What is blockchain and cryptocurrency Harmony (ONE)

Main

• Harmony is a high performance blockchain platform with fast and cheap transactions.
• Features of the Harmony architecture are sharding and its own Effective Proof-of-Stake (EPoS) algorithm, which allow achieving high throughput. Now the project network is divided into 4 shards.
• Native cryptocurrency Harmony is trading under the ticker ONE and is among the top 150 crypto assets by market capitalization among crypto assets.
• The Harmony platform has a developed ecosystem that includes dozens of active decentralized applications.

Foundation of the project and launch of the main network

Harmony Protocol founded in 2018 in the United States, several people: Rongjiang Lan, Nick White, Steven Tse and Sahil Dewan. They have previously worked for major technology companies including Google, Amazon, Apple and Facebook.

Already at the beginning of 2019, the startup team held three rounds of investments and attracted investments totaling $28.5 million.

The main Harmony network was launched in June 2019, and in May 2020, the network was decentralized by launching a mechanism for delegating native ONE coins locked in staking to validators.

Features of the Harmony Blockchain

The Harmony protocol has two features that allow this blockchain to achieve high performance:

• unique Effective Proof-of-Stake (EPoS) consensus mechanism;
• sharding, that is, the division of a single chain of blocks into segments that operate in parallel.

The EPoS mechanism is based on the widely used Delegated Proof-of-Stake algorithm, in which coin holders can participate in the network by delegating cryptocurrencies to validators.

To reach consensus between validators, the Fast Byzantine Fault Tolerance (FBFT) protocol is used. It allows you to process transactions in parallel in separate segments (shards), which increases speed and efficiency. As a result, creating new blocks in Harmony takes less than 2 seconds.

The FBFT consensus consists of three stages:

1. Announcement. At the start of a new round, a random leader creates a new block and passes its hash to all validators;
2. Preparation. The validators validate the message, sign the block hash, and send the signature back to the leader. To complete the phase, at least 2/3 of the votes must be collected;
3. Fixation. The leader combines the collected signatures into an aggregate signature and distributes to the validators. They check whether 2/3 of the votes were indeed collected in the previous phase, and sign the approved block, which will be fixed by the leader after collecting at least 2/3 of the signatures.

How sharding works

The consensus cycle in Harmony is called an “epoch” and lasts 32,768 blocks (about 18.2 hours). Validators in the Harmony blockchain are distributed among the “head” network (Beacon Chain), which is responsible for consensus between segments (shards).

Shards work in parallel to each other, each of them has its own group of validators, which is randomly selected from the general list for the next epoch. Transactions and blocks are also confirmed independently in each shard.

The principle of sharding is necessary to achieve a high level of scalability of the Harmony blockchain. Each shard maintains its own blockchain and state database.

The individual elements of the Harmony network are synchronized at the end of each epoch. The so-called “zero” shard Beacon Chain, or “beacon”, acts as a coordinator for other shards. It produces a fixed number of blocks. It is on the “beacon” that other shards synchronize the height of their block chains. As soon as the next epoch ends in the Beacon Chain, this change is also transferred to other shards.

Now all network activity is concentrated in the Beacon Chain, and shards 1, 2 and 3 are practically not used, although they generate blocks uninterruptedly. In the current configuration, Harmony allows you to achieve a throughput of 2000 transactions per second. As the load grows, the number of shards can be increased.

Issue volume and functions of the native coin Harmony (ONE)

Initially, the project team released a native cryptocurrency on the BNB Chain blockchain. The issue of 2.8 billion ONE was sold to large investors during investment rounds.

Harmony later held an IEO on the Binance Launchpad platform. During the token sale, another 1.575 billion ONE tokens were sold. With the launch of its own mainnet in June 2019, the native coin was transferred to the Harmony network, immediately releasing 12.6 billion coins.

As of September 2022, the total supply of ONE is more than 13.15 billion coins, and the maximum emission size is not limited. Approximately 441 million ONEs are issued annually to reward validators on the network, which corresponds to an annual inflation of 3%. But, since the burning mechanism for transaction fees works, the actual inflation directly depends on the activity in the network.

The main ways to use the ONE cryptocurrency:

Harmony supports three custom token standards that are completely similar to Ethereum standards: fungible HRC-20, as well as non-fungible tokens (NFT) – HRC-721 and HRC-1155.

ONE cryptocurrency staking

On the Harmony blockchain, the number of available slots for validators has increased several times in accordance with the needs of the network and currently exceeds 800. However, of these, there are just over 150.

The validator must have at least 10001 ONE coins in the wallet. Coin holders transfer their ONE to selected validators in exchange for a certain share of block rewards. As of mid-September 2022, ONE staking yields over 9% per annum when delegated cryptocurrency.

An important difference between EPoS and DPoS is a special reward distribution mechanism that encourages decentralization. The profitability of nodes with less ONE in the stake is higher than that of large validators. This encourages managing nodes that each have a small stake rather than one large node.

How many projects are in the Harmony ecosystem

Activity at Harmony began to skyrocket in 2021, along with its main competitors – EVM-compatible networks Polygon, Avalanche, Fantom, BNB Chain and others.

According to DeFi Llama as of September 2022, this blockchain is powered by about 60 DeFi protocols. In total, more than 200 decentralized applications have already been launched in this network. EVM compatibility made it easy integrate successful projects from Ethereum in Harmony.

Major protocols running on the Harmony network include SushiSwap decentralized exchange, Aave landing service, Synapse and Router Protocol cross-chain bridges, and Beefy yield aggregator. The GameFi segment is represented by blockchain games DeFi Kingdoms, Defira, MarsColony, Knight & Peasants, Moon Robots and other projects.

In January 2022, the amount of blocked liquidity (TVL) in the Harmony ecosystem reached $1.35 billion. But in the next few months, amid a bear market, TVL dropped to less than $40 million.

Network activity has also dropped significantly. If on January 24, 2022 more than 5.3 million transactions per day were processed, then in September the average number of transactions does not exceed 250 thousand per day, and the number of active wallets is about 10 thousand. Moreover, the mentioned blockchain game DeFi Kingdoms provides almost 50% of the activity on the network.

The big blow for Harmony was the attack on the Horizon cross-chain bridge, from which the project has still not been able to fully recover.

Hacking the Horizon cross-chain bridge and stealing $100 million in cryptocurrencies

On June 23, 2022, hackers managed to break into the Horizon Ethereum Bridge, as a result of which about $100 million in cryptocurrency was stolen from users.

The Harmony team offered the hackers a reward of $1 million and then $10 million for a refund. However, the attackers ignored all offers and laundered the stolen funds through the Tornado Cash mixer. According to experts, the infamous hacker group Lazarus, affiliated with the DPRK authorities, may be involved in the Horizon hack.

A month after the incident, the Harmony team released a remediation plan. It included a hard fork to issue new ONE tokens that would be used to compensate victims of the hack. However, the Harmony community did not accept this proposal.

Since August 2022 in the community discussing a new recovery planwhich involves the release of a special management token and the creation of a DAO based on it called the Recovery One Foundation.

Key partners of Harmony and project prospects

In 2019, when the Harmony mainnet was launched, its key developer began collaborating with several leading crypto projects. Then the partners of Harmony, in particular, were:

• Chainlink, a network of decentralized blockchain oracles;
• Ankr, a decentralized computing environment and platform for business applications.

In addition, Harmony has been actively collaborating with crypto wallet teams and staking providers.

In April 2019 Harmony concluded a partnership agreement with the securities tokenization platform Nomica, which intended to use this blockchain to record information about the ownership of digital tokens and automate their management.

In the autumn of the same year at Harmony Protocol submitted a $300 million fund designed to develop the ecosystem until the end of 2025. Of this amount, $180 million was allocated for developer grants, and $50 million was allocated to finance 100 regional DAOs. We also planned to hold 10 hackathons for developers and launch incentive programs for liquidity providers and partners.

The next step was the launch in 2022 of a comprehensive program Harmony One Acceleratorwhich is divided into four areas:

• Harmony Venture Network – search for strategic investors;
• Harmony Talent Network – attracting developers, designers and other professionals to the Harmony ecosystem;
• Harmony Advisors Network – expert advice in the field of corporate structure, finance, tokenomics, law, etc.
• Harmony Services Network is a curated list of service providers for blockchain companies, from smart contract auditing to liquidity providers.

However, already in June 2022, the Harmony Protocol team announced about the partial suspension of the fund due to large losses incurred as a result of the attack on the Horizon bridge.