This post might seem a little off-course from the usual investments/markets I write about but I promise it’s relevant. Obviously the world is becoming more technology oriented and while most people still don’t really understand the details of cryptocurrencies, I believe we’re in the very, very early stages of a movement where the world is going to become “tokenized” and Hashgraph will be a major platform for this.
I’m going to do my best to explain this in simple layman’s terms but I will be leaving out a lot of the technical aspects. This is just a primer to get Hashgraph on your radar. Let’s start with a few definitions:
What do I mean by “tokenized?” A token is another name for a crypto coin which represents the digital asset. It’s the way that transactions are recorded on a digital ledger or DLT (distributed ledger technology). The most popular cryptocurrency is Bitcoin (the token) and it’s transaction are recorded on the blockchain (the DLT). A blockchain is a type of DLT but there are also other types as well. Ethereum is another popular network which allows users to create “smart contracts” that automatically run once the criteria of the contract is met. Some additional aspects of DLT’s is that they are generally decentralized, meaning no central authority controlling everything, and immutable.
DLT’s really aren’t some crazy new idea. Individuals, companies and governments all keep books and records. DLT is just an extremely efficient and fair way of doing so that’s made for the 21st century.
What I mean by the world is becoming “tokenized,” is that assets and transactions in the physical world will be recorded on and kept track of with DLT’s. For example, when you buy a house, you will no longer have a physical piece of paper for your title. Your ownership of the asset will be represented by a token, a digital title, and the transaction will be recorded on a DLT so you always have proof that you purchased the house, you received the title and the seller received a payment of money. And remember, these ledgers are immutable.
The implications of this technology are enormous because it’s going to cut out all of the inefficiency and waste of intermediaries. That’s a lot of disruption to the way things are currently done and is definitely something to be thinking about when making long-term investment decisions.
So why do I like Hashgraph over other networks?
Hashgraph is one of the newer networks being developed and is about to go live. I consider the creator, Leemon Baird, to be a genius. He has thought through just about every weakness and inefficiency of the earlier crypto networks and has created a network that has the potential to disrupt the way we do nearly everything. Here are just some of the various things he has discussed the network as being able to handle:
- Micro-payments and transfers (Fintech)
- Investment markets (Trading)
- Cloud/data storage (medical records, etc.)
- Voting (proxy votes for companies)
- Online gaming
- Smart contracts
- Asset tokenization (real estate, cars, etc.)
Users are in full control of their data kept in the network (watch out Facebook and Google…). For example, if your medical records are stored in the network you have full control of who has access to them. You can grant access to your doctor and later revoke it if you change doctors. Need to apply for a mortgage? You can grant the lender access to your financials and statements and automatically have it revoked after a period of time.
Blockchains are sort of a first generation DLT with a few inefficiencies, with the two major ones being speed (only processes about 7-10 transactions per second) and cost. Bitcoin’s blockchain is a proof-of-work concept which requires a lot of computing power and electricity to run. Hashgraph, on the other hand, has the ability to process hundreds of thousands of transactions per second – more than Visa’s global network! Hashgraph is more similar to a proof-of-stake network and it uses a rumor protocol between users to pass transaction info. All users participating act as a node on the network and you get paid for participating (by allowing your computer to act as a node) similar to bitcoin miners. The difference is that you don’t need super computers, just your basic computer and internet.
Perhaps the biggest reason I’ve been so impressed with Hashgraph is based on how the company is operating. They’re approaching this very seriously with a long-term vision. Most cryptocurrencies went live via an Initial Coin Offering (ICO) to raise money first and then focused on building out the technology of the network. Hashgraph has been building the entire foundation of the network behind the scenes for a couple years now, and now that they have companies and app developers signed up, they’re bringing the network live. I think this is going to really ramp up adoption speed whereas other networks have good ideas but have struggled to gain acceptance and usage.
Here’s the website. The corporate side of the company is called Swirlds and the cryptocurrency itself is called Hedera. Here’s a pretty good article from earlier this year that gives you a rundown on the network. And if you’re really interested, there are a handful of videos on YouTube with details on the network (click here to start).
Ultimately, Proof-of-work networks are too slow and costly for mass transactions. I think they’re much better suited as a long-term store of value. Hashgraph was designed from the beginning to be able to handle mass transactions and data. I haven’t seen any other network with the potential to be adopted on such a wide scale and fully plan to get involved personally once they go live. Cryptocurrencies aren’t able to be purchased in brokerage accounts so this isn’t something I’m advising clients on or purchasing for them.
As a reminder, this is not investment advice. I just wanted to give you an introduction to a new technology that I believe has the potential to be very disruptive. Investing in cryptocurrencies contains a lot of risk and you can potentially lose all of your money. Please do your own research before getting involved.
Thanks for following!
Nick