Harmony (ONE -3.40%) is a somewhat newer blockchain network that is gaining more traction, as more and more developers and crypto investors see the capabilities of the network. The price of the ONE token, which fuels the network, is now at about $0.23 and roughly a $2.5 billion market cap, which represents an increase of more than 5,200% over the last year, and I see great potential going forward. Here are five things to know about Harmony.
1. Addressing core blockchain concerns
When some of the first cryptocurrencies like Bitcoin came along, their goal was to replace fiat currencies and serve as an alternative or replacement for the traditional financial system. They were outside the control of banks, the government, and the Federal Reserve. Now, that didn't exactly happen, or at least it hasn't happened yet. One reason for this is that it has been difficult for blockchain networks to maintain their core values such as security and decentralization while scaling and being able to handle all of the transaction volumes that come through a normal financial network.
Harmony believes it is able to scale while maintaining decentralization and security because its network is powered by sharding, which establishes several separate groups of validators and allows them to approve transactions and new blocks simultaneously. Harmony can currently process 2,000 transactions per second (TPS), comparable to Visa, one of the largest payment rails in the world. Long-term, Harmony thinks it could get up to processing 10 million TPS.
Image source: Getty Images.
But even while scaling, Harmony does not sacrifice security or decentralization. The network uses a distributed randomness generation process to assign nodes, computers that connect to the network and validate transactions, to different shards. Harmony also maintains a low threshold of One tokens that nodes need to have in order to join the network as validators and maintain decentralization.
Harmony believes that the massive scalability of the network, coupled with decentralization and security, will enable the blockchain to accomplish feats that previously weren't realistic on other blockchain networks such as setting up large decentralized exchanges, large payment rails, and "internet-of-things transactions."
2. Energy-efficient
The original way that blockchain networks validated transactions, mined new tokens, and created new blocks was through proof-of-work, in which miners would see who could solve a cryptographic puzzle the fastest to get the opportunity to confirm transactions and reap the rewards of new tokens. However, the competition to get new tokens got so competitive on certain networks like Bitcoin that mining companies would use huge amounts of computer power to solve the puzzles, which started to be seen as a concern for the environment.
Now, a lot of blockchain networks are moving to a proof-of-stake concept, which Harmony has used from the beginning. Under this process, nodes put up existing tokens as collateral to have the chance to get picked at random to validate transactions. A number of validators must verify transactions for a block to get approved. Harmony stands out from other networks because its proof-of-stake consensus mechanism and architecture enable the network to finalize blocks in just two seconds.
3. Lower gas fees
Because of the TPS that Harmony can process and its use of proof-of-stake validation, the network rarely gets clogged like Ethereum and therefore does not have high gas fees -- they are currently a very small fraction of a penny per transaction on Harmony. Now, obviously, a network like Ethereum is seeing much more overall demand and transactions than Harmony, but on its website, Harmony says that even if it gets to a point where the network is being fully utilized and seeing extremely high demand, it could solve congestion issues by simply adding more shards.
Image source: Getty Images.
4. Cross-chain capabilities
Harmony's technology has the power to share data across multiple blockchain networks, whether they run a proof-of-stake or proof-of-work governance, by enabling nodes on other networks to validate transactions. Toward the end of November, Harmony launched a bridge called Horizon, which allows cross-chain interoperability with Ethereum so assets can be transferred between the two networks. This feature is potentially huge for furthering cross-border payments and making cryptocurrencies easier to exchange among one another. Harmony has also made bridges with other chains like Binance.
5. Huge potential for NFTs
Harmony's cross-chain capabilities open the network up to some interesting possibilities for non-fungible tokens (NFT), which are digital art, video, and audio files that are secured and can be transferred on a blockchain network. For one, with lower gas fees, the network may be more appealing for creators who want to mint NFTs. Harmony has pointed out that bridging NFTs from one network to another may be expensive at first, but then the following transactions will be cheap. Harmony also said on Twitter that it is developing other capabilities such as NFT Lending, NFT Verification, and rationalization.
