Everything about Hedera Hashgraph Cryptocurrency – HBAR

“HBAR – Hedera Hashgraph Cryptocurrency to build and deploy dApps on Hedera Platform”

To achieve consensus in a secure, fair and fast way, the founder of Swirlds, Leemon Baird invented the revolutionary Hashgraph algorithm. The Hashgraph algorithm is based on the virtual voting mechanism, which is combined with gossip protocol, thus making it the robust platform.

To meet the needs of the distributed applications’ market, Hedera Hashgraph framework provides the ability to perform micropayments, build smart contracts and file storage.

Developers don’t require any license to use the platform but need the platform coin Hbar, a utility token, which grants token holders access to distributed applications on the platform.

Hedera Hashgraph cryptocurrency is designed to be fast, which leads to low network fees and makes micropayments practical. Also, Hedera Hashgraph’s user can earn Hbar for running the node in the network.

The article is intended for all the entrepreneurs and innovators who want to have in-depth knowledge of Hedera Hashgraph’s Cryptoeconomics.

Hedera Hashgraph’s cryptoeconomics involve two types of mechanisms:

  1. Staking
  2. Proxy staking


Staking involves the purchase of crypto-coins and holding them in an account for a limited period. The user can stake coins in their account and get rewarded for running the network.

To attain transparency and performance advantages of shardings, it is crucial to allow individuals to become nodes in the network. To prevent from Sybil attack, the system is implemented where each node has an influence on the consensus, which is proportional to the amount of Hbar that node owns.

Further, it is essential that Hbars should be staked to run the network continuously.

The Hedera ledger uses proof-of-stake. When a node joins a network, it must declare the account it controls and every account should have its own private key. The node will be paid to act as a node, with the amount proportional to Hbars available in its account, making stake earn interest.

Proxy Staking Mechanism

A mechanism is known as the proxy staking when any user owns the coins but doesn’t run any node. So, the user can stake those coins and earn interest by proxy staking their account to a node. It means providing another account credit for the user’s coin and enabling a node to use that stake.

The payments made to run the node are split between the node and the coin’s owner. The split ratio of the profit between nodes and proxy stakers can be negotiated.

The owner still controls the Hbars, which are being proxy staked. They have the right to turn off or redirect the proxy staking to another node at any time. Also, they can spend the cryptocurrency at any time, which will reduce the amount he/she receives in payment for staking.

There must be atleast a few cryptocurrencies in the node’s account to perform the following tasks:

  • Influence consensus
  • Receive payment for operating as a node
  • Pay fees to send transactions to the ledger

Proxy staking is the better way to earn interest while not running nodes.

Now we shall discuss what type of payment and fees is made to access the distributed applications on Hedera Hashgraph platform. 

Payments and Fees

Whether there is a need to transfer crypto coins or add items to the ledger, users have to pay fees to the platform.

Since the Hedera network has high throughput and doesn’t need POW (proof-of-work), so the anticipated fee is too low as compared to other platforms available in the market. Hedera nodes are compensated for the bandwidth, computing and storage resources they perform to reach consensus and provide services.

Here are the various types of payments and fees associated with Hedera Hashgraph platform

Node Fee: A user can utilize the platform’s services by interacting with the node, which will submit the transaction on their behalf. For example, if the user wants to transfer Hbar from their account to other, they will approach the mode and provide the signed transaction.

Then the node will add that transaction into another event it creates and tells (gossip out) it out to the network to enter the consensus. The user compensates the node to perform the job with a node fee. The fee is negotiated between the user and the node, which is not set by Hedera.

Service fee: The user will make the payment to use any Hedera services. For example: if the user submits the transaction for storing a file in the ledger, the fee will be calculated as per the Hedera’s schedule.

The storage fee is evaluated as fees per file plus an amount per byte per second. If the user’s account doesn’t have sufficient Hbars, then neither the file is stored, nor the user is charged. But, if there are adequate funds, then the user is charged and the file is stored simultaneously.

Network fee: There is a transaction fee handled by each network. From the cost of nodes gossiping transactions to storing it in the memory and calculating the consensus, there is a fee for every transaction made by the network.

The fee is calculated on the basis of an amount per transaction plus an amount per byte within the transaction. While node including a transaction in an event created by it, the network fee would be charged by the node when consensus reaches on that transaction.

If that transaction is initiated by the user, then the user will pay the pay the node network fee the node paid.

The services and network fees are collected by the Hedera on behalf of the nodes, which perform the services and process the transactions. The collected fees are used by Hedera to fund two different types of payments:

Incentive Payment: Once a day, Hedera will make the payment from its account to the node, to incentivize them to work as a node. For getting paid, a node should be online for 24 hours, as per thresholds determined by Hedera. A node will be paid proportional to the amount of Hbar it is staking.

Dividend Payment: Hedera makes payment to the Governing members for performing their roles in governance. The fees, that Hedera collected will be divided between dividend payments and incentive payments, as per defined by Hedera.

At LeewayHertz, we can help you to develop scalable dApps on the top of the Hedera Hashgraph. If you want to build dApps, our Hedera Hashgraph developers are here to assist you at every step of development.

Author’s Bio

Akash Takyar
Akash Takyar
CEO LeewayHertz
Akash Takyar is the author of Blockchain Technology and Business book. He is the co-founder of LeewayHertz and is a consultant to fortune 500 companies including Siemens, 3M, Hershey’s and others. He has a Masters Degree in Computer Science. Akash’s experience of building over 100+ apps allows him to rapidly architect and design solutions. His ability to explain complex technologies in simple and practical ways has resulted in him becoming a popular speaker at colleges, universities, and conferences.

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