High Performance Blockchain — Fundamentals
Last updated: April 2019
Blockchain technology is a phenomenon of the last decade and it gained a lot of attention, especially in late 2017 and early 2018. Most people have already at least heard of Bitcoin, but blockchain technology is much more than Bitcoin. There are thousands of cryptocurrencies and their use cases are far beyond just transferring value. For good or bad, death rate within this new emerging industry is massive and many of these cryptocurrencies won’t be around in few years time.
I wrote this text to give you a deeper understanding of fundamentals that are not only going to help HPB survive this bear market, but will make HPB thrive in the next bull run.
The problem and the solution
As you probably know, the blockchain industry has been plagued with a low Transactions Per Second (TPS) bottleneck. Everyone who’s been around for a while remembers when CryptoKitties congested the most popular smart contract platform Ethereum to the point where it became pretty much unusable and I think this made many people realize how far from readiness for mass adoption blockchain technology actually is.
Different projects take different paths to tackle this bottleneck. Some decided to increase their performance by significantly lowering the number of nodes, some are trying to solve this on a software level, for example by implementation of sharding. One thing these projects have in common is that all of them use conventional hardware that was not designed for running blockchain, and this is where HPB differs.
HPB is a product of HPB Foundation and Shanghai Zhaoxi Network Co., Ltd. Zhaoxi is an innovative blockchain technology research and development company founded in 2014 by Xiaoming Wang. With offices in Shanghai, Beijing and Singapore, they are taking a very unique approach to tackle the TPS bottleneck to balance the blockchain trilemma — how to be fast enough to enable mass adoption but not at the expense of decentralization and (thus) security.
HPB has a permissionless blockchain architecture that combines customized open-source hardware (the BOE, or Blockchain Offload Engine) with High Performance Blockchain software. If you remember how ASIC miners changed BTC mining, or how GPUs changed the gaming industry, you might likely come to the conclusion that creating a dedicated hardware is a very logical step to take for the whole industry. Even internet speed was vastly increased thanks to hardware advancements such as ADSL or fiber optics. HPB is the first player in the market that has successfully designed and manufactured hardware dedicated to enhance blockchain transaction speed. There is a very good article on hardware and scaling from one of the community members. You will find a link at the end.
Part of the BOE is the ECDSA (Ecliptic Curve Digital Signature Algorithm) module that performs signature verification at high rate and is essential for the network to be able to process thousands of signatures per second.
The BOE has an in-built hardware random number generator to protect transactions and increase security. Any malicious actors on the network would have to overcome not only software, but also the hardware part of the network. Blockchain data is already well protected, but this component adds another layer of security for HPB.
Other parts of the BOE are the MAC module that handles processing of data packets transferred from Ethernet cables and the TCP/IP Offload engine (TOE), which optimizes throughput for high-speed Ethernet systems.
As the name of the hardware indicates, its purpose is to offload CPU load from the node servers. At the BOE Launch and Reveal event in July 2018 there was a live test of two identical servers — one with the BOE hardware unit and one without. The non-BOE server took 40 seconds using 76% of CPU to process 200,000 inspection data. The one with the BOE took 8 seconds to process the same amount of data, using only 5% of the CPU. That’s 5 times faster while using only a fraction of CPU! You can see this test at 48th minute of BOE launch and reveal event video (link at the end of the article).
Using BOE hardware has another significant advantage. Other projects very often use VPS services to host their nodes, which adds another layer of centralisation because sometimes too many nodes use the same VPS service (EOS nodes most often use AWS for example), and if a VPS provider has some issues, then many nodes using it have issues as well. Also, once the network reaches higher constant TPS, nodes will need to rent more CPU, resulting in much more energy consumption and thus much higher costs.
HPB nodes are much more energy efficient and less costly because the vast majority of the CPU load is performed by the BOE unit itself. Furthermore, all HPB nodes are obligated to use the BOE hardware, which means they can’t use VPS service and that makes the network more decentralised.
To further optimize the network performance, HPB is using a dedicated HPB server network instead of a universal one.
The HPB MainNet went live in late September 2018 and is currently run by 118 nodes (not all invitation node spots are full yet). Thanks to the BOE hardware, the network is capable of achieving more than 5,000 TPS globally and 10,000 TPS within China, where most nodes are located. This makes HPB faster and much more decentralised and secure than many competitors that are run by only a fraction of the nodes that HPB and waste much more energy.
Even though current TPS is already incredible, the team has a plan to increase the performance soon: “In the coming months we will increase our TPS through a multi-step approach. First, we will further enhance parallel processing of transactions by optimizing the organization of data in the transaction pool. Secondly, we will perform network protocol optimizations to streamline network traffic. Thirdly, we will design a new virtual machine that runs on our BOE.”
HPB has a team of over 60 full-time employees and developers who profit from having experience in huge companies such as IBM, Alibaba, Huawei, UnionPay and others. I won’t go much into detail since you can check yourself on the HPB website, but I do want to briefly introduce the CEO — Xiaoming Wang.
Xiaoming Wang has over 10 years of experience in finance and big data. He is one of the founders of UnionPay Smart — the Big data division of the largest payment processor in the world, UnionPay. I will come back to this later in the article. He is a blockchain pioneer, who is very well known among the Chinese blockchain community as Blue Lotus. He’s been lecturing in Asia about the advantages and use cases of blockchain technology for years. He was the person who wrote the Chinese version of Ethereum’s official document, he wrote a series of books including a “Blockchain developer guide” and many scientific articles about blockchain. In March 2018 he received the “Most innovative CEO” award at the 4th annual Blockchain Finance and Fintech China event. If you look at the attendees and partners of this conference, it seems like a decent award to receive.
HPB is a highly flexible project
It should not come to you as a surprise, after what you’ve just read about the CEO, that HPB is in many ways similar to Ethereum. The source code is 80–90% based on ETH, it uses Go-ethereum and HPB also adopted a similar gas/fee system to ETH. This might be just a coincidence or a very pragmatic step. Ethereum has one of the largest developer communities, and since Ethereum is open-source and software parts of the two projects are similar, any software solution adopted by ETH should not be hard to implement on HPB with slight modifications if needed or desired. It should also make it easy for ETH dapps to migrate to HPB should they want higher performance.
HPB supports the General Virtual Machine (GVM) mechanism. This GVM also supports code from other blockhains, allowing for greater flexibility. Currently Ethereum VM and NEO VM are supported and HPB is capable of adding new VMs as needed through its modular design. This basically means that dapps on ETH or NEO can interact with HPB should they run into scenarios requiring high performance.
HPB is working on their Blockchain middleware project, which is currently being tested by Chinese community Befull (formerly Fupin).
Another interesting feature is that HPB supports sidechains. This means for example that core technological and/or software updates can be tested on a sidechain prior to public release. HPB is also offering BaaS (Blockchain as a Service), providing end to end solutions and consulting for enterprises that want to take advantage of of blockchain technology for their business.
HPB generally takes a very wide and holistic approach towards blockchain industry. The team recognises that different entities have different needs and motivations. A game developer has very different priorities than a financial institution for example. While a game developer might enjoy developing his game on a public blockchain, a financial institution might not be happy with all their data being stored on a public ledger. HPB takes a hybrid approach — it works as a public blockchain platform where anyone can come and build their dapps but at the same time they can reach partners or developers that want more freedom in terms of their consensus algorithm, privacy etc through their BaaS offering and side chains. This allows HPB to build massive ecosystem with many different entities that can easily and safely interact and exchange data between each other
Use cases of HPB are endless since performance is not an issue, but the whitepaper mentions mainly big data, gaming and anti-counterfeiting traceability.
Node system and consensus algorithm
The number of nodes that run HPB network is 150, of which 31 are High Performance Nodes and the rest are Candidate Nodes. The number of nodes will increase to 300 in the future, of which 61 will be High Performance Nodes and the rest Candidate nodes. HP-nodes are responsible for synchronization and block generation while Candidate-Nodes process transactions. The algorithm rotates the nodes and any Candidate-Node can become an HP-node at any time.
The block rewards are distributed as followed:
2/3 of the block rewards are allocated to HP-Node that generated a new block and all CandidateNodes. For each block generated, the HP-Node responsible for the block generation receives 35% of the block reward, and all other Candidate-Nodes evenly divide the remaining 65% of the block rewards.
1/3 of the block rewards is allocated according to the proportion of community votes that all BOE-Nodes obtained. Invitation nodes are excluded from this reward.
70% of nodes are decided by voting, 6% of nodes are run by the HPB foundation and 24% of nodes are issued by invitation (Enterprises that can easily deploy dapps and serve target users; Academic institutions; Developers; Non profit organizations..). Invited nodes are currently: Tianshu Society — an organization of the Beijing University of Posts and Telecommunications; The Distributed Intelligent System Laboratory of Shanghai Jiaotong University or Bixin. All invitees will be contributing to R&D of the network.
Another aspect that makes HPB unique is that it adopts its own consensus algorithm — Proof of Performance. This algorithm takes into account three key factors when choosing an HP node: network bandwidth (50% weight), ranking of community voting (35% weight) and number of HPB coins held (15% weight). This way all nodes are incentivized to add as much performance to the network as possible.
HPB adopts an inflationary system. Current inflation is capped at 3% of the initial token supply and once another 150 nodes are added, it will increase to 6% of the initial token supply. Fixing the maximum inflation rate to initial token supply means that the real inflation will actually decrease each year.
To drive adoption and economic incentives, HPB team decided that for the first year of inflation an equal amount of HPB will be burned from reserve fund. Which means the first year of HPB there will be 0% inflation.
HPB coin is the fuel of the whole HPB ecosystem. Some of the use cases are:
- It is used as gas for transactions
- Developers need it to issue smart contracts
- New projects can hold HPB and launch ICOs to raise funds
- Coin holders can vote for nodes and influence the way the network is governed
- Nodes also need to hold HPB coins and the more they hold, the higher their chance of becoming an HP-Node and earning higher block rewards.
- Initial coin supply is 100,000,000 HPB.
This is where it’s getting really interesting. Remember the company founded by HPB’s CEO that handles the big data of the largest payment processor in the world? Yes, UnionPay Smart. To give you an idea what UnionPay is and how insanely big it is — UnionPay is something like Visa or MasterCard, but it is bigger than both of them combined. It processes about 80% of all transactions in China with annual turnover about 80 trillion Yuan! Well, guess what blockchain they are going to use for their big data authorization and traceability dapp? HPB! This is possibly one of the biggest partnerships in crypto space.
One of the speakers at the BOE acceleration engine launch and reveal event in July 2018 was the COO of UnionPay Smart, who described the issues and challenges big data faces nowadays. These are primarily: privacy leaks, revenue generated without user consent, identity fraud, and adapting to the new GDPR standard. He describes all these points in more detail during his speech. You will find the link to the subtitled video at the end of this text. He also called HPB “the most pragmatic blockchain”.
“We have completed the base blockchain infrastructure and developed an early-stage beta system that can extract and process data from legal documents. Key outstanding tasks includes transforming different types of legal documents into a standardised set of smart contracts and developing a front-end user interface, which is convenient to use for all stakeholders.” — from the latest update on UnionPay Smart dapp.
SME Finance forum
This is another partnership with a major financial institution. HPB has become a member in the SME finance forum in the International Finance Corporation (IFC) of the World Bank group. IFC, a sister organization of the World Bank, is the largest global development institution focused exclusively on the private sector in developing countries. The SME Finance Forum works to expand access to finance for small and medium businesses. It operates a global membership network that brings together financial institutions, technology companies and development financial institutions to share knowledge and promote growth of SMEs (Small to Medium Enterprises). Globally, SMEs account for 9 of 10 businesses, 50% of world GDP and two thirds of world jobs. Zhaoxi will take place in member working groups and build its knowledge of SME financing through member engagement and Forum events. Through this partnership, HPB is linked to global policy-making networks such as the World Economic Forum, G20, OECD, APEC and AFI.
“200 million businesses worldwide need financing to invest, grow and create new jobs. We are proud to have Zhaoxi join our network of 140 members who work to expand access to finance for small and medium businesses,” — Matthew Gamser, CEO of the Forum.
“Partnering with the SME Finance Forum allows us to effectively position ourselves to develop blockchain infrastructure for SMEs. We are excited to learn from other members and explore opportunities throughout SME financing together,” said Xiaoming Wang, Founder and CEO of Zhaoxi.
You can find HPB on the members list on the SME Finance Forum website. I will add a link at the end of the article. I think membership of such an institution gives HPB a lot of credibility and will open many doors to potential business partnerships.
This is another huge partnership for HPB. Laya.one is a venture of gaming industry giant Laya.box. To give you an idea how huge Laya is, here are some facts from one of their Q&A:
- By August 31st 2018, there were already 367,262 Laya developers, and more than 140,000 active developers each month. Laya engine is the fastest growing H5 engine in China.
- According to a survey in August 2018, 70% of the listed game companies in China, including Tencent, NetEase, 37Games, Xiaomi, Cheetah and OurPalm, etc. all are using LAYA.ONE’s engine.
- LAYA.ONE’s core engine（Laya.Air Game engine), is so far the only fully developed H5 3D technology. According to the statistics, there are 22 3D games on WeChat, 20 of which are developed with Laya.Air
- Since 2014, there have been more than 10 thousands games created on Laya engine and now more than 20 being developed on LAYA.ONE.
- For technical and market reasons, 80–90% of HTML5 games worldwide have been developed in China.
Now you know how big they are, the point is that Laya.one will be using HPB and its corresponding BOE engine to bolster their digital signature processes. The digital signatures ensure and identify each players’ identity and relevant assets. The current system uses the CPU of the system server to execute signature verifications. As you already know, HPB can offload the work onto the BOE and significantly improve verification speed and thus network performance.
As the whole platform will be open source, the game logic (such as chance-based events, rarity of items etc) is apparent to all users, all items are owned by players and stored safely on the blockchain and all trading is traceable. All these features bringing gaming experience to another level.
It’s fair to say that Laya doesn’t have a partnership exclusively with HPB. Their blockchain will be connected to other blockchains such as ETH, EOS or NEO for example.
HPB has come to an agreement with ITCEC to build a new industrial city development and operation services platform based on HPB MainNet!
ITCEC was founded in 1988, affiliated to China Electronics Corporation (CEC), which is a People’s Republic of China’s state-owned company, a world's top 500 enterprise for seven consecutive years and one of the largest producers of telecom equipment in China. Together with HPB they will work on resource integration in areas such as smart city, ecological park, comprehensive park, and industrial projects.
Knownsec, founded 2007 in China, is a security services provider. The company’s CEO was on Forbes ’30 Under 30' list in 2012. In 2015 Knownsec received a large-scale strategic investment from Tencent, which is one of their clients. Some other clients include for example: China Merchants Bank (major Chinese bank, ranked 213th in the Fortune Global 500 list), CITIC Securities (China’s largest full-service investment bank), Jingdong (massive B2C online retailer and the largest competitor to Alibaba), of course above mentioned Tencent and the list goes on. Providing security services to such companies made them very highly recognised in the industry.
HPB, keeping security in mind as a priority, announced a partnership with Knownsec in August 2018. In late Q1 2019 Knownsec finished their security audit. The audit was focused on HPB’s smart contract, consensus algorithm, BOE hardware, network protocol, plus iOS and Android mobile wallets. The result is very pleasing for everyone involved with HPB. According to the report “HPB has proved itself to be a high-performing blockchain with high security.”
Other partners of HPB include NEO (angel investor), Dapp Discover, Tsinghua University, Nebulas, BitShares, OKEx, Bixin, Pchain, Bottos, CoinID hardware wallet, Oath Protocol, Coinbucks, InVault and Atlas Protocol.
It is also worth noting here that HPB has already set up their first international dev incubator in Crypto Valley in Switzerland. Switzerland is one of most pro-crypto nations in Europe, a great place to be for any blockchain project that aims to succeed on a global scale and Crypto Valley is the fastest growing tech-hub in Europe.
Other facts and information about HPB
HPB is ahead of its initial roadmap since the MainNet was meant to be released in 2019.
BOE hardware is currently configured to work only at 50–60% of it's full capacity.
HPB was featured on Dutch national TV (https://hpb.io/post/195)
HPB was awarded “Hurun blockchain innovators TOP 50 projects” award. They also received the “Blockchain infrastracture with most potential 2017” award at the Financial Technology Introduction awards.
Marketing-wise, HPB didn’t participate in crazy altcoin bull run in early 2018. When I found out about HPB in late Feb 2018, there were literally two videos about HPB on Youtube and generally very little content to find for English speaking people. The HPB team always said that marketing will start only after their product is up and running smoothly. As a result, most of the crypto space is unaware of HPB's existence and the community is pretty small compared to other projects.
Well, the product is up and running now and we are starting to see the first marketing initiatives from the team. Danny Rowshandel mentioned in his interview with Brad Laurie that 2019 is where HPB wants to make a marketing push in key areas where they believe they can get a solid marketshare.
As this bear market lasts longer than many expected, we start seeing projects running out of money and cutting their operations. Not the case for HPB! These guys even hired around 10 more full time employees during 2018. HPB, on top of $8–10 million from ICO, received $10 million in private investment from OKex and other strategic partners in April 2018. According to Danny Rowshandel, Managing Director of International Business of HPB, HPB has enough funds to go another 2–3 years.
HPB takes global warming seriously. They made a minor adjustment and replaced the fan of BOE unit with an energy efficient sustainable heat sink to make nodes more eco-friendly.
An approximate energy consumption of one HPB node is only about 25.2kWh per week or 1310.4 kWh/year (data provided by “Lunar Node” after 4 months of running HPB node).
HPB shared a sneak peak of the CEO Xiaoming Wang working on what appears to be a “quad-BOE”. In one of early bi-weekly reports the team announced that TPS linearly increases with the number of BOE units on the board. Releasing “quad-BOE” would therefore significantly increase TPS performance, but there’s no need for that now. It will take a good couple of years to reach the current 5000 TPS potential on a regular basis. The BOE hardware is already giving HPB huge advantage over “software-only” projects and this advantage will be even more significant in future.
To summarise this whole article and briefly compare to some other projects, you can check this excellent infographics from one of HPB community members — Bernd.
That’s it from me. I believe you have all the major information about High Performance Blockchain now. I kindly invite you to do your own research on this incredible projects and you will find there is even more than what you’ve just read.
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Thank you for reading
Sources and interesting links:
https://www.youtube.com/watch?v=riO-SB_BMK0&t=1s — BOE launch and reveal event. Demo comparing performance of server with and without BOE unit at 47th minute. Union Pay Smart COO speaking right after that.
https://www.youtube.com/watch?v=674FSw__JuQ&t=1 — very informative interview with Danny Rowshandel from HPB, hosted by Brad Laurie. Highly recommend to watch.
https://www.blockhaven.ca/releases/high-performance-blockchain-a-future-giant — is HPB set up to become a future giant?
https://www.blockhaven.ca/releases/what-makes-hpb-undervalued — an article dedicated to current HPB price
https://medium.com/@pattympat/scaling-the-undeniable-role-of-hardware-d3c304af73f1 — an article explaining the importance of hardware for scaling different industries
https://hpb.io/post/185- Two year anniversary open letter from CEO Xiaoming Wang
https://www.hpb.io/post/201 — Mars Finance interview with Xiaoming Wang