Topics Altcoins
Bybit Learn
Bybit Learn
Intermediate
Dec 22, 2021

What Harmony Crypto (ONE) Is & Why You Should Care

Introduction

The growth of the decentralized finance (DeFI) space is unprecedented, and poised to continue indefinitely. There is, however, one salient issue: despite being in its early stages, it’s becoming increasingly clear that the distance between the DeFi space and the moon (a reference to the popular Dogecoin meme) depends on how fast interchain transfers can be carried out.

There are many constraints when it comes to using a single-chain platform for transactions. With more scalable cross-chain solutions being birthed, single-chain platforms have become a thing of the past. One cross-chain project that’s been gaining a lot of hype recently is Harmony (native token: ONE). In this article, we’ll be looking at how Harmony solves scalability issues in the DeFi space. 

What Is the Harmony Blockchain?

Built as a Layer 2 blockchain platform on the Ethereum network, Harmony makes it easier for developers to design decentralized applications (DApps) on the network. 

Due to Ethereum’s expensive gas fees, more altcoins are coming up with scalability solutions and vying to dethrone Ethereum as the most popular network for creating DApps. Unlike many other platforms in this category, however, Harmony collaborates with Ethereum instead of competing against it. 

Harmony uses a technique called sharding to split the blockchain’s network into parallel chains, called shards, to improve the speed and efficiency of the network — at a lower cost. Thanks to this strategy, transactions are sorted out in less than three seconds on the platform, while costing up to 100 times less than other blockchain transactions. 

Like many new tokens, Harmony operates a proof of stake (PoS) mechanism for its governance token, called ONE. PoS is less expensive, consumes less energy and enables greater decentralization than proof of work (PoW). With the ONE token, owners have a say in the decision-making of the Harmony platform via votes, and can earn passive income via staking. 

One major reason why the ONE token has gained widespread acceptance is its unique validation techniques. The number of tokens you stake determines the number of nodes which are validated. Therefore, higher-staking validators run more nodes than lower-staking ones. Currently, there are 1,000 active nodes on the Harmony platform

What Is ONE?

Like many other Layer 2 platforms, Harmony has its own community token, called Harmony ONE. Its name emphasizes Harmony’s vision of aiding open consensus mechanisms for billions of people worldwide. 

All activities and amenities in the platform are paid for by the Harmony One token: voting, transaction fees, gas fees, staking, and receiving ewards. 

Up until March 2020, the Harmony One token operated on a dynamic inflation schedule. This was later changed to a fixed annual inflation rate. 

How Does Harmony Work?

Harmony uses a distinct PoS mechanism, effective proof of stake (EPoS), which allows many nodes to be involved in network operations, including the improvement of sharding. The purpose of EPoS is to improve network delegation and ensure correct reward compounding, without compromising the decentralization of the network. It allows validators to effectively stake tokens and secure nodes according to the value of those tokens. 

To build consensus, nodes on Harmony identify similar nodes that might be important to its consensus development so that they can involve them in the building process. This improves processing and cost-effectiveness. 

Harmony developers’ use of sharding closely mirrors the technique used by Zilliqa, whereby each shard is allowed to process a fraction of the total network. The more transactions made on the network, the more nodes become available to process it. 

Seeing that the Zilliqa sharding technique doesn’t account for the division of blockchain data storage, the developers at Harmony decided to add a deep sharding mechanism by which both transaction and consensus layers undergo sharding. This added feature allows nodes to involve other similar nodes in consensus building. 

In the crypto world, every new entry is sooner or later subject to hacking. Knowing this, Harmony protects itself and its sharding network against malicious actors by randomly assigning nodes to each shard. Since it’s almost impossible for the code to guess the shard it will be attributed to, the probability of a successful attack is significantly diminished. Several crypto platforms have implemented this strategy, known as Distributed Randomness Generation or DRG. 

After reviewing the solutions proposed by OmniLedger and RapidChain, Harmony detected a key flaw. There was one thing lacking in both of these systems: either speed or security was compromised.

The DRG Harmony decided to use is a merger between Algorand‘s Verifiable Random Function (VRF) system and Verifiable Delay Function (VDF) proposed for the new version of Ethereum. Validator nodes generate random numbers and send them to another type of node called a leader node. From these options, the leader nodes then release a final number using what’s known as a BFT consensus. Algorand’s VDF comes into play here, as the aforementioned number is delayed to maintain security of the process. 

Harmony’s system is better, faster and more transparent than most other systems for verifying transactions, because it combines the strength of multiple systems while using them to mitigate the weaknesses of others.

Key Features

Harmony’s developers are working on three other key features that could creatively disrupt the general DeFi space. 

Special Noncustodial Wallet

Typically, to keep your crypto secure, you need a very strong password, and/or have to keep your private keys in a secure space to keep your crypto safe. Well, if Harmony gets it right, that’s about to change. The Harmony team is working on a noncustodial wallet you can access via 2FA (e.g., your email account and the Google Authenticator app). It remains to be seen how this would work on a security level, but we’re keeping our fingers crossed.

DeFi Protocol for Stablecoins

Harmony is also looking to produce a DeFi token which provides an interest rate of 20% on stablecoins every year. We’ve seen it done before with Terra’s Anchor protocol, and we’re excited to see how Harmony’s native protocol works out. 

A Cross-Chain Platform for Bitcoin

The final plan in Harmony’s playbook is a bridge-like platform which allows transfers to be made between two different protocols — within three minutes. This is a huge task in the DeFi space, and so far, the only known protocol that has done it is THORChain

How to Buy ONE Tokens

ONE can be bought on various cryptocurrency exchanges, most notably on Bybit. 

To buy ONE on Bybit, follow these simple steps:

Step 1Register an account (or log in) with the Bybit exchange.

Step 2: Visit the Spot Market section and search for the ONE/USDT pair. 

Step 3: Make sure you have USDT in your Bybit wallet. You can acquire USDT by exchanging fiat money for it using methods such as credit card and debit card.

Step 4: Click on Buy, and then place your transaction at a limit order and price of your choice.

Harmony ONE: Pros and Cons 

Pros

  • Harmony is the first shared protocol which can be staked.
  • Is Harmony really faster than its competitors? Yes, it is. Apart from boasting fast speeds, it also has the infrastructure needed for higher scalability and reliability.
  • Harmony also seems to be getting it right with its partners. It first entered the crypto space via an initial exchange offering (IEO) and funding from Binance Labs — a sign that the team knew what they wanted.
  • NFTs are a major phenomenon in the world of digital finance, but Ethereum’s high gas fees have discouraged many people from purchasing them. Harmony joins the list of altcoin alternatives working for an NFT marketplace with lower fees. 
  • The ONE token could be listed on Coinbase in early 2022. Should this occur, the ripple effects would be immeasurable.

Cons

  • Ethereum and Zilliqa are already fixing the problems Harmony is trying to solve. Is Harmony better? Probably. But if there’s anything meme coins have taught us, it’s that solid use cases don’t necessarily make a cryptocurrency popular. Instead, the public gravitates toward hype — and which option the crypto market perceives as the “best.” 
  • The effectiveness of Harmony depends on powerful technologies like the 5G network, which is still unavailable in most parts of the world. 
  • In a recent interview, Harmony’s founder Stephen Tse didn’t explicitly state Harmony’s road map for the ONE token in the foreseeable future. For a token with this much hype, that could definitely add some unnecessary red candlesticks to its long-term charts.

What Is the Maximum Supply of ONE?

Unlike some Layer 2 tokens, Harmony doesn’t have a maximum supply. In addition, every year 441 million ONE tokens are released and added to the existing supply.

How Many ONE Are in Circulation? 

Harmony’s ONE token has a circulating supply of ten billion. Although there is no maximum supply, it uses inflation to reward stakers. At first glance, you could call ONE a deflationary token, but that’s actually incorrect. There’s a fixed supply of 441 million ONE every year, and half of every staked token seized from malicious actors is burned. This helps offset the issuance of new tokens and direct the inflation rate toward zero as more people join the network. 

Is Harmony Crypto (ONE) a Good Investment? 

Yes. Although a lot still needs work, the Harmony project has been seen to solve the dilemma of poor scaling and interoperability, and offers DApp developers a good platform to scale their applications and transactions. Harmony aims to become a top crypto network known for its speed and effectiveness, and it’s currently on track to achieve that. The platform stays true to its promise of inexpensive gas and transaction fees. 

As with every other token and platform, ONE will become more valuable as Harmony gains more mainstream acceptance. Perhaps then we’ll see more use cases in addition to buying, selling and staking. (Note: Please do your own due diligence/own research before investing.)

Closing Thoughts

Although it’s in a crowded space, the Harmony network has done the smart thing by opting to leverage Ethereum’s huge user base, instead of competing with it. The space is still new, and there’s no clear-cut winner yet. Harmony’s decision to solve the fourth trilemma of the blockchain — privacy — might turn out to be its comparative advantage. That being said, it’s clear that Harmony is moving from a cross-chain solution to a fully decentralized platform. We’re interested to see if the Harmony token will still be in vogue when Ethereum 2.0 is fully rolled out.

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