More than 3 years ago, Leemon and I had a vision for how to use the breakthrough hashgraph technology that we invented to correct many of the inequities and abuses of the digital world. In addition to inventing the best consensus algorithm in the market, we recognized early on the importance of exceptional decentralized governance. By combining the two, we theorized, we would be able to reach a higher level of trust and fairness, ushering in a new era of distributed ledgers.
In 2019, the company that we formed to realize that vision, Hedera, fully opened its network to the public. Since then, dapps, or distributed applications, have logged more than 24M transactions on the network. This makes Hedera one of the top 10 public distributed ledgers by transaction volume. In addition, we inaugurated a world-class governing council that includes some of the most successful companies from around the world to provide diverse, decentralized stewardship of the network. After years of hard work, the vision is coming to life, and this is just the beginning.
As we enter 2020, the purpose of this post is to outline Hedera’s plans for the new year.
In 2018, many of you made a courageous decision—to buy future tokens from a fledgling company in the emerging distributed ledger field. To date, we think the performance of the technology and the promise of the governance model have validated our approach. The rate of adoption and demand for hbars to use on the network has not been what we originally expected, however we are confident that the initiatives that the Council is undertaking will bring the Hedera network closer to achieving the goal.
We are launching the following initiative in order to thank SAFT holders for their continued support.
Beginning in early 2020, existing SAFT holders may choose to participate in a program that further incentivizes network usage and growth. Specifically, participating SAFT holders would receive additional allocations of coins, made on an annual basis, the cumulative sum of which, over time, would equal the value of their original principal investment, in exchange for stretching out the release schedule for their remaining coins.
The release of these additional hbars would be based on the pace of network adoption. On an annual basis, Hedera would calculate the total revenue from the sale of coins received as network transaction fees and from treasury sales. A pool of coins equal to 10% of these sales would be released to the participating SAFT holders. These “additional allocations” would be made pro rata, based on and capped at each SAFT holder’s aggregate USD investment amount. SAFT holders who don’t want to participate would keep their existing SAFTs without change.
Any current SAFT holder that chooses to participate will receive the full number of coins expected in their original SAFT agreement, but will agree to extend the distribution schedule for what remains of their original SAFT allocation by 25%. In exchange, Hedera will repay the full value of their original investment over time, in coins, at a rate commensurate with network growth and adoption. Note that the additional payments will likely be made over a period longer than the remaining distribution period on the SAFTs, since they are limited to 10% of hbar sales. We are not able to accurately estimate how long it will take for participating SAFT holders to receive their principal investment back in coins, as it depends both on participation in this program and network activity levels.
This is a summary and not the definitive offer; there aren’t any steps you need to take for now. Documents describing these options in greater detail will be provided to all SAFT holders in early 2020, the effect of participating or choosing not to participate in this program may vary based on individual considerations, and SAFT holders should review the documents carefully and consult their counsel and financial advisors before deciding how to proceed. We will finalize the new token release schedule and publish a revised plan once the election period for the new SAFT option has closed.
This update does not constitute an offer to sell, or a solicitation of an offer to buy, hbars or any securities. The terms of the SAFT distributions described above do not constitute a legally binding agreement and are subject to change, based on the definitive documentation to be distributed in early 2020.
Hedera will reward developers for contributions that they make which contribute to the growth and well-being of the platform, and grow the developer community. Today we are privileged to announce an ambitious new developer incentive program whereby Hedera will use its hbar holdings to reward developers for contributions that generate real, measurable activity on the Hedera network. This strategy was informed by the analysis completed by the Prysm Group of our token economics model in November. Dapps and projects that drive network utilization will be ranked on a leaderboard, and those that contribute the most will receive the most HBAR rewards and other program benefits. This program will allocate rewards both to Dapps and to other projects based on increases of economic activity on the network. More details to come in early 2020.
In furtherance of the continued decentralization of Hedera’s governance, Brett McDowell, Executive Director and Vice Chair, will no longer report to the Hedera CEO, but will report directly to the Board of Managers and play an expanded role in Council governance going forward.
Separately, in order to better serve those building on, using and supporting the network and broader ecosystem, Hedera is implementing a way by which different community constituencies will be able to interact directly with the Council regarding issues of importance to them. We anticipate that people representing community and ecosystem interests will report directly to the Council during quarterly Council meetings and also have the ability to discuss issues of importance with Hedera’s Board of Managers and the executive team.
While most of the industry is struggling to increase the speed of smart contracts on public networks, and to broaden the range of scripting languages that might be used, Hedera is leapfrogging the industry by changing the model. The future Hedera Consensus Service (HCS) will combine the benefits of private networks (privacy, dedicated resources, low cost) with the benefits of public ledgers (elevated trust),and will allow the developer community to choose their favorite programming language, whether it is Java, JavaScript, Go, WASM, or any other language.
HCS allows a private network to store the information and process its own transactions, but flow the encrypted transactions through the Hedera network for trusted and fair ordering of timestamps. This gives the privacy of a private network with the trust of Hedera’s public network. The first version of the Hedera Consensus Service is expected to roll out in Q1 2020, followed by additional features.
What we find most exciting as we look to the new year is the market validation of Hedera’s core strategy. The dapp community has discovered how to improvise using the existing cryptocurrency service to create an early version of HCS, and is thereby already validating the value of the future HCS service before it is even available. Hedera is pioneering this approach of exposing “consensus-as-a-service”, and both the dapp and enterprise markets are responding. Nearly all of the enterprise use cases in our pipeline today plan to use HCS.
Our strategy envisions that Hedera will not merely be the leading public distributed ledger, but that the Hedera network will become the standard high-volume consensus service for a broad range of public and private use cases. We see a clear path to high-volume usage of the network.
In early 2020 Hedera will begin opening the codebase. The base layer of the codebase (the Swirlds hashgraph layer) will be open for public review, and the Hedera services and tools will be open source. The Hedera Improvement Proposal (HIP) Program will enable developers to make recommendations and submit pull requests for all parts of the codebase.
We believe that 2020 is the year when DLT begins to deploy mainstream use cases. And we believe that Hedera and HCS are ideally positioned to enable this for the enterprise DLT community. Thank you for being a part of this journey as we build the future together.
Mance Harmon
Co-founder and CEO