Hedera Hashgraph (HBAR): what it is and why it is outperforming

Every year it
brings a number of new cryptocurrencies and platforms to the attention of investors, and this year it’s Hedera Hashgraph’s turn. Its native token HBAR has outperformed most other major coins in recent weeks, having risen 142% since January 1 (compared to 50% for bitcoin and 43% for ethereum). Yet it’s not an entirely new platform, having launched its mainnet in beta in September 2019.

Since then, it has continued to develop almost under the radar, overlooked in an industry where newer platforms like Solana, Avalanche, and Aptos have attracted more hype as potential “Ethereum killers.”

However, in recent months, Hedera Hashgraph has been able to position itself more convincingly as a potential rival to Ethereum, thanks to a combination of upgrades, growth, and new partnerships. And while it may never surpass Ethereum as a top-tier network, its superior efficiency and scalability could make it the platform that businesses end up using for their blockchain needs.

Why Hedera Hashgraph is going up right now

Starting with the short-term reasons for recent HBAR price increases, the cryptocurrency enjoyed a big rally on February 7, when it went from $0.069058 to $0.077016 in about an hour. This was an increase of 11.5%, and was caused by the announcement that US multinational tech giant Dell was becoming a member of the Board of Directors of Hedera Hashgraph, joining Google, IBM and Boeing (among numerous other heavyweights).

This announcement not only means that Dell will play a role in the governance of Hedera Hashgraph and manage a Hedera node, but also that it wants to use the platform’s technology. In particular, Dell will use Hedera’s technology to develop decentralized applications for edge computing, which is a relatively new branch of computing related to intelligent technology and the Internet of Things.

In other words, it’s a massive endorsement for Hedera that one of the biggest names in technology has chosen it as a springboard for explorations into distributed ledger technology. And as noted above, this triggered a rally that continued for several days, with HBAR closing at $0.098084 — an eight-month high — on February 13, marking a 42% gain from February 7.

However, HBAR’s recent fortunes began some time before February, with the coin starting to rise steadily from January 1 onwards. In fact, as noted above, the price has more than doubled since the New Year and until February 13 it increased by 168% compared to the price of January 1.

Was there any particular news that triggered this surge? Well, actually not, because what is primarily responsible for HBAR’s earnings this year has been the organic growth and adoption of Hedera Hashgraph.

There are various indicators of this growth. Perhaps most impressively, Hedera’s Twitter account announced on February 13 that her network had processed four billion transactions to date. What’s remarkable about this is that it surpassed three billion recently on January 22, indicating that its network is growing exponentially.

To put this into perspective, Cardano — which launched its mainnet in 2017 — has processed a total of 61.6 million transactions to date, according to Cardanoscan. Yes, some of Hedera’s (and Cardano’s) transactions will be trivial (i.e. they will only involve exchanging metadata), but the fact that most are not is indicated by the growing total value of the blocked network and its growing number of dapps and partnerships.

The total value of locked Hedera has increased by 95% since January 1 and by 215% since mid-August, when SaucerSwap (its largest decentralized exchange) was launched. While it remains at a fairly modest $45.71 million (compared to $126 million for Cardano and $30 billion for Ethereum), it has risen faster than TVL than many other chains (e.g. Avalanche grew 31.5% and Solana 32% since January 1).

Much of this has to do with the constant launch of new applications, with DEXs in particular serving to attract new users. For example, in addition to the launch of SaucerSwap in August, Hedera also welcomed the launch of Tangent Finance in July, HeliSwap in September, and Pangolin Exchange in February. Some of these apps are growing rapidly, with Pangolin already scoring $8 million blocked, despite being released on February 8.

Needless to say, HBAR being Hedera’s native token, the launch of new apps means a growing demand for the token, which helps explain its steadily increasing price over time.

Speed, Scalability… and Centralization

And there’s a reason apps, users, and even large enterprises are choosing Hedera over other potential platforms: scalability. Hedera is significantly more scalable than many of its rivals, and the main reason for this is that it doesn’t use a blockchain, but rather a hashgraph.

As summarized in its white paper, “Hedera’s hashgraph consensus algorithm provides near-perfect efficiency in bandwidth utilization and as a result can process hundreds of thousands of transactions per second into a single fragment.” Basically, the fundamental difference between a blockchain and Hedera’s hashgraph is that the latter does not discard valid blocks that are created at the same time or time as the only block that ends up being added to the chain.

More simply, Hedera’s different approach to reaching consensus allows it to process many more transactions per second than many other blockchains and at a fraction of the cost. This is why apps that were recently launched on Hedera have been quick to gain traction, with SaucerSwap boasting a confirmation time of just eight seconds, for example (unlike Ethereum-based Uniswap, which takes around 27 seconds).

However, such speed comes at a cost, and for some, Hedera remains a centralized platform. In fact, such allegations have followed the platform since its launch in 2019, and there are a number of basic reasons for this.

First, Hedera has only 28 nodes, with these nodes being the members of her board of directors. Second, Hedera has almost made a new commitment to never afford to undergo a divisive hard fork, with its white paper stating, “Hedera’s technical and legal controls ensure that the platform does not fork into a competing platform and cryptocurrency.” This could probably attract more companies to use it, but it implies a certain degree of closure to difference and, probably, to innovation.

However, such doubts do not prevent Hedera from having a very good 2023. And with its extremely low energy consumption coming at a time when interest in ESG investing is only growing, it could end up being one of the fastest-growing platforms (and coins) of 2023, if not beyond.

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