Holochain: The New Blockchain? A Look Beyond the Hype

Introduced in Satoshi Nakamoto’s 2008 whitepaper, Bitcoin was truly groundbreaking and has obtained great success and popularity for the last ten years.

Consensus or coming to agreement on the state of transactions is established in a decentralized manner with multiple parties through a method called proof of work.

Many miners process sets of transactions called blocks and the miner who finds the right nonce (string of random numbers) necessary to add a new block to the one before it is rewarded with some Bitcoin. Blocks form a chain of blocks known as the blockchain, which is a series of blocks (which are series of transactions themselves) that collectively represent all Bitcoin transactions since Bitcoin’s initial block, known as the genesis block.

All nodes (computers, servers, etc. that may or may not participate in mining) host copies of the same blockchain, which ensures that blockchain integrity is maintained and that there is no single point of failure when it comes to potentially losing the record of Bitcoin transactions. Changing the blockchain is impossible without gaining control over a majority of the network’s hashing or computing power, a feat that is considered implausible due to exorbitant computing costs.

Bitcoin’s approach allowed the creation of the first digital currency that overcame the double-spending problem (sending one transaction then another after it to negate the first), as no one can send such fake transactions without all other nodes knowing due to everyone having the same copy of the blockchain.

However, in recent years, the proof of work method has proven to be unable of processing large amounts of transactions efficiently, which is worrisome if Bitcoin is ever to gain more widespread adoption.

Different approaches to this problem have proposed.

Projects like Ethereum and EOS have proposed their own respective solutions to solving the problem of “scalability” (improving blockchain protocols so that they can handle a large scale of transactions without issue), yet no project has actually been proven on a commercial scale.

Holochain: Solving Blockchain Issues without a Blockchain

Holochain is yet another contender in the fray. While it aims to provide a solution to the scalability question, it takes quite a different approach as it technically isn’t even using a blockchain.

As stated on Page 1 of the Holochain whitepaper, Bitcoin’s approach to the problem is a data-centric one that focuses on creating a single, shared data reality (in this case the Bitcoin blockchain) that is hosted by all participants.

While this approach has proven to be great over the past decade or so of Bitcoin’s existence, it has come at the cost of scalability as mentioned, as coming to consensus via the computationally-intensive proof of work method is complex (takes time) and currently not suitable for large amounts of transactions.

Holochain’s approach is an agent-centric one, enabling the sharing of independently evolving data realities amongst participants as long as some ground rules are established and adhered to by participating agents or users. Git is the most well-known project with this approach, creating forks when differences of certain degrees are made in the code, allowing two projects to exist on the same fundamental layer. Just as different species come from the same origin, different applications can emerge from the same layer.

However, this may cause one to wonder how it’s possible to have a consensus between non-identical realities. As Holochain has no one, global shared state, there is neither consensus nor a single ledger. This is an extremely important point that one can miss easily: Holochain is not your everyday blockchain or even a blockchain.

Holochain’s and Distributed Hash Tables (DHT)

What makes Holochain different from traditional blockchain is distributed hash tables (DHT), a decentralized storage system most known for its use in torrents. In a DHT, while downloading a file, for example, you don’t download data from one single source. Instead, you download different parts of that file from different hosts.

In the same manner, Holochain nodes don’t have to share a single, global state, (e.g. a ledger of all transactions from beginning to end as seen in “traditional” blockchain systems) as long as some nodes can “piece together” parts of a whole (DHT).

Increased Flexibility (and Responsibility) for Developers

Bitcoin has no room for varying validation rules out of the box, thus giving the network participants no flexibility (unless soft forks, or software changes, are implemented, or hard forks, which can even create a different Bitcoin, such as Bitcoin Cash, Bitcoin Gold, and so on, take place).

On the other hand, thanks to its feature called DNA, which are the pre-established “ground rules” set by participants in a decentralized application’s (Dapp’s) system, Holochain allows Dapp developers to have increased flexibility to choose and implement their own rules as long as they do not contradict DNA. It’s important to note that DNA is inherent to each Dapp. In other words, each Dapp has its own DNA or rules for “consensus”.

Something to note, though, is that DNA places more responsibility on developers, who have to set quality DNA before building out a Dapp ecosystem to ensure that the Dapp runs smoothly. Giving more flexibility to developers (which also means more responsibility) could prove dangerous, as seen in the case of Ethereum.

Ethereum uses a fairly open-ended programming language called Solidity. While developers have more free reign in designing their Ethereum-based Dapps and smart contracts, this has led to numerous issues, such as The DAO hack, Parity wallet hacks, and other mishaps, as developers have been unable to develop their solutions properly.

DNA and Immune System as Holochain Security

DNA also acts a security measure. For instance, imagine a Holochain Dapp called “Ourbnb” (Holochain-decentralized version of Airbnb) with DNA that stated that an Ourbnb host couldn’t rent an apartment to two parties at the same time. If user(s) try to initiate a transaction that goes against this DNA and rent out an apartment to more than one party, the transaction would automatically be rejected by the other nodes in the Ourbnb network.

Another security feature that Holochain has is the immune system. Nodes look at their DHT and the various Dapps and their respective DNA that they have. When certain actors are determined to be breaking DNA rules, nodes communicate this information to each other, and the bad actors are shut out of the Holochain network.

Token Economics

Holochain has a token called Holo Token (HOT), which is rewarded to nodes for running Holochain software and hosting Dapps.

Therefore, while “traditional” software providers, such as Airbnb, are responsible for not only building out applications but also providing the hosting and security, on Holochain, Dapp developers build out Dapps while nodes host them and uphold security by enforcing DNA rules and using the immune system to cross-check for bad actors.

75% of HOT tokens were distributed via the Holo Token ICO and 25% are held by the team and organization.

Token Sale Metrics

The Holochain ICO raised 30,202 ETH. The soft-cap was determined to be €1 million, but the team successfully collected more than €20 million. The price per token was approximately €0.0001.

According to the Allocation of ICO Funding by Amount Raised table on the Holo Token ICO page, 15% of the collected funds were allocated to Holo development, 10% to Holochain development, 40% to currency reserves, 10% to infrastructure, 10% to operations, 5% to support of developers, hosts, and app providers, 5% to marketing and communication, and 5% to events and programs.

Team

Chief Architect Arthur Brock: Brock was the CTO at Targeted Currencies Network and is the founder of Metacurrency Project. As both jobs were focused on creating alternative digital currencies, Brock has been working on digital currencies since 2001, or before Bitcoin was even conceived.

Verdict

Below is a breakdown of the risks and growth potential of Holochain.

Risks

  • As Holochain is quite different from traditional blockchains, it is hard to make any guess on its future and its adoption, which is a crucial step for long-term success. (-2)

Growth Potential

  • A unique approach to the consensus problem that could solve blockchain’s current limitations. (+1)
  • Not a “whitepaper project” – developers can get started building on Holochain. (+2)
  • ICO went smoothly and was structured to prevent centralization in terms of token distribution amongst ICO contributors. (+1)
  • In addition to the above, no crazy private or presale deals (large bonuses, no lockups/vesting for large bonuses, etc.), which prevents token dumps by large, early-stage investors. (+1)
  • The project lead Arthur Brock has been working on alternative digital currencies and peer-to-peer technology since 2001. (+1)
  • Low $20m ICO hard cap (as of writing, $175m market capitalization) vs. other projects, such as EOS and Dfinity, which have raised billions of dollars. A lower market capitalization could leaving more room for HOT price appreciation. (+1)
  • Marketing for the project seems to have taken an organic approach, with the community being Holochain’s biggest evangelists, as evidenced by social media support and activity (comments, likes, etc.) on platforms like Reddit and Twitter. (+1)
  • Support from Mozilla CFO and Netflix Co-Founder Jim Cook. (+1)

Disposition

Holochain is a platform based on a quite different agreement mechanism than traditional blockchains. Due to its data-centric nature, Bitcoin meets with many problems such as inefficient mining. While Bitcoin forces one shared reality (the Bitcoin blockchain) on the entire network, Holochain allows people to have free will and their own realities as long as some ground rules are accepted by participants. While it’s too early to tell if Holochain can achieve its goals, the project’s novel approach, working product, fair ICO structure, team’s background in digital currencies and peer-to-peer technology, lower market capitalization relative to other big projects, and community support on social platforms as well as from tech industry heavyweights like Jim Cook could prove favorable in terms of the project’s investment potential. Holochain receives a 7/10.

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