When Satoshi Nakamoto wrote in the Bitcoin Whitepaper that “a purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution,” they likely had some idea that peer-to-peer networks would revolutionise not only payment transactions but also business and finance. As blockchain technology and its use cases are evolving, so is the need for innovative solutions for the blockchain trilemma and cross-chain solutions. Harmony (ONE) is a project that has set out to offer a combination of solutions to these challenges.
What is the blockchain trilemma?
We recall the conundrum: there is a widespread assumption in the world of blockchain that decentralised networks are only able to offer two of the three features a blockchain needs to provide in order to meet user needs in the long term: security, decentralisation and scalability - with seemingly one element always needing to be sacrificed.
This is called the “blockchain trilemma” - a network on a blockchain obviously needs to be secure in order for users to use it for transactions, and it needs to be decentralised to ensure that users only have to place a minimal level of trust (“trustless”) and that no one party or group of parties controls the network. Finally, the network needs to be able to scale to handle increasing numbers of transactions reliably, at a high throughput and with low latency.
Harmony in a nutshell
Originally founded in 2017 by a group of researchers and engineers, Harmony is considered one of the most secure open-source networks. Harmony uses a random selection of nodes, and is the world’s only project that uses a cross-sharding mechanism to increase the speed of transactions, as well as offering a unique combination of other features.
Firmly convinced that the future of protocols is permissionless, Harmony is looking to address the issues of scalability, decentralisation and security by instituting the best research and engineering practices in an optimally tuned system. They state on their official website:
“Harmony’s interoperability frees users from being locked on a single platform. The future of web3 is a multi-chain ecosystem, and Harmony’s bridges can connect any Proof-of-Work and Proof-of-Stake chains.”
Here are the essential features of the Harmony project in its crypto ID:
Cross-chain bridge building with Horizon
Horizon cross-chain bridging enables the exchange of crypto assets such as stablecoins, fungible and non-fungible tokens between the blockchains of Harmony, Ethereum and BSC. It is based on a set of smart contracts deployed on both Ethereum, BSC and Harmony blockchains and a pool of validators following events on both Harmony and Ethereum bridge smart contracts.
How does the Harmony Horizon bridge work?
Once a token lock action is detected on one chain, the information is validated and relayed to the other chain and the same amount of a bridged token is minted. If a bridged token burn is detected, it is validated and relayed to the other chain and the same amount of the original token is unlocked.
Solving the trilemma
Harmony addresses the problems of the blockchain trilemma - scalability, decentralisation and security - by combining several engineering practices.
Scalability
Scalability, the ability of a system to increase throughput in line with rising demand, is of the essence to projects running on blockchains. Sharding is a method of partitioning a database into many parts that is employed to manage large amounts of data.
Unlike any other project, the Harmony network shards the entire state of the blockchain in not just one but three dimensions: state, network and transaction. Each shard maintains its own state data based and chain of blocks.
The Harmony network is also divided into shards where each shard involves a separate set of closely-connected validators running consensus among themselves. Finally, the network is able to conduct transaction processing in parallel through specific shards, greatly improving overall transaction processing capacities.
Security
In order to prevent single-shard attacks, Harmony validators are assigned shards via a distributed randomness generation (DRG). In the Harmony network, DRG is based on both Verifiable Random Function (VRF) and Verifiable Delay Function (VDF) to ensure that:
The random number is unpredictable before its generation;
That generation of this random number is unbiased and independent from participants;
That the validity of this number is verifiable by anyone;
That randomness generation algorithm can be scaled to high numbers of participants.
Decentralisation
Harmony was created to enable “decentralisation on a large scale” and it’s living up to this standard on many levels inherent in its structure, such as its Effective Proof of Stake (PoS) consensus mechanism to prevent stake centralisation.
The higher the amount staked, the more nodes a validator needs to support in running the network. The algorithm randomly distributes the stakes among all shards for increased security to prevent malicious stakers from concentrating their power in one shard while enabling the participation of small stakers in a growing ecosystem.
Harmony’s native token ONE
Harmony’s native token is ONE and is used throughout the platform for governance procedures, the payment of transaction fees and gas fees, staking and for earning rewards.
Exploring the metaverse
The Harmony ecosystem is also moving towards the metaverse - just recently the project announced its new partnership with the multiverse gaming platform, LootMogul, to build a scalable product for the sports and crypto communities.
How to start your research
As always, before deciding whether to invest in an asset, make sure to consider a number of things:
Don’t forget to do your research - one good place to start is to visit the official website of the project you are interested in, in this case harmony.one.
Make sure to know your risk profile and how investing in a certain asset aligns with your greater investment goals.
Finally, assess how an asset would fit into your personal investment portfolio regarding asset diversification.
Where can you start investing in ONE?
On Bitpanda, you can invest in ONE and more than 1,000 other assets, including cryptocurrencies, crypto indices, precious metals and more from just €1, 24/7 and even automate your investments with Bitpanda Savings.
You want to open a Bitpanda account? Registering is fast, simple and secure via Bitpanda’s desktop app or our apps for iOS and Android. Go ahead and verify your account, make your first deposit using your favourite payment method - including SEPA Instant - and start investing right away.
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