The rise of blockchain and cryptocurrency has shed some light on the inadequacy of centralized networks. While such solutions are convenient to use as well as easier to maintain and manage, they are exposed to severe vulnerabilities related to a single point of failure.
For example, suppose the central servers of a video streaming solution go offline during a power outage. In that case, users won’t be able to watch content on the platform until the issue gets fixed. Also, centralized ecosystems are attractive targets for attackers as it is enough to breach one or a few more servers to take control over the whole network.
Furthermore, the business operating the solution controls everything in the network. For that reason, the service provider has increased authority over users, which allows the company to block clients and restrict their access to the platform. Centralized setups also come with increased responsibility as businesses have to store their users’ data securely while complying with various regulatory laws.
Networks based on a centralized architecture are relatively inexpensive to maintain when starting out. However, hosting costs generally scale with traffic, limiting growth and potentially making the service providers’ business models inefficient.
Implementing blockchain technology has been a viable solution to eliminate the above issues and vulnerabilities of centralization. Instead of using central servers, blockchains operate in a decentralized way, storing the same data across all participants’ devices while recording changes to the distributed ledger in real-time. Since validators have to reach a consensus to verify transactions or add new blocks to the chain, the blockchain is immutable by nature.
However, while most blockchain networks on the market are highly decentralized and secure, most struggle with limited scalability. Participants have to maintain, verify, and come to a consensus on each record, which significantly decreases the network’s efficiency.
Holochain, a crypto project featuring unique technology, has the ambitious goal to eliminate centralization’s vulnerabilities while solving the efficiency-related problems of DLT networks by leveraging a post-blockchain app framework.
In this article, we will introduce you to Holochain and Holo, how they work, as well as the most important elements of the project’s ecosystem.
What Is Holochain?
Holochain is an end-to-end, open-source, peer-to-peer (P2P) framework for powering distributed applications. In other terms, Holochain provides the necessary tools, infrastructure, and technology for developers to create their own decentralized applications without the need for a blockchain or centralized servers. Instead of using servers, every Holochain application connects directly to users’ devices and features its own secure network.
Unlike in blockchain networks, where full nodes and validators are responsible for maintaining the ecosystem, Holochain takes an agent-centric approach.
Simply put, this means that everything in a decentralized application (dApp) happens on your computer (instead, for example, on cloud servers or the blockchain).
For that reason, all your application data is stored locally on your computer, which provides full control to users over their personal information. At the same time, this removes the burden from service providers to keep customer data securely on their servers in a way to comply with regulations.
Most importantly, Holochain eliminates the global consensus (e.g., Proof-of-Work, Proof-of-Stake) blockchain networks utilize in which every node validates every piece of data to secure their ecosystems in a decentralized way.
Instead, every Holochain application (hApp) features its own isolated, cryptography-powered network where participants mutually enforce and commit to shared data integrity rules.
As a result, applications within the Holochain ecosystem can run fast, achieve high scalability without serious bottlenecks – hApps only need a little extra computing power and storage to run on user devices – while amassing fewer resources than blockchain-powered dApps.
Furthermore, hApps don’t necessarily need cryptocurrencies or tokens to operate. Also, while validators in blockchain networks are rewarded for their service, Holochain participants don’t compensate users for maintaining hApps.
For that reason, Holochain lacks transaction fees while featuring rapid processing times.
How Does Holochain Work?
Since it neither uses a centralized architecture nor a blockchain, Holochain’s design can sound quite complex at first. For that reason, we have broken up the key processes and components into smaller sections to better explain how Holochain works.
On Holochain, everything with the app happens locally, which means that a user’s data is created and stored on their device in a journal called a source chain. Each entry to this journal is signed cryptographically by the author. Like data recorded on the blockchain, once something is written in the journal, it’s immutable, meaning that it can’t be modified or tampered with.
When someone joins a hApp’s network, the user generates a unique identifier in the form of a public and private key pair. Public-key cryptography allows the user to communicate with others in the network, message securely, prove ownership over authored content, and detect third-party tampering with data. Most importantly, every action recorded in the user’s chronological journal (source chain) is written exclusively by them and signed with their private key.
The source chain stores the user’s actions as elements, which also include the hash of the DNA, a string of code that defines the functionality and the rules within the app’s network. By including the DNA’s hash in your source chain, you agree to abide by the hApp’s rules.
It’s also important to mention the two major element types in source chains: entries and headers. Entries refer to actions (transactions, votes) or data (e.g., messages, pictures, user profiles) recorded by the user, which are included on the source chain in binary form. On the other hand, a header includes a signature along with the hash (a cryptographic fingerprint for an element’s data) of the previous header, a timestamp, and the type of the entry (e.g., picture, video, text file, etc.).
While entries can be both private and public, headers are always public.
Distributed Hash Table (DHT)
While source chains eliminate the risks of third-party tampering, they don’t prevent their owners from falsifying their own records. Suppose the author has the ability to delete certain records or important voting information. In that case, the network won’t be able to maintain data integrity as there’s a high risk false details will be circulating between users.
This is the exact reason why Holochain uses a distributed hash table (DHT), a database where the public elements (headers and public entries) of individual source chains are shared with peers in an application’s network. As part of the process, you share your source chain elements with a random set of other users who witness, validate, and hold copies of them. Since you all agreed to abide by the same set of rules within an application’s network, you will validate others’, and other users will verify your data against those rules.
Interestingly, unlike in blockchain networks where every full node has to store and validate all records on the ledger, Holochain users only keep a small part (a shard) of the DHT on their devices. At the same time, the DHT stores multiple redundant copies of the same entry, which allows users to access the data even when the author or several others are offline.
This allows the network to remain resilient even during severe network disruptions. Even if most nodes go offline, users will still be able to access and use the app, sometimes even without a working internet connection. However, a severe network outage would make a hApp outdated. At the same time, it would still remain functional, and it will update itself to the latest version as soon as the network recovers.
According to the Holochain team, this type of storage is similar to how people store language around the world.
For example, every English speaker carries the language. However, everyone has different expertise with specialized vocabularies and various levels of exposure to slang. For these reasons, nobody stores a “complete copy” of the English language, with everyone’s version being at least slightly different from the others’.
And, even without a full copy of the English language, speakers can understand and communicate with each other.
At the same time, in the case of a hypothetical scenario in which the majority of English speakers disappeared suddenly, it wouldn’t have a significant impact on the language itself (as people would still be able to use it effectively for communication).
As a side note, this is the exact reason behind Holochain’s name. If you cut a hologram into half, you can see the whole scene in each piece.
Now that you know what the DHT is let’s take a brief look at the validation process.
As mentioned earlier, owners of source chains can validate their records for third-party tampering. To check whether the owners of other source chains are honest and abide by the rules of the application, each participant takes responsibility to be an authority for validating and storing a portion of the DHT’s public records.
If someone sends valid information to others, his peers will store it in their personal DHT shards along with their validation receipts that serve as evidence that the data is indeed legitimate. After that, they send the receipts back to the author and share both the entries and the validation receipts with their neighbors.
On the other hand, in case the author tampers with the entries and sends invalid data to his peers on purpose, his validators will create, sign, and store a warrant – a validation receipt claiming an entry is invalid – on their devices. After that, the peers will share the warrant with both their and the author’s neighbors to expose the user’s malicious activity.
This comes in handy for other users as they can ask for warrants from the above authorities when checking up on the dishonest author. Based on the information they receive, they can choose to refuse to contact the malicious user.
After some time, everyone in the network will learn about the author’s warrant due to gossip communication between participants.
As a result, all participants will ignore the dishonest user, which effectively ejects him from the DHT due to their malicious activity.
What Is Holo and How Is it Different From Holochain?
Launched by the same project, Holo is a distributed peer-to-peer hosting platform for hApps that allows users to utilize Holochain-based solutions without hosting them themselves.
Simply put, Holo allows users to run hApps in normal web browsers (e.g., Firefox, Chrome). For that reason, Holo serves as the bridge between Holochain, cryptocurrency solutions, and the (semi-)centralized internet, and as such the entire project could be see as part of the shift to a Web3 digital environment.
However, to achieve that, Holo uses a variety of centralized elements to operate, including domain name resolution, routing algorithms, and performance metrics for matching hosts with hApps.
As a result, Holo has the authority to shut down services hosted in the network. In fact, the project clearly states on its blog that Holo must monitor its ecosystem for illicit activities and do its best to combat cybercrime to comply with regulations. This makes Holo much more centralized than Holochain and less decentralized than most blockchain networks on the market. According to the project, it will take time until the general public will get used to the new technology introduced by Holochain. For that reason, they decided to launch Holo to serve as a bridge and kickstart the adoption of hApps.
How Does Holo Work?
On Holochain, hApps reside on the users’ devices and operate without any miners, servers, or full nodes. However, on Holo, hosts offer their unused computational power and storage to publishers to run their hApps. In exchange for running hApps on behalf of users, app publishers compensate Holo hosts in HoloFuel, the project’s native, asset-backed, mutual-credit currency.
Hosts can set their own prices (they can even offer their services for free) and choose which applications to host.
Hosting credits (HoloFuel) can be bought and sold for various currencies via reserve accounts.
Interestingly, while every participant (end-users, developers, publishers, hosts) can purchase credits on the platform, only hosts can redeem HoloFuel using reserve accounts. That said, non-host participants can still sell their HoloFuel via third-party services like cryptocurrency exchanges.
In terms of Holo, it’s also important to mention HoloPorts. HoloPorts are dedicated, external hardware devices users can utilize to host hApps and receive HoloFuel in exchange.
Coming in three sizes, the project’s team sold HoloPorts exclusively to early backers in early 2018 to fund Holo’s development. The crowdsale in which the team collected over $1 million via an Indiegogo campaign was successful.
It’s important to note that you won’t necessarily need a HoloPort to host hApps on Holo. Instead, upon the launch of the platform’s beta, you will be able to utilize the spare resources of your desktop, smartphone, and tablet devices as well.
What Is HOT and How Is it Different From HoloFuel?
The Holo team mentions two different currencies – Holo Token (HOT) and HoloFuel – on its website and official documents. However, the project won’t use a two-token model for operating its platform. Instead, the upcoming HoloFuel currency will replace HOT after the beta launch.
To better understand their differences, let’s take a look at the two Holo currencies one after another.
Holo Token (HOT)
Holo Token (HOT) is an Ethereum-based cryptocurrency based on the ERC-20 standard.
Currently, as the platform is under development, HOT functions as a placeholder until Holo launches in Beta and releases HoloFuel. When that happens, HOT holders will be able to exchange their tokens into HoloFuel at a 1:1 rate (1 HOT equals 1 HoloFuel).
It’s also important to mention that HOT has a maximum supply of 172.69 billion coins, which matches its circulating supply. For that reason, the cryptocurrency is not expected to experience inflation related to Holo minting new coins.
Now, let’s look at how the token’s price has been doing since it hit the market.
The project’s team used HOT to raise a little over $20 million during an Initial Coin Offering (ICO) held in April 2018. Since its launch, HOT’s value remained relatively stable until early 2021. However, the cryptocurrency entered into a bull run in February. As a result, the HOT price surged from February 1’s $0.0007569 to $0.02848 by April 5, representing a growth of over 3,650%.
Since then, HOT entered into correction territory, with the digital asset currently trading at $0.01237.
HoloFuel is the native, asset-backed, mutual-credit currency of the Holo platform, representing a contractual service obligation redeemable for hosting. In other terms, publishers pay hosts in HoloFuel for their services, which the latter parties can redeem into other currencies (crypto or fiat) via reserve accounts.
As mentioned earlier, HoloFuel hasn’t been released yet; it is expected to hit the market upon the launch of the Holo platform’s beta. According to the project, HoloFuel does not use any tokens or coins for transactions. At the same time, currency transfers get counter-signed by both parties. Interestingly, HoloFuel is backed by the total computing power of hosts in the Holo network.
For that reason, in theory, the more popular Holo gets, and the more hosts use it to share their unused system resources, the more HoloFuel will be worth in the future.
According to the project, since the network’s computing power capacity will change at a slow rate, HoloFuel is not expected to display the same levels of volatility associated with other cryptocurrencies.
HoloFuel is designed for facilitating microtransactions between network participants. For that reason, just like cryptocurrencies such as BTC and ETH, HoloFuel is divisible in fractional units (e.g., 0.0000001 HoloFuel). At the same time, the Holo team states that HoloFuel is expected to have the capacity to support millions of transactions per second (TPS) between users.
According to the project’s team, HoloFuel will feature the following use-cases:
- Medium of exchange between hosts and publishers for hosting hApps
- HoloFuel earned by hosts can be redeemed into other currencies via reserve accounts
- Participants can spend HoloFuel through various apps and online marketplaces
- Hosts can optionally borrow HoloFuel based on their proven hosting track-record
Unlike HOT, HoloFuel has a dynamic supply, which means it doesn’t have a cap for the number of coins that can be created. Instead, HoloFuel’s supply will (aim to) match the computing resources of Holo hosts based on various platform capacity metrics.
Holochain: Leveraging Post-Blockchain Technology to Decentralized Applications
Holochain is a project in the cryptocurrency space that takes a unique approach to achieve decentralization while solving blockchain’s scalability issues. However, Holochain is still heavily under development, and the project’s team expects adoption to go slow even after it is released.
Despite being increasingly centralized, the distributed P2P hosting platform Holo could speed up Holochain’s adoption by serving as a bridge between hApps and current web applications. With all this in mind, it will be interesting to see whether Holochain can become a disruptor in this field after its launch and how that would impact the blockchain and cryptocurrency industry in the future.