What is Hedera (HBAR)? A Plain-Language Explainer
Hedera is a public distributed ledger using hashgraph consensus. Learn how HBAR works, its uses, history, risks, and how it compares to other networks.
Key points
- Hedera is a public distributed ledger that uses a consensus algorithm called hashgraph, which aims to process transactions quickly and cheaply.
- HBAR is the native token used to pay network fees, secure the network through staking, and participate in governance.
- Hedera is governed by a council of large organizations, which critics say makes it more centralized than some other public networks.
What is Hedera?
Hedera is a public distributed ledger network. It is not a blockchain in the traditional sense; instead, it uses a different method for agreeing on the order of transactions, called hashgraph. The network is designed to be fast, low-cost, and suitable for applications that need high throughput, such as payments, supply chain tracking, and tokenization.
The native token of the network is HBAR. It is used to pay for transactions and secure the network through staking. As of September 29, 2026, HBAR had a circulating supply of 43,831,706,397 tokens and held a market capitalization rank of 25, according to the data provided.
How does Hedera work technically?
Most blockchains group transactions into blocks and use a chain of blocks secured by mining or staking. Hedera takes a different approach. Its consensus algorithm, hashgraph, is based on a data structure called a directed acyclic graph (DAG). In simple terms, each participant (node) shares information about transactions it has seen with other nodes. Through a gossip protocol, nodes quickly spread this information across the network.
Instead of waiting for a block to be mined, hashgraph uses a virtual voting mechanism. Each node can calculate how other nodes would vote on the order of transactions based on the information it has received. This allows the network to reach consensus quickly and with low computational overhead. Hedera claims this design can handle thousands of transactions per second with finality in seconds, though real-world performance depends on network conditions and usage.
The network is operated by a group of nodes run by members of the Hedera Governing Council. These nodes are responsible for validating transactions and maintaining the ledger. The council is made up of up to 39 term-limited organizations from various industries. Each member serves a maximum of two consecutive three-year terms. This structure is intended to provide stability and diverse oversight while avoiding control by a single entity.
What is HBAR used for?
HBAR serves several purposes on the Hedera network:
- Transaction fees: Every operation on Hedera, from sending HBAR to creating tokens or smart contracts, requires a small fee paid in HBAR. These fees are designed to be predictable and low.
- Network security: HBAR holders can stake their tokens to help secure the network. Staking involves locking up tokens to support the consensus process. In return, stakers may receive rewards, though the exact mechanics can change over time.
- Governance: HBAR holders can participate in certain governance decisions, such as electing council members or voting on protocol upgrades. However, the Hedera Governing Council retains significant authority over the network’s direction.
HBAR is also used as a medium of exchange within the Hedera ecosystem. Applications built on Hedera may accept HBAR for payments or use it as collateral in decentralized finance (DeFi) protocols.
Notable history
Hedera was founded in 2018 by Leemon Baird and Mance Harmon. The network launched its mainnet in 2019. The governing council was established to oversee the network, with founding members including companies like IBM, Boeing, and Deutsche Telekom. Over time, the council has expanded to include a diverse set of organizations from around the world.
In 2020, Hedera faced a notable event when the HBAR token was listed on major exchanges. The network has since been used for various applications, including the Hedera Consensus Service (HCS), which allows anyone to log events and data on the ledger. This service has been used for tracking supply chains, verifying documents, and more.
In 2024, Hedera contributed its core codebase to the Linux Foundation Decentralized Trust, where it continues as the open-source Hiero project. The network has also been involved in several enterprise-grade projects, such as a collaboration with the Coupon Bureau for coupon verification.
Main risks and criticisms
Hedera has faced criticism on several fronts:
- Centralization: The network is governed by a council of large organizations, and all nodes are currently run by council members. This contrasts with more open networks like Bitcoin or Ethereum, where anyone can run a node and participate in consensus. Critics argue that this makes Hedera less decentralized and more susceptible to collusion or censorship.
- Token distribution: The initial distribution of HBAR tokens was heavily weighted toward the Hedera Treasury and early investors. This has raised concerns about concentration of wealth and influence.
- Competition: Hedera operates in a crowded field of smart contract platforms, including Ethereum, Solana, and others. It must compete for developers, users, and enterprise adoption.
- Regulatory uncertainty: Like all cryptocurrencies, HBAR faces regulatory risks that could affect its use and trading in various jurisdictions.
Additionally, some have questioned whether Hedera’s consensus mechanism is truly as fast and scalable as claimed in real-world scenarios, though independent benchmarks are limited.
How does Hedera compare to alternatives?
Hedera is often compared to other smart contract platforms. Here is a brief comparison:
| Feature | Hedera | Ethereum | Solana |
|---|---|---|---|
| Consensus | Hashgraph (DAG-based) | Proof of Stake | Proof of History + Proof of Stake |
| Governance | Governing Council | Community-driven | Community-driven |
| Transaction speed | High (claimed thousands TPS) | Moderate (varies with layer 2) | High (thousands TPS) |
| Fee model | Fixed in USD, paid in HBAR | Variable, paid in ETH | Low, paid in SOL |
Like Ethereum, Hedera uses Solidity for its smart contracts. This makes it easier for developers to port applications from Ethereum. However, Hedera’s governance model is more corporate and less open than its competitors.
Another key difference is Hedera’s focus on enterprise and regulated use cases. The council structure is designed to appeal to businesses that value stability and compliance. This can be a strength for adoption in traditional industries but may limit its appeal to those seeking full decentralization.
Conclusion
Hedera is a public distributed ledger that uses hashgraph consensus to offer fast, low-cost transactions. Its native token, HBAR, powers the network’s fees, security, and governance. While it has attracted enterprise interest and a unique governance model, it also faces criticism for centralization and competition. As with any cryptocurrency, it carries risks, and its long-term success depends on adoption and technological execution.
Disclaimer: This article is for information only and is not investment, financial or trading advice. Cryptocurrency prices are highly volatile. Always do your own research.
