For this week podcast we continue our theme on how to build effective governance solutions in a blockchain ecosystem. This time we had the pleasure of having Mance Harmon, CEO of Hedera join us to share his insights on how to build effective governance.

 

What is blockchain?

At a very high level, blockchain is an evolution of database technology. In traditional database technology you can have a multi master database solution, which is essentially like having multiple copies of a same master database. It’s a replicated database with identical information in every instance. As users connect to these master databases to make updates to them you sometimes have what is called a write conflict. Meaning that the collection of all these databases need to come to an agreement on which one of those master databases was modified first. The assumption has always been that one organisation would manage all of those master databases. Whilst that may be fine in some scenario it doesn’t quite work in one where for example you’d ask Amazon to take one of its masters from its multi master database solution and give it to Google to run and administer.

What blockchain initially provided was for the first time the ability to take this multi master database solution and give away the masters to different legal entities, different organizations and do so securely. The 1st generation of blockchains, Bitcoin being an example of them, uses a very linear process. Each node in the network has a local copy of this chain and as new blocks get published the community decides which blocks to put on top of the chain and what order and everyone does that in this sort of linear fashion. For Mance this isn’t very efficient.

 

Difference between Hashgraph and Blockchain?

Hashgraph like blockchain is a form of distributed ledger technology (DLT). However unlike blockchain it doesn’t have a chain of blocks. Hashgraph is a graph that represents the flow of transactions, changes to the database across the network as well as an algorithm for determining which of these transactions to apply in a given order.

A hashgraph is a patented algorithm that promises the benefits of the blockchain, distribution, decentralisation and security through the use of hashing, without the drawback of low transaction speed.

While Bitcoin allows for approximately 5 transactions per second and Ethereum allows for approximately 15 transactions per second, a hashgraph can process thousands of transactions per second.

Hashgraph can achieve such speed and security because it adds a tiny amount of information on top of any transaction between databases. That tiny amount of information, or metadata, essentially keeps. A record of the last received transaction and the last one created. By taking those metadata one can build a picture of the flow of information within a network.

 

What is governance?

Governance refers to the process that a governing body goes through to determine what the product roadmap will be? What features are going to be added to the product? When those features will go to market? What rates are paid to the nodes in the network for their participation? What the fees are for the use of the network?

Governance can be thought of by using different model points as reference points. On one end you’ve got a dictatorship model where one person is calling the shots whilst on the other you have a full democracy.

 

Governance council type of model