Hedera Hashgraph Services — Part 1: Cryptocurrency
The Hedera platform recently launched its main network — more commonly known as the mainnet — with the three main services on the framework being cryptocurrency, file storage, and smart contracts. In this article, we’ll be covering the first of the three services, cryptocurrency service. So let’s get started.
Please Note: When writing software that utilizes any of the main services or to simply use the Hedera Hashgraph platform, licenses are not required. With no approval necessary both open source or proprietary dApps built on the platform remain owned by their developers.
All that’s required to use the platform are Hedera tokens, also known as HBARs — from which users pay a nominal fee to the platform when they make an API call to any of the services (except when using the getReceipt query to an account it’s free).
What is Cryptocurrency?
Like any currency, cryptocurrency is a medium of exchange. As a digital financial transaction, it uses cryptography for security and verification and bypasses the need of verifying third parties commonplace in traditional cash systems like banking institutions. In the wider schema, a cryptocurrency is made up of finite database entries that can only be altered under predetermined conditions.
In a typical payment network there are accounts, balances and transactions.
We’re going to take a deep dive into the different functionalities available in the Cryptocurrency service offered through Hedera. The main thing you get out of this is the cheap native micro-transactions that Hashgraph functions on.
Facilitating hundreds of thousands of transactions a second and as a precursor to the types of applications that can be run on the platform, it begs the question what can you actually do around them? First we’ll start with the account features and the different transactions you can make on the network.
You may have seen these before considering they are the main components of some blockchains that enable anonymous Accounts. In Hashgraph third party identities can be assigned or removed from accounts which helps to prevent dubious activities like money laundering.
Accounts
Making micropayments feasible, Hedera Hashgraph cryptocurrency has been created to be fast and with low network fees.
To take advantage of the features of an account, lets study what account properties includes:
Account ID
Every account on Hedera has a global account id. This is what ultimately decides how much money you have on your account. This ID is where you send HBAR to and from. You can use a public/private key pair (assigned to your account) in order to sign and send transactions.
Keys for Transfer Out
Accounts on the ledger have an HBAR balance and associated key. A key holder is required to sign for any transactions that are transferring coins out of an account.
Proxy Staking
Firstly staking connects your crypto-coins in an account to a node for a fixed amount of time, while getting rewarded for running the network. For the network to keep running it is vital that HBARs be staked. Stakes will earn interest because when a node joins to a network it will declare the associated accounts, which sees said node be paid to function as a node.
An example of this could be in a certificate of deposit, or CD, which is a type of savings account that has a fixed interest rate and fixed date of withdrawal.
In most proof of stake blockchains there’s staking, which locks up your tokens so you are unable to spend them. On the other hand Hedera provides proxy staking. This type only proxies your amount of HBAR to a node but doesn’t lock it out of circulation. Proxy staking occurs when connecting the crypto-coins in an account to a node — where the staking account doesn’t actually have to run it — and getting rewarded. More specifically it is a means of providing another account credit for the user’s coins by enabling a node to use that stake. When you proxy stake your account you don’t have to run a node and can still earn HBAR’s.
While the ratio of the profit between nodes and proxy stakers are negotiable, it is the coin owners that control the HBAR — to which they reserve the right to take out their Hbars as and when it suits them.
An example of proxy staking can be in a deposit to a savings account when you get an interest rate and there is not a fixed date of withdrawal.
In summary staking is when you connect your tokens into a node. These tokens are usually held in your account albeit they are locked but in Hashgraph, proxy staking does the same without locking the tokens — and as result acting more in tune with that of a savings account. Node maintainers will be incentivized to have more accounts staking their HBAR through their account considering they are paid proportionally to the amount of HBAR that’s being staked.
Thresholds
This involves setting a value that Hedera will compare transaction payments to and generate account records. Clients can obtain confirmation to the consensus of a transaction as Hedera provides an array confirmation mechanisms — and records are just one of the different types of transaction confirmation.
Records can be generated (when the flags are set to true) by Hedera when you set up a threshold for an incoming or outgoing payment.
The user can set a “send record threshold” or a “receive record threshold”. Send record threshold will generate a record when an outgoing payment that occurs is above the threshold. While, a receive record threshold will generate a record when an incoming payment occurs that is above the threshold.
Receiver Signature
The subsequent receive record threshold makes sure the payment is acceptable and allows for validation from the receiver of an incoming payment. An example of this can be seen in a foundation receiving a donation. Some foundations cannot take donations from certain individuals and this gives them that capability.
Auto-renew Period
As retaining an account on Hedera costs money, it allows for auto-renewal by taking money out from and account balance — according to the size of the transaction until it can no longer do so. The exact fees are yet determined.
Transactions and Queries
Within the Hedera framework, you can also make transactions and/or queries which lets you make changes or get information with respect to your account.
You can create and delete accounts as long as you provide a public key and an initial balance. In the instance of deleting an account, while it will stay in the ledger until its expiration it won’t have the ability to receive any further transfers — and HBAR’s will be moved to an alternate account that’s specified. This method helps businesses who are using this ledger keep their accounts GDPR compliant.
Adding and Deleting Claims
An account can have claims posted against it — and this lets users set up information on their accounts. These can include claims on a credential or certificate along with a list of threshold keys, the validity of such credentials or certificate to identify facts proven about them.
Keys are assigned to claims and act as a gatekeeper that can verify or revoke said claims. A key acts as an authoritative power in much the same way that when applying for legal residency in a country it has to be approved by issuing state departments — otherwise any onerous claims can be disputed and not recognized by law.
In the same way as uPort enables users to register a globally unique identifier to the Ethereum blockchain, Hashgraph allows users self sovereign identity which grants ultimate control over their identity — in terms of private keys, user accounts, private data and authority on who can access and use their data and personal information.
Transferring
As a linchpin of the platform micropayments make Hedera Hashgraph ideal for developers, organizations and ground level users. From impromptu transfers to mandated payments, fees stay at a fraction of the sum being transferred — and as low as 1/1000 of a cent. Users can also transfer to one or more accounts or to the same account as long as the total adds up to 0.
Querying
Account querying can be used to identify the latest information. For example information received can take the form of the confirmation a transaction was added to the consensus state. Querying can further be used to retrieve associated information like a receipt for that transaction, a ‘record’ associated with the transaction or to simply check your account balance.
Users can also benefit from Hedera allowing the updating of properties of accounts e.g. in line with the associated expiration date, time and also signatures. With respect to the types of queries you can make to an account they include GetBalance, GetRecords, GetClaims, GetInfo and possibly GetStakers, which as of the time of writing are to be currently implemented.
Conclusion
In tandem with what Hedera Hashgraph, on the whole, offers users and developers, the different properties of its cryptocurrency as detailed in this article afford them to be used fluidly and in different ways.
Encompassing a cryptocurrency as a service that supports native micropayments, all the way from fast, low fees to transacting without intermediaries, a developer can use some of these features, if not all, to their utmost advantage.
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