The Wolf Of All Streets - This Layer 1 Can Process ~1000x More Transactions Than ETH | Mance Harmon, Hedera

Episode Date: September 6, 2022

Mance Harmon claims Hedera’s core technology, Hashgraph, has solved the tradeoff between scalability and security. It’s an impressive claim. Hedera’s website boasts 10,000+ transactions per second versus ETH’s 12+ and BTC’s 3+, at a fraction of the transaction cost, and low latency while being carbon neutral or even negative. The result is an enterprise-level layer 1 solution that has completed 2 Billion transactions since 2019 and could be the “adult in the room” of cryptocurrency. How did they do it? Why aren’t more people talking about it? Is Hedera the next ETH or BTC killer? Watch this episode to find out. JOIN THE FREE WOLF DEN NEWSLETTER 📩 https://www.getrevue.co/profile/TheWolfDen THANK YOU TO OUR SPONSOR ►► Have you ever had your exchange go completely offline during days of high volatility? Of course you have. We've all been through it. Those days are no longer with Bullish. Bullish is a new breed of digital asset exchange that empowers users to trade with deep and predictable liquidity across highly variable market conditions. They also have incredible automated market-making and industry-leading security. I can't get enough of this platform and it's fully regulated. Sign up here: https://bullish.com/melker Bullish is licensed by the Gibraltar Financial Services Commission. Virtual assets and related products are high risk. Consult your investment advisor and trade responsibly. Bullish is available in select locations only and not to U.S persons. Visit bullish.com/legal for important information and risk warnings. EPISODE LINKS Mance’s Twitter: https://twitter.com/manceharmon Hedera Website: https://hedera.com/ Production & Marketing Team: https://penname.co/ FOLLOW SCOTT MELKER • Twitter: https://twitter.com/scottmelker • Facebook: https://www.facebook.com/wolfofallstreets • Web: https://www.thewolfofallstreets.io • Spotify: https://spoti.fi/30N5FDe • Apple Podcasts: https://apple.co/3FASB2c SHOW NOTES 00:00 Intro 00:22 Mance Harmon Intro 01:00 What Makes Hedera Different 02:40 Centralization 07:48 Hedera Use Cases 10:35 Scaling Layer 1 13:16 The Key to Up-Time 15:48 Sharding 16:35 Energy Consumption 22:16 Competition 23:46 Hedera’s Roadmap 26:15 Thanks for Watching

This episode is sponsored by my good friends at Bullish. Stay tuned for more information on this amazing company later in the episode. There's been endless debate as to whether any single blockchain can scale for mainstream adoption. What happens when we have 1 billion, 2 billion or 3 billion people using any given blockchain? Well, Mance Harmon from Hedera told me that they've already processed 2 billion transactions in a few years and that they can scale to effectively any level. Here's why. I have endless conversations about blockchains, layer ones, layer twos, roll-ups. We've got it all when we talk to all of the founders of these projects, but you actually

have some unique value propositions that are different from the others that I'd love to hear you talk about. We are, and that's intentional. We are very different than all the other layer ones that I'm aware of. Who knows what's going to be coming out in the future? But it's different in both in terms of the technology as well as in the governance model. A lot of people maybe have heard about Hashgraph. Hashgraph is something that my co-founder, Lehman Baird, invented. He developed that. He started it in 2012. Worked for years to try and solve this really hard problem.

Specifically, how do you maximize security for a consensus algorithm, reach the limit, theoretical limit of what's possible, while simultaneously maximizing the performance because there's always been this trade-off between yeah we got it we got a problem there we got performance versus security and and he solved the problem it is a fundamental advance in the state of the art it's uh rock solid we call it hash. And we knew when he invented it in 2015, this is a really big deal. Bitcoin had made the market. I mean, when he started all this in 2012, it had nothing to do with Bitcoin. He just wanted to solve this cool math problem because he's that kind of guy. And so in 2015, when he actually did it,

we said, holy cow, look at what's going on in the world of Bitcoin. We have something that could change the world, literally. So we decided to dive in. And two years later, when we were ready to create a public network on this new technology, Hashgraph, we wanted to take a lesson from the past in terms of how you govern a global public infrastructure

in a decentralized, distributed way. And I read a book by a guy named Dee Hawk, who is the founder of Visa back in the 1960s. Before it was Visa, it was called Bank AmeriCard. And Dee recorded his challenges, his experiences, and the governance model for that earliest of Visa networks back in the 60s. And I marked up the book and we applied it to our context here. And what it looks like is a governing body that is today, it's 26 strong. We're growing to 39. These are the largest organizations in the world, the biggest companies. It's the Google. It's literally Google and Boeing and Deutsche Telekom and IBM and their banks, Nomura and Standard Bank of South Africa, Shinhan DBS and others and their global law firms, DLA Piper and others. I mean, it's that caliber of organization that we created back in 2017 when we started all this.

And they govern. They govern the network. Today, we call it, effectively, it would be called a DAO. When we did all of this way back then. Pre-DAO. It was pre-DAO. It was pre-DAO. Today, it would be called a DAO. When we did all of this way back then, it was pre-DAO. Today, it would be called a DAO. But the combination of Hashgraph and its performance and security with this new

governance model that is this world-class set of organizations running the nodes, they create the network, and they govern the network,ives us an incredible value proposition, especially for mission-critical use cases. I mean, it's meant to be enterprise-grade and mission-critical grade, and we built it that way from the ground up. So that's what we focus on. In 2017, when you talk about putting together that governing body, we were still in the retail, FOMO, bull run phase, but we did not necessarily have a lot of believers in the technology or the long-term future of it. How are you able to onboard companies like Google?

It's crazy. No, you're right. In fact, I remember when we began to raise money back then for Hedera, people said, you're never going to be able to get a council like what you're envisioning. Have you ever had two enterprises, global enterprises, try to work together, let alone 39, which is where we're going. We're at 26 today, like I said. So we didn't know if we could do it. But what we did know is that we had something special, both in terms of the technology and a belief in a governance model

that we thought enterprises would buy into. They want to do business with organizations that look and feel like they do right i mean when you if you're a big company and you're considering spending millions of dollars to build an application or adapt on top of one of these public networks um you think long and hard about who am i going to get a service level agreement from yeah you know it's not going to be a bunch of anonymous farm characters from Twitter. No, exactly. Exactly. And they care about. Well, here's a good analogy. Right. So when you think about Netflix, the relationship between Netflix and Amazon Web Services, AWS. If AWS were crashing or going down once a quarter even for any period of time, Netflix is going to find another provider. And so we knew that to be able to attract the kind of organization that we wanted to

our council, we had to have a technology that could be bulletproof and could be enterprise grade. And we had to speak the language of enterprise and convince them that not only are they going to be using this platform, they also get to direct its evolution and its product roadmap and have a say in its legal and regulatory posture. All of these things that matter to enterprises that are going to spend millions and millions of dollars building their businesses on top of a layer one. Even though back then they didn't know what the use cases were going to be in the future, they believed that there were going to be use cases way back then. Big jump. It was a big jump, and we pulled it off. So how are they using it? Well, so the earliest,

the earliest use case was from DLA Piper, a global law firm, and they created a platform that they call Toko, which is a tokenization platform, generally speaking. I mean, they originally had in mind tokenization of commercial real estate assets. I mean, the value prop that they bring is when it comes to tokenization, the technology is not the hard part. The hard part is navigating the legal and regulatory frameworks cross jurisdiction on a global basis. And that's what they do. So they brought that. They were number one, fantastic partner. They don't have the high volume, the high throughput that we really were looking for in a use case to demonstrate the true value prop of Hedera. And that has now been announced by another one of our council members, Avery Dennison, another

global company. Avery Dennison has a platform that they call Atma.io. And this is what I'll call a product cloud platform. They help companies that are developing, manufacturing some kind of of product whether it be apparel or retail or food products or health care they provide a platform where if you're if you're making tennis shoes for example you have the raw materials flowing in and these raw materials get combined into a pair of shoes. The shoes themselves have a digital twin, a token.

So they're using the token service. And that token gets tracked through the whole supply chain, through distributors to retailers to consumers, and then what they call circularity. What's really cool about this, though, a couple of things. One is they're also tracking the ESG footprint, you know, the carbon footprint of a pair of tennis shoes as they're being manufactured. That makes it possible for the manufacturer ultimately, when they're completed on this, ultimately to be able to buy offsets through a carbon market programmatically in real time as part of the production process which is which is

pretty cool but the volumes are what's what what are exciting I mean they currently have 22 billion items in their platform with some of the largest companies in the world and And the amount of usage, real usage on top of our network is just going to be phenomenal to characterize that. In December, we crossed a milestone in that we processed our two billionth transaction. And we started in September of 19. That's when the network went live. That's pretty quick. That makes us the most used layer one platform if you measure it by the number of transactions, real transactions, actually processed. Two billion.

Even more so than Ethereum? Even more so than Ethereum. If you measure it in that way, we're year just from the one. And that's what's exciting. That's something that this industry has never seen. Everybody's kind of talked about, well, what happens when crypto grows up? This is what it looks like. I've asked, I can't even count how many people at this point, that exact question. What does it look like

when we actually onboard a billion people or two billion people or three billion people because it seems right now that things are breaking yes left and right so I mean from the outside looking in because I would say that the story you're telling right now yeah is not that well-known no it's not for better or for worse yeah Yeah. Right. But sure. But you see other chains that like Solana that's five times in five months has been down for at least five hours. Yeah. No, look, I get it because a single NFT project can freeze it or, you know, this network being spammed. Sure. Well, look, here's the deal. Everybody knows that there are advantages to trading on both centralized and decentralized exchanges. But why not choose an exchange like Bullish that offers the best of both worlds?

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He spent years trying to figure it out, and it makes all the difference in the world. It's something, just to be technical about it, it's something called asynchronous Byzantine fault tolerance. A lot of the proof-of-stake layer ones will say they're BFT, and they are, but the asynchronous piece of it is all important because if you don't have asynchronous, that part of it, what it means is that real world problems like denial of service attacks can bring your network down. If you're asynchronous BFT, then you

eliminate those points of failure, those single points of failure that can be attacked and cause, whether it's intentional or not, it could be malicious or just accidental. If there are these single points of failure in the network, in your consensus architecture, then you have the kinds of problems that the market has been experiencing. A BFT eliminates those single points of failure and we're unique in the industry with that. That's part of the solution. The other part is that you have to be able to scale. And if you start with a rock solid brick, you know, if you start with an ABFT brick, then the house that you build at scale looks very different, fundamentally

different than if you start with something less than an ABFT brick. And we just haven't cut any corners. We've started with the goal in mind of playing the long game and addressing enterprise grade, mission critical applications and use cases with this technology and this governance model. And we sort of ignored the fads of the industry over the years and stuck with that focus. Is there any level of scale that it becomes scary that something could break? Can you literally onboard the entire world to be using this as their core settlement layer for all transactions? Well, look, it's a great question. So here's the thing.

If you look at what we have today that is just sort of version one, and it's not scaled. It's a single network run by these council members that I described. We have capacity to process 10,000 transactions per second in this single network. Now, I think that that network alone will go up by some factor, three, four, five, who knows. But to scale, you then add more networks. It's called shardingarding technically it's sharding you scale through sharding and uh you know through sharding we easily can process what the payments networks are are processing today i have no question that we can process what the payment networks are processing which is incredible because there are certain things that centralized networks are better at, right? You're right. Decentralization in general has not solved everything because by virtue of being centralized, the Visa network or these networks are extremely

fast. They're extremely, and they should be, but they're not as efficient as they could be. Here's another point to sort of demonstrate the point. Because of the architecture of Hashgraph and the way that it works, we're not only incredibly performant, fast in terms of throughput and low latency in terms of coming to finality in a transaction, but we use a tiny fraction of the electricity that everyone else uses. I mean, everyone knows proof of work is terrible, and we blow away proof of work. We also, if you look at Ethereum... Proof of work is terrible for that. I do think Bitcoin, as a digital gold...

No, no, no. It's not an argument against the use case. Sure, sure. It's the technology I'm focused on. 100%. Yeah. So, I mean, but all proof-of-stake systems are going to do way better than a proof-of-work system in general. But when you compare the proof-of-stake systems, and we didn't do this comparison.

University College of London actually did the work and published a report, and others have as well, that show that on a per transaction basis, we're the best in the market. Not only that, this has come full circle, we are 74 times more efficient in terms of electricity usage per transaction than the Visa network. We're better than Visa and it's centralized. So there's a lot of room for improvement and on all levels, including, you know, being carbon neutral or carbon negative. And that's going to become increasingly important as these enterprises who are the ones that primarily care about their carbon footprint,

begin to try and really account for that carbon footprint and buy offsets. What it means ultimately is that when they have a supply chain or they're using partners and vendors to help them go to market with whatever it is, that they have to take into account the carbon footprint of those partners right you have to take into account all your partners and everything up up the supply chain well if they have to worry about the carbon footprint of a proof of work blockchain they just can't do it it blows at everything and if they care about proof of stake then it's going to have to be one that's really efficient. And we are the enterprise-focused

platform, and we're the most green of all the layer ones in the market. It's just exactly in our wheelhouse. It's really interesting, though, because the narrative against crypto in general to maybe the uninformed, but some of the informed as well, obviously, is that we have this major energy problem. You actually can solve the energy problem for centralized systems that are not receiving the criticism for their energy problem, but they're not even getting the criticism. Nobody's talking about how Visa uses too much electricity. Exactly. We can help. We're going the other direction, right? Instead of making things worse, not only we as a platform, if we're a partner or

you're using us for whatever, we're going to be carbon neutral or negative in your calculation, but there's a whole ecosystem of ESG partners that are building up around us because of that position and building out a full set of services that ultimately enterprises are going to use. Carbon markets for the purchase of RECs and offsets. EDF, I think it's the second largest utility in the world. It is the state utility of France, is a council member of Hedera, and they have plans to do exactly what I just said, build out a decentralized exchange for carbon credits as one example. And we have lots of partners in the ecosystem that are filling in the gaps and the holes in the ESG ecosystem so that we scale up. I'm going to ask you a question that I asked Stacey Worden from Algorand.

Okay. Which is, do you feel like you're the adults in the room? We're often told that. She said the same, but it's very funny having these conversations with different founders of different things. It feels like maybe the two of you, I don't want to lump you together, but do you feel like you're the adults in the room? Oh, look, I have a lot of respect for Algorand, right? I do. And it's kind of funny you say that because when we started all of this, we literally said, we literally said, if we can be the adults in the room and present that type of partnership opportunity, then that'll take

us a long way. And it has. It has. Just look, we've got gray hair. Me too. We've been doing this for a long time. We've been around a long time and all of those experiences, real world experiences, we brought to the table when designing this and,

you know, architecting the solution and the governance. And that was the goal, was to be able to have the kind of company or organization network that enterprises would feel comfortable partnering with. Since you have such a unique technological approach to sort of the same problems that everybody's trying to solve here, has anybody tried to copy you? You know, there are people that have used Hashgraph in some form or another. And, you know, we knew that was going to happen. But it's not easy to build a layer one protocol, you know. And we're open source. Hashgraph is now open source. Well, that's why I asked.

You're open source in theory. Yeah, I mean, in theory. Well, look, we open sourced the code base understanding that it would actually be a good thing if others would take that code base and use it to create their networks, whatever they might be. I mean, they could be a network focused on a specific vertical application. The more of those that are using our code base, the better, because they seamlessly integrate them with our

layer one protocol. They can have communications, secure communications among themselves and with us in a way that doesn't exist in the market today. It's something called state proofs. It's kind of technical. But we wanted to, like when I said, if you build the whole house with an ABFT brick, it looks very different. This is part of it. It makes it possible to build a neighborhood of houses that are ABFT. And those houses can work together fundamentally in ways that are way more efficient and more secure than what we see in the market today. And so we want people to be using a code base in that way. So let's live in a fantasy world of 10 years from now and everything's perfect and has gone in your ideal fashion.

Yeah. What's the most fantastical, spectacular vision that you have for what you're building? It's an interesting question. It's hard to predict where this will go. When we started, we did take literally a hundred year view. I've said publicly many times when we started, we wanted to build a company that was going to be around for a hundred years. I should call it a network. It's not a company. It's more like a DAO, a network that's going to be around for a hundred years. And Lehman has told this story lots of times. His vision from the beginning was to make it possible for people to sort of reach out and carve out a slice of cyberspace that is their own and invite their friends and their colleagues and their co-workers to come and join them in that slice of cyberspace to do whatever it is they want to do,

whether it's working together or playing together or exchanging goods and services with one another without the need for a third party that is sort of the referee that you have to trust, right? Trustless relationships in custom carved out slices of cyberspace. That was the original vision for Hashgraph. I think that a public network is a core piece of that. And it will be a bunch of many, many thousands of private networks that do the same thing. When you want to have a conversation with your family, you could spin up a shared world using Hashgraph and have that conversation, whatever form that takes. And you know no one else is there but you. And you should be able to do that for games and you should be able to do

that for spreadsheets and databases and social. Have know, have your own social platforms that are all private to you using the services of a global public distributed ledger. That's sort of where Web 3.0 can go. And that's what we're building towards. I look forward to seeing it in action. So we'll call you back in 10 years.

Absolutely. Hopefully long before that, but maybe here in 10 years again. So we'll call you back in 10 years. Absolutely. Hopefully long before that, but maybe here in 10 years again, and we'll revisit and see if we've accomplished all of that. All right. Thank you so much. Sounds good. Thank you. Thank you so much for listening to this episode. If you haven't already left a rating or a review on Apple Podcasts or Spotify, please do that now. Spotify just added ratings, so please go ahead and click that five star. I'll see you guys next time.