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20 September 2019

Market Commentary: Hedera Hashgraph (HBAR)

Simon Tobler

Simon Tobler

Head of Trading at Crypto Broker AG

About the author

Today, we will take a closer look at Hedera Hashgraph (HBAR), a project that was built up over the last couple of years and which started trading this week.

What is Hedera Hashgraph? HBAR is not a traditional blockchain, but rather a DAG. We know the concept of Directed Acyclic Graphs from other projects, e.g. IOTA and Byteball. The idea is not to collect transactions into blocks and then link the blocks together (the blockchain), but rather to create a net of single transactions, each referencing older ones. HBAR claims to have a throughput of more than 10,000 transactions per second, without compromising security. To reach this high number of TPS, it relies on its “innovative gossip about gossip protocol”, and a delegate proof-of-stake model. Currently, the network is run solely by the Hedera Governing Council, but the aim is to become permissionless in the future. For further details click here.

However, there is quite a bit of criticism about its technical design and the claims made by Hedera Hashgraph, as pointed out in the following Medium article, which I highly recommend you read: To the article.

As a trader, I’m also very interested in the economic aspect of these kinds of projects. So let’s have a look at some key figures, and try to figure out if an investment would make sense or not. The Hedera economic paper presents a great deal of interesting details. The chart below shows the actual coin allocation. More than 54% is with Hedera Treasury, 15.5% is set aside for employees, and another 17.45% has been sold to investors.

Hedera didn’t go through an ICO the way many other projects over the last few years did. Hedera went through three traditional founding rounds (Venture Capital), where they raised a total of USD 124 mio from such names as DCG, Fenbushi, and BlockTower. Interestingly enough, the first two rounds went through at prices “close to zero dollars.” The third round comprised most of the 124 mio, at prices around 10 cents per coin.

The release schedule makes it clear that only 7% of all coins will be released this year. We will have an inflation of 142% in 2020 and another 50% in 2021. Total inflation over the first five years will be 614%, which is quite impressive and something that needs to be thought about when investing today.

HBAR started trading two days ago at prices between 8-10 cents, and has since then fallen to about 5 cents. This means that the 3rd-round investors are already fairly under water. It will be interesting to see how the price will develop over the next couple of days with some more coins being distributed, and then also in 2020, given the rather high inflation.

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