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Frequently Asked Questions

Answers to the most frequently asked questions about the Hedera technology, network governance, native currency, and more. For more technical or in-depth governance-related questions, visit the Hedera Docs or the Hedera Council website.

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HBAR

What role does HBAR play in Hedera’s “proof-of-stake” model?

Hedera’s native cryptocurrency “HBAR” serves two vital purposes:

  1. To secure the network against cyberattacks though Hedera’s coin-weighted, proof-of-stake consensus mechanism.
  2. To be the “fuel” that incentivizes and pays for the computing resources necessary to make it all work.

HBAR is used to pay transaction fees for all network services, including transferring tokens, executing smart contracts, and storing data.

Hedera’s coin release schedule was designed to maintain the security of the network and correlate with expected activity on the network. With a mission of being a 100-year company, Hedera is focused on the long-term well-being and growth of the network.

Staking HBAR helps secure and decentralize the Hedera network while earning rewards.

As a proof-of-stake network, Hedera uses staked HBAR to determine each node’s influence on consensus—the more HBAR staked to a node, the greater its voting weight. By staking, you’re actively contributing to the network’s security and decentralization, making it more resistant to attacks. In return for this contribution, you can earn staking rewards on your holdings.

One of the key advantages of Hedera’s staking model is its flexibility.

  • Your staked HBAR remains completely liquid with no lock-up periods, meaning you can spend or transfer your tokens at any time without penalties.
  • No “slashing” risk—your tokens can never be taken as punishment for node misbehavior, which is a concern on some other proof-of-stake networks.
  • You can change which node you’re staked to whenever you like.
  • Your entire account balance is automatically staked to your chosen node, so there’s no need to specify an amount.

Both delegated proof-of-stake (DPoS) and Hedera’s native 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 and poor voter participation.

In Hedera’s native weighting model, stakeholders can directly influence consensus by proxying their stake to a node. The relative weight of that node in the virtual voting algorithm will reflect the sum of the stake the node controls and that proxied to it by various hbar holders, up to a maximum cap. Stakers are incentivized to proxy to reliable nodes that will consistently earn them rewards, and the maximum cap will protect against too many people proxying to the same node.

Network governance

What is the Hedera network?

Hedera is a public, open source distributed ledger that can support applications in highly-regulated enterprises, DeFi and the public sector. It is differentiated from other DLT platforms in its scalability, security, and stability. It provides a core set of services, including Consensus Service, Smart Contract Service, Token Service as well as a suite of application accelerators. HBAR is the protocol coin used to transfer value and consume services on the Hedera network.

For more information, see the original Hedera whitepaper.

Yes, the Hedera source code is open source. You can find it in the official GitHub repository: https://github.com/hiero-ledger/hiero-consensus-node.

Hedera is committed to transparency and open source as core principles. For this reason, the entirety of its source code—encompassing the hashgraph consensus algorithm, core services, and essential tools– has been contributed to the LF Decentralized Trust, where it lives as the “Hiero” project. For more details about the approach to open source, please refer to:

Introducing Hiero: https://hedera.com/blog/introducing-hiero-the-foundation-of-the-future

Hedera is continually expanding the scope of its security audits to ensure that all critical components of the Hedera network are thoroughly evaluated. The hashgraph consensus algorithm has been audited by multiple independent firms. You can find the audit report from FP Complete, along with the formal verification (COQ proof) from Carnegie Mellon University, in the Knowledge Center. In addition to the hashgraph consensus algorithm, there have been extensive audits of the Hedera services codebase. These audits cover a wide range of components, including the modularization of the Java-based code, which focused on the restructuring of the codebase to improve modularity and maintainability.

The Hedera network to date does not have any system or precompile smart contract bytecode maintained by the network. All smart contracts are deployed by users who will employ their own auditing and transparency processes. The Hedera network does offer System contracts, which are address interfaces that support the execution of HAPI code as if they were deployed smart contract functions. Hedera makes reference example Solidity contracts available to enable developers to get started developing at https://github.com/hashgraph/hedera-smart-contracts. However, these contracts are not audited and serve as examples only. While previous audits did not include an assessment of these Solidity smart contract examples, this is planned for future audits.

It is important to distinguish between centralization of the consensus algorithm and governance.

The hashgraph algorithm is highly decentralized – there are no leaders, miners, coordinators or block producers with special influence towards consensus. Hedera is currently operated by a group of KYC’d nodes from diverse industries, geographies, and operational environments.

The Hedera governance model is also decentralized. All members of the Hedera Council will have equal voting rights and Council members (except Swirlds, Inc.) will be limited to a three-year term with a limit of two consecutive terms. Swirlds, Inc., the owner, and licensor of the hashgraph technology will retain a permanent seat on the Council. Council membership will be decentralized across sectors and regions, with no one industry or country having undue representation.

Hedera believes that the design of the Council, composed of multi-billion dollar companies from different sectors and regions, will deliver a governance model that will be resistant to collusion and coercion – the ultimate measures of decentralization.

Currently, Hedera is a public network with permissioned nodes run by the Hedera Council. 

The coin native to the Hedera network is called HBAR. You can find more information about HBAR in the HBAR section above.

The Hedera network, at its foundation, is built on the hashgraph consensus algorithm. Hashgraph 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.

Dr. Leemon Baird is the inventor of the hashgraph distributed consensus algorithm. 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 provides all the guarantees associated with voting (which proof-of-work doesn’t provide), but is incredibly efficient because the network doesn’t actually send any votes over the internet.

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 network of nodes 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.

Hashgraph is asynchronous Byzantine Fault Tolerance (aBFT) – the highest degree of security a consensus algorithm can provide. ABFT means that finality of consensus will be reached with 100% probability if a) attackers control less than 1/3 of the voting power over consensus and b) we assume only that messages from an honest node will eventually get through, but make no assumptions about how long it will take to do so. 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.

Hedera uses 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.

In 2015, Dr. Leemon Baird develops the breakthrough innovation now called hashgraph. A few months later, Leemon and his longtime friend and business partner, Mance Harmon, form Swirlds, Inc. to develop proofs of concept and battle-test it in permissioned environments.

The original whitepaper is published on May 31, 2016, and hashgraph is selected over more established solutions for use in private network pilots. 

In 2017, Leemon and Mance begin to grow the project. They meet Andrew Masanto, founding CMO, who helps bootstrap the company by providing key early contributions and introducing both Leemon and Mance to a number of Hedera’s initial team members. The founding team is brought onboard, including executives Jordan Fried (former SVP, Business Development) who joins in August 2017 to lead Hedera’s global business development and Council recruitment and Natalie Grunfeld Furman (General Counsel), who joins in September 2017 to develop Hedera’s legal and regulatory strategy. 

Hashgraph Consortium, LLC is created as a Delaware limited liability company. Hashgraph technology is displayed publicly to the world for the first time at TechCrunch Disrupt in San Francisco, CA. First Letters of Intent are signed by potential Council members.

See how the rest of the story unfolds at hedera.com/journey. 

Interested in more FAQs?

Visit the Hedera Docs for more technical questions or the Hedera Council website for more in-depth governance-related questions.

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