hi this is mike maloney and a lot of viewers have been asking for an update on hashgraph and i just finished the most amazing interview with mance harmon of hedera hashgraph but he does get a little bit technical on some aspects so if you don't know much about cryptocurrencies and digital tokens you might want to go watch my episode 8 of hidden secrets of money because that really dissects it and you're going to really understand what he's talking about then come back and watch this interview and the reason you


want to watch this is because whether you're interested in cryptocurrencies or not it's based on distributed ledger technology and distributed ledger technology is already affecting our lives in major ways and it's going to affect your life more and more and more as we go forward so if you want to understand what's happening to you in this world and have sort of a you you can say like oh that's why this is happening you really do need to watch this episode so now without further ado


here's the interview hi this is mike maloney and i've got mance harmon on the line here with me uh for an update there's been a lot of viewer questions and uh we did episode eight almost three years ago or more than three years ago so mance how are you doing i'm great thank you it's great to see you and and be back with you again here today i've got a lot of viewer questions like i said and and we need an update since we made episode 8. uh can you give us the 40 000 foot view okay


well hashgraph as a piece of technology is an alternative to blockchain so they both are consensus algorithms distributed consensus algorithms blockchain of course became famous because of bitcoin and enabling bitcoin more than a decade ago ago hashgraph solves a bunch of the fundamental problems associated with blockchain specifically it improves performance by orders of magnitude if measured in throughput and latency how long it takes for this community to come to consensus on the order of transactions


so performance improvements as well as security improvements hashgraph achieves the theoretical limits for the field of distributed consensus in terms of security and uh and so it improves upon the first and second generation technology significantly but that's what hashgraph is it's consensus algorithm hedera is an organization that's using hashgraph to create a global public network that enables developers to build distributed applications and of course it has the the advantages of hashgraph but it's also unique in the


industry in its governance model what we have is a council that will ultimately be 39 global blue chip organizations uh as well as ngos and and universities that provide the oversight of the governance of the platform so there's a technical steering committee for example that that oversees the product roadmap there's a legal and regulatory committee and and marketing and and so on and so forth it's distributed governance by organizations that have an interest in building enterprise grade distributed


applications okay you know like i said it's been three years since we made episode eight but just before we made episode eight uh we came to new york to an event that you were putting on and uh so i guess this was shortly after you created uh the company for hashgraph and uh and so we were one of the very early people to learn about this and you know i'd been following i i attended a conference called bitcoin on the beltway back in 2014 and started investing in cryptos back then announced that to all of my uh my


insiders that i was putting a percentage of my portfolio into cryptos um and then all of the footage that we had taken from this journey sort of got canned because we went into this crypto winter and uh so uh during the making of episode 8 though it was a revelation for us we realized that this even though it didn't exist yet that it was going to be in a very very powerful technology now before we get going on this i want to let everybody know that i've never been paid by hedera hashgraph uh we made episode


eight it the we had all of this footage of uh my journey through bitcoin and cryptocurrencies in the can but there was really no news or interest in this and when we saw your event in new york we just decided wow we've got to get this out we've got to get it out quick and it just happened to coincide with the release was right at like the bitcoin one of its peaks and then it went in to another this uh winter and that winter is when i invested in an early funding round of hashgraph but uh can you tell us about uh why this


technology is so much more powerful than regular blockchain technology in your opinion yeah well from a tech perspective it's pretty black and white there's no subjectivity it's just math and uh blockchain is inherently serial in its operation what i mean by that just conceptually there are people that want to submit transactions to a blockchain network all of those transactions go to a set of what we call miners all the miners in the network that are running nodes in the network collect all


the transactions put them into a block and they compete with one another for the privilege of putting the next block on top of the chain and they do so by trying to solve a hard math problem uh and once they've solved it they take their block they include with that block a proof that they solved the math problem this is why it's called proof of work it's proof that they actually did the work to solve a math problem and they send that block with the proof to all the other miners and then you know upon


validation that the work had actually been done they take the block and they put it on top of their local copy of the chain of blocks the block chain this is this is how blockchain works so it's very slow and the reason it's slow is because the miners have to do this proof of work first and it may be that miners solve the problem at about the same time and the community has to be given time to resolve which miner actually solved it first so it's inherently a slow process but it does work it results in a stream of


transactions that have been put into consensus order that's important if you're keeping a ledger of accounts and and recording the transactions and the order in which those transactions occurred hashgraph on the other hand is inherently parallel there are no miners there are node operators and all the miners excuse me node operators just submit transactions to the network to all the other node operators as they flow in now this is going to sound like black magic but conceptually this is how it works


as the as the transactions flow in each of the node operators keeps an account of that and as they pile up on top of each other the nodes in the network through um through the magic of math can come to an agreement on the order of the transactions and it's guaranteed uh they have 100 percent cryptographically secure certainty on that order of transactions because it's done in parallel and there's no need to slow things down to allow the community to come to agreement hashgraph can just process orders of


magnitude more transactions per second and come to agreement on the order of those transactions within seconds it's just a huge leap beyond what was first introduced there by blockchain and conceptually that's that's how the technology works okay so uh just for anybody that isn't that familiar for with blockchain so you've got all of these miners millions of computers making trillions of guesses per second on a really big number and the the computer that solves it uh gets a reward for solving it mining the coins


and his that block gets to be the block that is updated and all the other millions of computers around the world agree on that and update their ledgers to match but because of the potential of disagreement and and two people winning at the same time and and something called soft forking um they have to slow it down to where it's about one block every 10 minutes correct exactly that's precisely right okay and those blocks can only hold a certain number of transactions so you've got this big pool of transactions they're


selecting some of them to fill up this block but the blocks are limited in size uh at least on bitcoin there are others that aren't uh and then if computers start solving this really this guess at this really big number too quickly the system increases the difficulty by adding another digit to the number that they've got to guess and so it always tries to maintain this 10 minute block time that's updated where hashgraph does this pretty much instantly by comparison and you don't


have the limitation of how many transactions can fit into a block that's right there are no blocks in that traditional sense each transaction is its own event right correct correct it can be and it just they all just flow in the entire community of node operators receives all of them and and as the as they fill up the hash graph which is a data structure sort of like blockchain is a chain of blocks there's a graph of transactions that fills up and as it fills up the uh the math of the algorithm results in all the


miners coming to an agreement very quickly on the order of those transactions within the graph so it's very different in its function with some fantastic properties relative to blockchain okay now um i i sort of have to repeat this one more time for all of our viewers i've never been paid by hedera hashgraph this is just an update because everybody's asking what's happening with hashgraph uh you know i did get in on an early funding round and uh so that's my only connection with hashgraph is that they


allowed me in on an early funding round so can you tell us what has happened uh with hashgraph since we filmed three years ago since that meeting uh that you had in new york where you announced this yeah right so it seems almost like a lifetime ago yeah i mean this was giant news at the time and that's the reason that we go oh my god we've got to finish this bitcoin episode because it was a bitcoin episode until that day then it became from bitcoin to hashgraph yes we had like i said we had been


filming for years on it and putting stuff in the can and couldn't release it because there was just no interest in bitcoin during that period of time well so in 2017 we lehman and i came to the conclusion that we had done enough in terms of maturing the technology and interacting with the market and understanding the the market that we could build a public network on top of hashgraph using the hashgraph technology so we began writing it all down this is the 50 000 foot view of the sort of the company life cycle so far in


my opinion and we we wrote it all down we created a white paper we hired the initial team just a small group of us in the fall of 2017 and then in 2018 we enjoy introduced hedera hashgraph the organization to the world that was in march and i think you may have even been there at that event in new york city and we so we introduced the world to hedera hashgraph we raised a lot of money and we launched the network in the fall of 2018. um it was closed only certain developers and partners could get access to the


network so it wasn't open to the public yet but it was functional in 2019 we operationalized the council the governance model associated with the technology and in the network in february of 2019 we added our first five members of the council in seoul korea had an event in seoul korea and that's where we sort of inaugurated the council and then through the remainder of that year we continued adding members to the governing body and we opened the network to the public in the fall of 2019


and it launched with three services cryptocurrency as a service distributed file storage and support for smart contracts last year in 2020 we observed how the market was using the platform how it was interacting with the use cases that the market brought to the platform and um we we decided to add some additional services that really helped to achieve product market fit to use that term first was the hedera consensus service which really just explo exposes hashgraph as a service to developers and we could


talk more about that perhaps later and then later in the in the year late last year um we decided that it was time to build a tokenization service in addition to just the cryptocurrency service basically take the cryptocurrency service augment it in various ways to create a general purpose tokenization service and we're just preparing to launch that have the marketing launch here in a few weeks so 2020 was all about understanding how the market interacted with the platform and getting product


market fit making sure that we had the right products built for the market demand for our technology and its value proposition now this year 2021 is what i consider the beginning of the growth stage sort of scaling the platform for various use cases that we've identified and just repeating that process and uh so yeah this year is a big year for us we made a lot of progress since we talked a few years ago and now we're just entering growth phase so this is the year that hedera hashgraph where the rubber really meets


the road right it is we already have dozens and dozens of customers what we want to now do is turn that in i shouldn't call them customers they are they are developers or companies that have elected to use the platform they do so on their own right we we don't have interaction with most of them some of them we do but they've decided to use the platform now we want to turn that into hundreds and hundreds maybe thousands of users of of the network okay some people are saying that hedera hashgraph is not decentralized


can you sort of clarify this for us yeah the first reaction that people uh have when they look at our governance model is that it's a bunch of large corporations that are making the decisions for for the platform and when we talk about large corporations i view this as a strength certainly not a weakness it's by design that we've chosen this governance model there are organizations like google and ibm and lg and boeing and tata communications and fis world pay the those types of global


organizations uh and they they govern meaning that they make products make decisions regarding things like product roadmap and use of treasury so they literally govern the organization in that way but when people think about say bitcoin or other platforms like ethereum what many of them fail to realize is that there may be hundreds of developers that are writing code but there's just a handful of core developers that make all the decisions regarding the product roadmap for example you know a dozen core developers


are the ones that sort of hold the keys to the to the baseline code base uh you know the real changes to to the uh code base so in that sense we're more decentralized than the largest platforms in terms of its governance also importantly the governing council that we have created is by design meant to be decentralized in that it's not a the council members are not coming from a single sector they're chosen to be cross industries uh cross sectors they're also geo-distributed so we have council members from asia and


europe and the us and the middle east and south america by design these council members come from around the world so we've been intentional in creating a governing body that is meant to be representative of all use cases all constituencies on a global basis not governed by a handful of developers so that's the difference and that's my that's my reaction and response one other thing i i know that a lot of uh people will look at the number of nodes in the network and say well you don't have thousands of


nodes running that's a true statement that's also by design early on and it has everything to do with protecting the security of the network we we have the council members today running the nodes in the network that will scale to non-council members and then uh ultimately nodes that we know nothing about or at least we're not we we have a kyc'd or given permission to nodes to participate in the network ultimately permissionless nodes will be able to participate in the network like all the other platforms as


well but there is a challenge and that challenge is when you start a new cryptocurrency like we did with hbar and you're using a consensus algorithm then the math works out such that if a bad actor can buy up or hold a significant portion of that cryptocurrency they can interfere with consensus and so the challenge is to increase the distribution of that cryptocurrency broadly enough across a lot of different uh participants in the network and have the price of the cryptocurrency high enough


that a bad actor practically can't buy up a third or more of the tokens in supply uh and and so the way you do that is you start with a collection of highly trusted entities that are going to manage treasury and then as you achieve that decentralization in the token and increase in value you then add additional nodes and you get decentralization and consensus that's the path that we're on and uh we you know we we're again being very intentional about the the opening up of the network and adding


other nodes that are not council member nodes but it has everything to do with protecting the security of the network okay uh you touched on your consensus service uh earlier uh and you know my producer dan says that this is probably the biggest thing in the distributed ledger space ever it's plug and play consensus for uh these developers that don't have to write their own code uh for to create their own blockchain token anymore they can just plug into this and they're ready to go so basically uh you're the


layer underneath that you know they've got their uh website their tokenized whatever it is and below that the thing that is doing all the accounting keeping track of everything is hedera hashgraph can you tell us about your consensus service sure sure when we look at the range of public ledgers today um as opposed to the private ones when we talk about private networks just to be clear there are frameworks out there that are designed for organizations to get together create their own consortium and


run a private network that doesn't allow just uh the average person to participate that's not what we're talking about we're talking about the public networks like bitcoin or ethereum eos algorithm the others where anybody can use the network if they so choose um for the public networks they all do two functions they perform two functions they accept transactions flowing into the network they put those transactions into a consensus order and then once they have the transactions in consensus order they feed that stream


of transactions into a business logic layer to be operated on the smart contract layer that people normally refer to the smart contracts the problem with this model is that that smart contract layer is developed by by developers around the world and you know any developer can create their own smart contract and put it onto the network and then they compete for cpu cycles on that network to operate or run their smart contract to process the business logic that's in their smart contract because we have many thousands


of developers building smart contracts and all trying to get time on the same nodes that do consensus the cost of operating a smart contract is exorbitant it doesn't scale well and in addition it's not private if you have say you you want to add variable a to variable b you have to know the value of a and b and it's on a public network the entire world can see the data that is being operated on in that smart contract so for enterprises and organizations that care about privacy this is a non-starter


what we realized is that we could split apart those two concerns we could create a service that simply does consensus ordering but companies organizations can take the smart contract layer quote quote the business logic layer and put it into their own private network and and they can get the benefits of consensus distributed consensus in a public network for transaction ordering with the benefits of a private network for scale low cost and privacy this essentially solves the enterprise problem of of scale cost


and privacy while using a public network for consensus that's the change in the model our our enterprise customers a lot of our non-enterprise customers are looking at this exclusively as as the model that helps them scale their their enterprise grade solutions wow uh i you know i had no idea i just this this is a new one for me i didn't uh realize that uh there was so much difference be i i didn't realize that the smart contracts that are operating on blockchains where all the data so you're putting in


financial data when you're making an agreement on something that's basically being put into escrow or something like that right everybody can see uh how much you're paying how much you're selling for uh wow uh that okay so um the tokenization service uh you know you've launched something uh about called holla and uh so and and another one called toco tell us about uh toco what this is and and how this service works uh that that can be you know uh someplace that some organization that needs this can


basically sign up for this right yeah okay well i mean let's talk about tokens generally for a moment to sort of set the context when we think back to 2017 the the cryptocurrency world was just on fire because people had discovered they could create a token and sell it to sort of crowd source funding for their organization so the technology enabled a new type of crowd sourcing of of capital for for standing up a company now there were all kinds of regulatory problems with that the regulators got involved in and the


ico craze came crashing down in 2017. however this idea that tokens could exist digital tokens could exist and perform functions that um were previously difficult if not impossible to perform cut hold and today there are a range of different kinds of tokens token types or tokens that can be used for various various things including supply chain tracking and security tokens that make it possible to uh take securities that are considered securities and tokenize those securities and have them traded on


on special exchanges that enforce the regulatory constraints or requirements if you're trading securities as as one example and so the world of tokenization has changed a lot since 2017. what tocco has done and toco by the way is a platform that was created by one of our council members dla piper dla piper is a global law firm one of the largest law firms in the world scott teal uh is the man in charge of this new product that dla piper is coming to market with called toco toco makes it possible for those that


want to create a token issue a token for something in the security space it could be real estate it could be artwork you know collectibles uh you know tokens generally but i think they were originally focused on on real estate commercial real estate makes it possible to to create a token and and issue it take it to market in sort of the way you might take a security to market um it uses the consensus service that i just talked about the hedera consensus service what they did was they took hyperledger which is one of these


frameworks for private dlt networks they created their business logic in a private network using hyperledger but then hyperledger turns around and uses our consensus service the hedera consensus service for putting all the transactions into consensus order associated with those security tokens so it's the combination of the two public trust in a consensus service using hashgraph with the benefits of a private network in terms of of scalability and and uh security and and privacy and they took that to market in in


november they're doing quite well i think the first uh first thing that they tokenized just to demonstrate that it's real and possible was a piece of artwork they they took a a painting and they split it up into some number of of pieces they created non-fungible tokens each token was unique in that it represented a piece of that painting and and they issued it as as a security token and it's now trading so that's what toco is doing and that's using hcs what we realized is if you want to create


tokens that are maximally uh configurable then use hcs but there are a lot of use cases where you want to spin a token up in five minutes and just use it maybe because it's part of a game you have game characters or objects in the game that are non-fungible tokens uh or or other and you want a quick way of doing that then what you can do on our hedera token service is exactly that the hedera token service makes it possible not to use a private network but to just within a few minutes spin up a brand new token have it issued


and available for trading on the network and it covers 80 percent of what token managers or issuers need to manage their their tokens and um and so that's the new service and and what we believe is that we're moving into a world where everything is going to be tokenized and this is going to be a you know trillion mini trillion dollar market because the the markets that currently exist the assets that exist in those markets of whatever form we're talking about each one of those assets will end up


being tokenized because of the efficiencies that come from tokenization so the hedera token service enables that for the average token and the hedera consensus service enables it for tokens that have special needs and need maximal customization wow you know i used to go to the pebble beach concord de elegance when i lived in california i'm a car guy i just love cars and all of the collector cars there i mean this is just this is the most prestigious car show in the world and there are cars now that go for 5


million 10 million 20 30 40 50 million bucks and one of the things that you want when when somebody buys a car like that is you need to know the car's history every hand that it has passed through if it was ever in accidents you know the repairs things like that the car's history is extremely important um once uh the the car is tokenized the history from that point on automatically comes with the purchase of the car am i correct exactly so i mean you know everybody that has owned a piece of that and and you can sell


shares in a car now instead of uh one person bidding on the car and having it so you could have a hundred people that have ownership in that vehicle because these are becoming uh investments now as much as uh you know a cherished possession that's it yeah what you raise is a really interesting and important point or leads me to an important point um provenance as a use case tracking who has owned a widget in the most general sense you know from the time the widget was created until its end of life


that as a use case has been one of the primary use cases that the distributed ledger industry blockchain industry has focused on for for years and years and years what's new is that the the realization that all of that information that had been stored in a ledger just recording the provenance of a widget if instead you issued a token with the widget when it gets created you now have the same information you still have the provenance but the token by its design by its nature is designed for economic activity and by


transferring the token from one owner to another you've transferred ownership of the widget so you have the benefits of a ledger and in terms of recording who is on what and when and what those transactions between parties look like but the design of a token for economic activity in in managing the monetary value value transfer that's now associated with that widget all in one package that being the token wow uh you know one thing i wanted to add to this conversation this is a this isn't


like a viewer question this is a question that i just had when you were introducing this at that meeting in new york back in 2017 or whenever that was um one of the things you talked about was a trust layer for the internet yeah and about securing things even things such as email and so on can you expand on the trust layer and how this is going to make the internet i mean with transactions and so on uh it definitely increases the security you're less likely to get scammed in the future but how does it secure things like email and


so on yeah well when we think about the way the internet works today it's it's siloed it was meant to be decentralized and in some sense maybe it is but the applications that are running on top of the internet are siloed and they're owned by massive companies the biggest tech companies you can imagine control you know most of of the traffic that happens on the internet and and they have a captive uh customer base in those in those siloed applications if we talk let's just use a token as an


example let's say there's a token it has some value there's a ledger that records who owns a certain amount of value for these tokens you you know there's some kind of identifier for a user and then there's another field that says they have a thousand bitcoin or whatever right whatever this token is a thousand uh a thousand hbar the the problem is that if that's a single organization you have to trust that organization with the ledger you have to trust not only that they're not going to tamper with


the ledger but that they are protecting the ledger such that a bad actor can't break in and and tamper with the ledger in some way change the change the values in the ledger delete the ledger modify its history etc when we talk about the trust layer of the internet what we're saying is that we're creating a a layer that removes the need to trust a single party with that ledger so if you have a collection of parties like the council or many thousands of nodes that are voting on the order of the transactions


that result in the update of that ledger and that ledger is distributed meaning that each one of those nodes has a copy of that ledger there is no single party that can go in and modify the ledger for whatever purposes good or bad they can't do it it takes a bad actor to control at least a third or more of the voting weight on the order of those transactions which is practically impossible uh at scale so we've eliminated this a major source of vulnerability in in knowing that our data isn't going to


be modified to our disadvantage in some way from there you can build any kind of application you want it could be in an email client an email exchange or it could be uh you know one of our customers or partners is taking video in syria and and pictures of of things that are happening on the ground and they're they're hashing that information they're creating a digest and then they're recording it on our ledger and we have all these nodes that are giving it a consensus timestamp which makes it possible to


prove in the future when somebody presents video that that video has not been tampered with it's tamper-proof images or video or text that's important to people on the ground and in a war-torn country like like syria it's that level of trust that's being created for the first time there's not a uh you know a tech giant that can go in and say that that's uh you know that that's correct or not correct we have the proof that it's not been tampered with for the first time we don't have to


trust anybody with that that in a world where uh they can just take an image of somebody and then make that person say anything on video that they want all they have to do is type the words in put in the motions and it looks real it's completely fake this is going to be a very very important thing anyway the the very last question here is what do you see as the future for blockchain and hashgraph where is the industry headed and then just give us any of your other opinions or comments you want and we'll close this interview


well so a couple of things immediately come to mind um the world of blockchain sort of bifurcated in 2015. it was clear to the industry that there was real value here but the existing public networks just couldn't scale and they're going to be too costly and so these private network platforms like hyperledger and corda and others eea popped up to try and solve that problem by creating private networks what i see now is that after years it's the case that the industry the industry at large companies


specifically have discovered creating and governing and managing a consortium in a private context is really hard it's not nearly as simple as as people might have thought it would be they can spend years trying to create these consortia at the expense of getting the business logic that they care about completed and deployed to solve the real business problem so we're seeing a move away from private networks to public networks the use and adoption of public networks by enterprise is happening


and and we see it throughout our our business you know in our partners our system integrators we see it everywhere so i think that um public dlt is on the rise number one secondly i think that well you know five years ago even three years ago we were looking for killer applications the industry was looking for the use cases that would benefit the most from this new type of technology and what we're seeing today is not grand vision we're seeing use cases and working out the mechanics the workflows that actually will benefit


and i see this in the enterprise and it's a combination of tokenization and stable coins solving the price volatility for value transfer we haven't talked about stable coins but but the idea is that you can create a token that's pegged to some underlying asset like the dollar or or other so that it's it doesn't have a volatility of a lot of cryptocurrencies but it is a token so it has all the benefits of a token tokenization and uh provenance and and d5 decentralized finance it really quickly


all that means is that finance operations can be componentized and embedded in workflows and we see this happening in enterprises so you have a widget that gets created in a supply chain it gets a token from the day it's born it carries its provenance it can be traded it can be used as collateral for getting a loan against it for example it can be associated with purchasing of insurance shipping insurance perhaps it can be associated with a an accounts receivable and this defy component can be used for


factoring that accounts receivable associated with this widget all of that is being enabled by um tokenization and defy and it's going to ref revolutionize the way that companies operate and all parts of finance associated in in the supply chain and that's just supply chain right there are a lot of other use cases where that are going to be disrupted and and benefit from this world of tokenization that we're moving to wow uh you know it has more uh business applications than i had ever thought i'm


just absolutely amazed at what you just said uh you know most people think of any cryptocurrency or a token is just something that can be traded peer-to-peer and that's it right uh that's that's the you know that's basically what uh how bitcoin was first imagined it's just a payment system peer-to-peer uh skips all of the banking system and any other uh what i call frictional losses that you have when you've got other people other organizations involved managing it so the the it lowers cost increases


security but this does so many more things uh i think the future then of of blockchain and hashgraph is bright for both of them but i think hashgraph has a little bit of an advantage um so i want to thank you so much for this interview and is there do you have any last thoughts anything you want to add oh no well thank you it's it's a pleasure being here i certainly appreciate your interest in this and those that uh follow you we're very excited uh it's been a fantastic journey so far like we said


from the very beginning we started this wanting to create a 100 year company a company that's going to be around for a hundred years and feels more strongly about that today than ever before we're on a great path okay well thanks a lot mance and say hello to leemon when you get a chance i want to thank all of our viewers uh for watching this i'm mike maloney this was an interview with mance harmon of hedera hashgraph so thanks a lot mance we'll see you next time thank you you