Editor: Matt Beneduci
April 9, 2024 | Token Report | Hedera Hashgraph (HBAR)
If you’ve dealt with the U.S. banking system before, it’s almost certain you’ve experienced delays, inefficiencies, and archaic practices that leave you scratching your head.
When my friend sends $10 to my Venmo account, it appears in seconds. This is because third party apps like Venmo, Cash App, or PayPal can process payments instantly. When I go to transfer those funds to my bank account, it’s a much different story. Three days later, it “settles” into my account, and I may have even incurred a fee for that settlement.
You see, this has been the case since 1972, when the automated clearing house (ACH) model was adopted by the Federal Reserve. To say the ACH model is outdated is an understatement, and the U.S. financial system is looking to make significant changes.
On July 20th, 2023, the Federal Reserve launched the FedNow platform, which allows us to transfer money instantly throughout the U.S. banking system. Through financial institutions who participate in the service, businesses and individuals can send and receive instant payments around the clock, any day of the year.
As of early February 2024, approximately 470 banks and credit unions have become part of the FedNow network. The current roster of participants is predominantly made up of regional and community institutions, with many of the larger banks yet to join the network. Considering there are over 9,000 banks and credit unions across the United States, this is a notable but still limited participation. The platform launched initially with 35 participants, and is expected to see continued growth.
It’s still early, but this is a big deal. Instant payment capabilities within the banking system are long overdue. The FedNow platform is one of the most significant advancements to the U.S. banking system since perhaps the ACH model was introduced. Some are calling it the start of the digital-dollar revolution, and The Digital Age portfolio holds a crypto project that’s been adopted as a network to help the FedNow platform move money faster and smarter.
Introducing Hedera Hashgraph (HBAR)
Hedera Hashgraph (HBAR) operates as an open-source ledger with low, predictable fees, providing a robust infrastructure for various projects to build upon. It’s like a digital system where people can exchange things, like money or data. It's set up so that it's affordable and reliable for different projects to use. However, to be part of this system and help run it, you need permission from a group called the Hedera Global Governing Council. This group is made up of 29 members from different parts of the world and industries like finance and technology. They make important decisions about how the system works, with input from the HBAR community and token holders.
This may sound different from other projects in the portfolio that are more decentralized and open to the public without any “gate-keeping” tactics involved. We recognize that this level of centralization is unpopular and uncommon in the crypto space, however it’s not preventing us from seeing Hedera as a great asset in the portfolio.
Let me explain…
Hedera has been careful about who gets permission to help run it. They've partnered with trustworthy companies from all over the world to be part of the system, which helps keep it safe and fair. These companies are spread out across many countries, and work together to prevent any cheating or problems with the system. We’re talking about big names like Google, IBM, LG, and Boeing just to name a few. Take a look below at the full list of partnerships.
These partnerships help create a trustworthy and transparent system that gives us as investors confidence in the project, maintaining integrity and remaining free from corruption. Eventually, Hedera intends to make the system more open and decentralized in the future. For now though, its setup offers a lot of potential for growth and improvement, especially because of its unique technology and partnerships.
So, let’s get technical … What is a Hashgraph?
We aren’t going to take you to coding school, but it’s important to have a high level understanding of what makes Hedera Hashgraph unique.
Hashgraphs are a fascinating technology that presents a different approach to keeping track of information compared to traditional blockchains. Instead of bundling data into blocks and relying on miners to validate transactions, hashgraphs use a process known as "gossip about gossip."
The term “gossip” is not to be confused with what we learned in elementary school, where information becomes increasingly inaccurate as it gets passed along. In this case, it’s actually just the opposite.
You see, each computer, or node, in the network communicates with every other node, sharing information about transactions they know about. This communication creates what we could call a “digital gossip network”, where each node learns about transactions from others and shares what it knows. Over time, this gossip network forms a directed acyclic graph (DAG) that organizes transactions in chronological order. Below you’ll find a visual representation we found on the Hedera website, which shows the difference between blockchain and hashgraphs. We’ll include a link to this page in the resources section below.
What's remarkable about this approach is that it enables hashgraphs to achieve lightning-fast transaction speeds. Because nodes are constantly gossiping about transactions, the network can process thousands per second, facilitating near-instantaneous transactions. This speed is a significant advantage, especially in applications where real-time transaction processing is essential.
And while hashgraphs work at impressive speeds, let’s talk about how secure it is…
They secure the network through use of asynchronous Byzantine fault tolerance (ABFT) consensus algorithms. This algorithm allows nodes to reach a general consensus on the state of the network and verify the validity of transactions. Essentially, they help computers agree on the truth, even in the presence of malicious actors. As long as less than one-third of the nodes are compromised, the network remains secure and tamper-proof.
You see, Hashgraph technology is baked with integrity, predictability, and efficient energy use. Hasgraphs are known for their fairness, since all nodes have equal access to information and participate in the decision-making process without favoritism. This is critical to earning the network trust and shows commitment to inclusivity and transparency. They also produce low and consistent fees, all while operating in an energy efficient manner. For contrast, Ethereum’s energy output costs around 3,000 times more per transaction.
So, yes.. Hedera does have a lot going for it, but It's important to note that hashgraphs currently operate as permissioned ledgers, meaning that only invited participants can run on the network. This differs from permissionless blockchains where anyone can participate without needing an invitation. However, the speed, security, and fairness of hashgraphs are attracting interest from various industries and applications, and we believe it makes a strong case for continued adoption in the future.
The HBAR token
HBAR is the native, energy-efficient cryptocurrency of the public Hedera network. HBAR’s are used to pay transaction fees and protect the network from attacks through proof-of-stake. This is achieved by dispersing HBAR as rewards to individuals who actively participate in securing the network by running nodes.
Token holders on HBAR also hold the right to vote on potential changes or improvements proposed for the governing ecosystem. These decisions are ultimately determined by the Hedera Global Governing Council, which oversees the network's development and direction.
With a max supply of 50 billion tokens, HBAR tokens are capped similar to how Bitcoin (BTC) is. Of these 50 billion to ever exist, 33.7 billion HBAR tokens are already in circulation. As the Hedera ecosystem continues to grow amongst companies and investors, we expect to see a steady increase in demand for HBAR tokens. Thus causing more HBAR to be bought, sold, traded, and staked within the ecosystem.
Potential Upside
Hedera has one of the most established teams in the crypto space. The team consists of high profile names, with impressive backgrounds. They’re led by people like Andrew Aitken, Hedera’s chief open-source officer who previously served as an advisor to the white house. The team is also constantly making updates to the hashgraph technology, and they do a great job keeping the public informed on their progress, which we like. You can find a link to the public roadmap in the resources section.
We mentioned that Hedera has been selected as the network to help run payment processors for essential tools on the revolutionary ”FedNow” platform. While this is true, it’s not the only reason we’re holding it in the portfolio. In fact, this is just one of the many use cases we like for this network.
You see, Hedera aims to become compatible with Ethereum's technology, known as Ethereum Virtual Machine (EVM). This means that apps and tokens from Ethereum can work on Hedera, taking advantage of its fast transactions, low fees, and strong security. Users will be able to hold HBAR in Ethereum wallets like Metamask. While this is exciting, we’re still early. Hedera has made progress in this direction, but it's not fully there yet. By becoming EVM compatible, the user base would increase dramatically which ultimately would drive the HBAR token up in price.
Take a look at how the network stacks up against crypto blue-chips, ethereum and bitcoin…
The Hedera network leads in transactions per second (TPS), with lower fees, and lower energy consumption. This is significant, because an essential element of HBAR’s utility are the applications that use it. Anyone from developers, startups, investors or fortune 500 companies could run a Hedera-based application for things like payments, CBDC (central bank digital currencies), NFT’s, DeFi protocols, permissioned blockchains, decentralized identity, or more.
We believe HBAR has a promising future, and there’s plenty of upside left. Hedera is solving a critical problem in the market by offering a high speed, energy efficient network for institutions to build and develop projects on. With predictable fees and top-notch security, we see it being a staple to the crypto ecosystem, and massive projects are already adopting it. In 2021, HBAR reached about $0.51 cents. It’s currently trading around $0.10 cents. If HBAR could get back to its all-time high, that would be a 400% gain from today's price. This could happen sooner than you might expect, and we think it could easily exceed this target over the long-term. HBAR is a buy in the portfolio up to $0.20 cents.
Hedera Hashgraph (HBAR): Buy up to $0.20.
Exchanges: Coinbase, Crypto.com, or more
Wallets: Blade Wallet
Hedera Resources:
Want to get in touch?Matt@benedefi.com