Hedera Hashgraph raises $100 million for fast and secure blockchain alternative

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VentureBeat | Dean Takahashi | Aug 1, 2018

Move over blockchain. Hedera Hashgraph has raised $100 million via a future token sale from institutional investors as it seeks to create a new commerce network based on its “hashgraph consensus” technology. That’s a fancy term for a new distributed public ledger that the company says can function much faster, more securely, and at a larger scale than current blockchain technologies.

The Dallas, Texas-based company will use the money from its public sale of future tokens to accelerate development of key services to be provided by Hedera. The company says the amount of money raised shows how much potential it has to change the internet as we know it and overcome the obstacles that have stopped cryptocurrency and blockchain from disrupting the world’s financial systems.

“As a technology, it’s a fundamental advance in the world of distributed systems,” said Hedera CEO Mance Harmon, in an interview with VentureBeat. “It has fantastic performance, and it achieves the best in security one can have in the field.”

He added, “Small systems have achieved this in the past, but never at scale. Bitcoin had terrible performance, but it is reasonably secure. It was always a trade-off. What hashgraph does for the first time is break that trade-off, maximizing both security and performance.”

That means it can be used as a foundation for a cryptocurrency that can function at hundreds of thousands of transactions per second in a single cluster of computers (a shard), compared to five for Bitcoin and 15 for Ethereum. With enough clusters operating in parallel, the performance can reach millions of transactions per second, and that is enough to handle commerce on a gigantic scale, Harmon said.

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“This is like the difference between a calculator and a computer in what we can do,” he added.

The Hedera Hashgraph provides a new way to arrive at distributed consensus, or verifying something like a transaction to satisfy people who don’t know each other or trust each other. They do this in a collaborative way without the need for a trusted intermediary, like a bank.

With the blockchain, achieving that consensus can take a long time, slowing down technologies such as Bitcoin or Ethereum when it comes to doing transactions. The compute-heavy task, dubbed “proof of work,” can make Bitcoin more secure, but it also slows it down. In closed networks, proof of work isn’t necessary, but that means sacrificing security.

Hedera Hashgraph doesn’t require the compute-heavy proof of work that slows down some of the blockchain platforms. It uses something dubbed the “virtual voting consensus algorithm,” which dispenses with the proof of work and runs extremely quickly. And so Hedera Hashgraph aims to run transactions at least 1,000 times faster than other cryptocurrencies, Harmon said.

One of the things Hedera Hashgraph will enable is the micropayment, or the ability for one party to pay another a fraction of a penny, Harmon said.

“We think that will be incredibly important for things like the internet of things, where the things will discover each other and engage in commerce automatically in a micro economy,” Harmon said.

He also said it could enable high-throughput transactions for online games, where you can use the hashgraph to verify the authenticity of resources, like a sword in a vast universe.

“You could do a fully distributed Metaverse,” Harmon said, referring to the world of virtual worlds envisioned by sci-fi author Neal Stephenson in the 1992 novel Snow Crash. “It ensures scarcity of items, and you can’t cheat. We think gaming will be a huge vertical for us, and it was part of our original motivation. The vision for cyberspace is for an individual to grab a piece of the space, play together, work together, exchange goods and services, and do it without having to trust a central third party with their privacy and their data. That was the goal.”

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