permissions for determining the consensus timestamp assigned to a transaction. Instead, the consensus timestamps for transactions are calculated via a voting process in which the nodes collectively and democratically establish the consensus. Hedera is fundamentally fair because no individual can stop a transaction from entering the system, or even delay it very much. If one (or a few) malicious nodes attempt to prevent a given transaction from being delivered to the rest of the community, and so be added into consensus, then the random nature of the gossip protocol will ensure that the transaction flows around that blockage.

The source code will be open review, but not open distribution. Open review provides trust and transparency, while limiting distribution will inhibit forking and the associated instability.

The hashgraph algorithm is protected by patents. The patents are a tool designed to inhibit forking and the associated instability and loss of network effects. The absence of enterprise-grade applications running on the public networks today is partly due to the possibility of those platforms splitting into competing platforms and cryptocurrencies. This represents risk to anyone considering building mission critical applications on those platforms. The patents will allow Hedera to make a commitment to such enterprises that we will never authorize a fork. 

A cryptocurrency account on the Hedera Hashgraph Platform can have hashes of identity claims about the account holder attached to it, as asserted by an authority. When funds are moved in and out of that account, the signed identity claims can be retrieved from some other location and validated. These verified identities will enable Know Your Customer (KYC) in support of Anti-Money Laundering (AML). Both the authority & account holder must explicitly authorize the initial attachment of the claims to the account and either can remove them at any time - providing both a privacy respecting opt-in model and a revocation functionality.

The Hedera Hashgraph Platform will start with a small number of nodes during the testing phase. Then it will expand to have nodes run by all the council members. It will later expand to include other participants. Later, we anticipate this will become available to anyone who wants to host a node (and meets basic requirements for bandwidth, CPU, and storage). We expect to eventually have millions of nodes around the world, run by ordinary people, many of whom might choose to remain anonymous.

No license will be required to use the Hedera Hashgraph Platform. No license will be required to write software that uses the services of the Hedera Hashgraph Platform. No license will be required to build smart contracts on top of the Hedera Hashgraph Platform. Applications built upon the Hedera Hashgraph Platform can be open source or proprietary. They do not require any license or any approval from Hedera. Swirlds and Hedera will simultaneously embrace open review, while bringing stability through use of the patents. In this way, Hedera will provide a transparent codebase that will provide the stability that markets demand for mainstream adoption of a public ledger.

Swirlds is the licensor of the underlying hashgraph technology that enables the Hedera Hashgraph Platform, and will continue to develop the technology. Swirlds is a member of the Hedera Council and will have the same voting rights as every other Governing Member. Prior to formal launch of the platform and the council, Swirlds may retain control of governance and network development. After launch, the operation of the network and all changes to the codebase will be controlled by the votes of the Council, not by Swirlds.

DApps thst have announced their intent to build on Hedera Hashgraph include:

CULedger, a credit union consortium, will be using Hedera to enable cross border payments for credit unions around the world.

Intiva Health, a medical credentialing platform, will use Hedera to build their ReadyDoc platform for doctor credential management.

Artbit, a new distributed ledger platform will also use Hedera to revolutionise the ways artists are discovered and compensated.

The Hedera Hashgraph Platform will initially support smart contracts written in the Solidity™ language. Over time, it may support additional smart contract languages. There can also be programs running on user computers and mobile devices, that call the Hedera API to use the services. Those programs can be written in any programming language.

There is a test network currently running for Hedera Hashgraph Council members.

You can learn more about the Hedera Hashgraph Platform in the whitepaper. Alternatively, if you want to discuss council membership, system partnerships, building distributed apps, or anything else, send us a message via our register interest form below.

The mainnet is live as of August 24th 2018 and tokens have been generated. Hedera expects to release tokens to SAFT investors no earlier than six months after network launch. Hedera does not control whether its token will be on exchanges, but we anticipate that Hedera tokens are likely to be traded on exchanges at some point in 2019.

We have officially closed our crowdsale. We will not be accepting any new applications, and the crowdsale registration page has been removed from our website. Please do not fall for any scams pretending to still be collecting funds from Hedera.

We have a fixed supply of 50 billion tokens.

We expect token distribution at the beginning to be approximately as follows:

65%: Hedera Council Treasury
17%: Hedera management and employees
13%: SAFT purchasers and developers
5%: Swirlds

The Hedera network reaches consensus on transactions through a token-weighted process, in which a particular transaction becomes final when nodes holding an aggregate of over two-thirds of tokens have validated that transaction. This means that an attacker could disrupt the network by owning or controlling one-third of the tokens. This is the reason we initially have a very slow token release schedule. By having almost 65% of tokens held by Hedera treasury and proxy-staked to trusted nodes (that is, nodes hosted by Hedera Council members), an attack becomes virtually impossible. To protect the Hedera network from certain classes of attack, we anticipate that the circulating supply of tokens will remain below 10% of the total token supply for the first year and below 33% of the total token supply for at least five years.

We are proud to be partners with Blockchange, BlockTower Capital, Digital Currency Group, Distributed Global, DNA Fund, Hexa Labs, Multicoin Capital, and many others. Visit the Investors page for more information.

As a US-based company, the crowdsale was conducted in accordance with SEC regulations as a private placement pursuant to Rule 506(c), and was thus limited to accredited investors. We appreciate all those who had expressed interest through our website. As the public network launch nears, developers and community members will be invited to beta test the network and will receive tokens for their contributions (regulations permitting). To apply as a beta tester, visit hederahashgraph[dot]com to register your interest.

We would have liked to offer the SAFT as widely as possible, yet we are also committed to complying with applicable laws and regulations. Therefore, the SAFT was not offered in jurisdictions where, based upon the advice of legal counsel, doing so could place either Hedera or investors at risk of violating local laws and regulations, particularly as they relate to securities offerings, offshore investments, or the sale of tokens or cryptocurrencies.

The minimum investment per person was $1,000 and the maximum was $250,000.

Tokens were offered at $0.12, which implies a $600 million valuation based on expected 10% circulating supply in year one and $6 billion based on total supply. This is the same price that our institutional investors paid and the same price paid by management and employees who invested over $10 million in this round.

The release schedules for institutional investors in the last round are the same as those for the crowdsale. It is important to note that the Co-Founders, Mance Harmon and Dr. Leemon Baird, have the majority of their tokens vesting in four to six years. They have been business partners for over 25 years, and plan to focus on, and invest in, Hedera for the long-term.

Management and almost two-thirds of employees invested over $10 million in the most recent round.

There are no approved investment pools and Hedera does not condone the participation in such pools. Any investment applicants discovered to be pools with non-accredited investors will be banned from participation.

Please be vigilant and take extra precautions against scams. We are not offering a crowdsale to non-accredited investors. Beware of pools and sophisticated “sale” websites that look like legitimate invitations to participate in a Hedera token offering, but are hosted on a different URL. Hedera SAFT offerings were hosted at the hederahashgraph[dot]com URL. Never click a link or trust an email or chat message soliciting investment. Rather, type the Hedera URL hederahashgraph[dot]com directly into a browser. Read more on how you can protect yourself from phishing attacks. Please report all scams to [email protected] and additionally report to outlet channel if possible.

At this time, there is no AirDrop planned. We are developing testing program where the community will be able to earn tokens for testing the network.

Hedera expects to release tokens to SAFT investors no earlier than six months after platform launch. Hedera does not control whether its token will be on exchanges, but we anticipate that Hedera tokens are likely to be traded on exchanges at some point in 2019.

The funds will be used to build and grow the Hedera platform globally. Core divisions that we will dedicated resources to include Engineering, Marketing, Sales, Developer Advocacy, Community Development, Legal, etc.

You can learn more about the Free & Fair Voting Initiative here.