We all are making hundreds or even thousands of decisions every day of our lives. In fact, the only way to move forward and make progress is by making decisions. And the best kind of decision is one that is backed by experience, education, information, and an understanding of the subject matter.
Cryptocurrency and its slang can be daunting to a lot of new users and investors and especially with the complicated jargon. To isolate excellent cryptocurrency projects from good ones (or worse ones from the bad ones), it can prove very handy to understand the crypto jargon. In this article, I want to break down some of the key terminologies you will read and hear on Harmony (ONE) forums. A better understanding of these expressions will not only add to your crypto knowledge but also help you recognize the potential and hard work of the team behind Harmony.
Harmony’s (ONE) community, like any general crypto community, is a vibrant one that came together from all over the world with a different language and technical backgrounds. Some of the terms explained may appear self-explanatory to a native user of language or to someone who has been affiliated with crypto for a longer time than most of the other community members. But let us break a few things down to their core so that even the people who are altogether new to Harmony or even crypto can easily understand them.
Let’s break down a few things about Harmony for a better understanding of ONE.
And The not so simple
Open consensus for 10 Billion, To scale trust for billions of people and create a radically fair economy
Eh? Really? Are you going to explain this too? YES ABSOLUTELY! What other places to start other than the very first thing you will see when you visit the homepage of Harmony.
Every blockchain is a decentralized public database in which any record, once entered, cannot be modified or falsified. One of the aims of Harmony is to bring millions of people to use and build decentralized marketplaces on Harmony block-chain for fungible and non-fungible tokens and assets.
An example of a fungible (interchangeable) asset on Harmony would be a cryptocurrency token which has the same value as other individual tokens. It will not hold any unique data within itself but can be used to buy and sell other assets. This token may also represent something like energy credits or security offerings. A non-fungible token would be a token that stores unique data in it which makes it digitally distinctive to all other tokens. On Harmony, these tokens may represent game collectibles, real estate titles, event tickets, diploma certificates, or even art.
Harmony offers this real-world value by providing a secure, scalable, fast, and cheap trust-less network that can support markets for billions of users. As in the team’s own words “a permissionless network operated and governed by a large community”.
In short, businesses can build a marketplace of data sharing, asset trading, collectibles, and even supply chain or other services with Harmony providing a scalable and secure architecture to run these applications. A unique consensus system designed by the Harmony team provides evidence for the ownership of data and assets owned and sold by these businesses and keeps the blockchain running.
Harmony uses Effective Proof of Stake (E-PoS) as its consensus protocol. Wait, what?
So there are two terms used here: Staking and Consensus protocol. Let’s look at both of them.
Staking is defined as a process in which you hold particular cryptocurrency tokens (mostly in its native wallet) to support the network. This means that you effectively lock your tokens or ‘put them at stake’ to support the network.
Proof of stake has many different models, but in all of them, the common thing is that your stake is used as voting power to perform tasks on blockchain such as verification and signing of blocks. You are rewarded in tokens for providing this service on the blockchain-based on the number of tokens you stake. Sometimes, these tasks are performed by validators who have not only staked their tokens but are also running a node for the network.
Now Proof of Stake is only one type of Consensus Protocol out of many that exist. A modification of this model that is used by Harmony is called Effective Proof of Stake. It takes away the unfair disadvantages of the basic PoS model such as people with huge amounts of capital getting the most voting power and hence accumulating more tokens with the possibility of making the network more centralized.
In Harmony’s Effective proof of stake mechanism, both the voting power and block rewards are based on Effective stake. This Effective stake is calculated by the formula shown below which takes into effect the Median stake and makes the selection process statistically fairer.
Here, c is a protocol parameter (for example, c = 0.15). Imagine the following scenario of YOU staking 60,000 ONE tokens and someone else staking 200,000 ONE tokens. If the median stake is 100,000 and c is taken as 0.15 then the effective stake calculation will be;
YOU: Stake = 60,000, c= 0.15. Using the above formula, your effective stake will be = 85,000.
A RICH’er PERSON: Stake = 200,000, c= 0.15. Using the above formula, their effective stake will be = 115,000.
The difference in staked token amount is more than 3x but the difference in voting power and rewards is less than 1.5x. Harmony’s Effective proof of stake is very fair as it drives towards a more even reward system among all validators. In this fair economy, validators with a smaller stake can enjoy a fair share of rewards for their stake without getting overwhelmed by those holding large amounts of tokens. An excellent strategy!
Now if you are not running a node which means that you are not a validator, you can take part in staking by supporting other participants on the network by voting for them or in other words DELEGATING your tokens to them and thus sharing the reward. Check out the article linked at the end of this page for a guide on how to delegate your tokens.
The not so simple
Harmony main-net uses shards. Phase 3 of the main-net will use 6 shards with 400 nodes. But what is sharding?
Sharding is breaking up a blockchian into smaller sub-chains called Shards.
It is a way to make the blockchain faster. A better terminology than ‘faster’ is the word scalable, which means that the blockchain should be able to process the growing amount of data or transactions in it without slowing down. In Sharding, the main network is divided into smaller networks, or the main chain is divided into subchains or any other way you want to imagine it. But the whole idea is that each node does not need to process all the data of the entire network. Instead, each node or each shard is responsible for processing and verifying transactions assigned to it. All the shards (nodes) can still share information with other shards (nodes) but they do not need to process or store it.
Imagine a house on rent. One shard is responsible to keep track of utility bills, a second shard is responsible for paying the rent, and a third shard is responsible for maintenance bills. The three of them have to process and store the history of their own work but if they need any information, they can ask the other shards.
Without sharding, the whole network acts as a single machine.
It may sound simple but achieving scalability through sharding while maintaining security, decentralization and privacy of the network is a great challenge. Harmony team has achieved this by using Kademlia routing and Erasure Encoding and made it the first ever blockchain to practically implement this concept in its main-net.
Out of the total number of shards on the network, shard 0 has a special name and purpose. It is called a Beacon chain.
Besides processing transactions, as other shard chains do, the Beacon chain is in charge of extra functionalities which are generating a random number (not discussed here) and accepting stakes.
This means that the beacon chain is the chain where stakers deposit their tokens to become validators.
We will leave this topic here for now, for more details, please refer to the Harmony white paper.
In Harmony chain, validators check the validity of the block header, sign the block header with a BLS signature, and send the signature back to the leader. What are you talking about here
BLS stands for Boneh–Lynn–Shacham. It is a digital signature method used for verifying the authenticity of digital messages or documents. A valid digital signature, where the prerequisites are satisfied, gives a recipient very strong reason to believe that the message was created by a known sender, and that the message was not altered. Each validator in the Harmony chain processes the job assigned to it and sends it back by signing the block just as you would put your signatures at the end of a report. This key provides a high level security to the network.
Now that we understand the terminologies explained above, it is easier to understand this term. Epoch defines a particular period of time in history. Or it can be defined as a fixed period of time.
In Harmony, the consensus and sharding process is orchestrated by this concept of epochs. An epoch is a predetermined time interval during which the sharding structure is fixed and each shard continuously runs consensus with the same set of validators. Harmony chain defines an epoch as the period of time it takes Shard 0 to produce 16384 blocks which currently roughly equate to 1.5 days.
Hopefully, this article has helped you understand some of the terms you might not be familiar with. I will try and update this with even more information.
Meanwhile, check out the following links about Harmony and community resources.
Official telegram: https://t.me/harmony_one
Official Twitter: https://twitter.com/harmonyprotocol
Official Medium: https://medium.com/harmony-one
Harmony white paper: https://harmony.one/whitepaper.pdf
My personal Delegator website: https://www.harmonyone.tech/
Detail of Harmony EPOS:
Guide to Stake harmony test-net tokens
Disclaimer: The information shared is not to be taken as investment advice, financial advice, or trading advice. Please conduct your due diligence before making any investment decisions. I have personally invested in ONE but not related to the team in any way at all.