What is Harmony (ONE)

Main

• Harmony is a high-performance blockchain platform with fast and cheap transactions.
• Harmony’s architecture features are sharding and a proprietary Effective Proof-of-Stake (EPoS) algorithm that enables high throughput. The project’s network is now divided into four shards.
• Harmony’s native cryptocurrency trades under the ticker ONE and is one of the top 150 crypto-assets by market capitalization among crypto-assets.
• The Harmony platform has a well-developed ecosystem that includes dozens of active decentralized applications.

Founding the project and launching the core network

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

Already in early 2019, the startup team has led three rounds of investment and raised investments totaling $28.5 million.

Harmony launched the core network in June 2019, and in May 2020 the network was decentralized by launching a mechanism for delegating native ONE coins blocked in stacking to validators.

Features of the Harmony blockchain

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

• A unique Effective Proof-of-Stake (EPoS) consensus mechanism;
• sharding, which is the division of a single blockchain into segments running in parallel.

EPoS 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.

The Fast Byzantine Fault Tolerance (FBFT) protocol is used to achieve consensus among validators. It allows parallel processing of transactions in separate segments (shards), which increases speed and efficiency. As a consequence, it takes less than 2 seconds to create new blocks in Harmony.

FBFT consensus consists of three steps:

1. Announcement. At the beginning of a new round, a randomly assigned leader creates a new block and passes its hash to all validators;
2. Preparation. The validators check the message, sign the block hash, and send the signature back to the leader. At least 2/3 of the votes must be collected to complete the phase;
3. Fixing. The leader combines the collected signatures into an aggregate signature and sends it to the validators. They verify that 2/3 of the votes in the previous phase were actually collected and sign the approved block, which will be fixed by the leader after at least 2/3 of the signatures have been collected.

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 “parent” network (Beacon Chain), which is responsible for consensus between segments (shards).

The shards work in parallel with each other, each with its own group of validators that are randomly selected from a common list for the duration of the next epoch. Transactions and blocks are also validated independently in each shard.

The sharding principle 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. A so-called “zero” Beacon Chain shard, or “beacon,” acts as a coordinator for the other shards. It produces a fixed number of blocks. It is by the “beacon” that other shards synchronize the height of their block chains. As soon as the Beacon Chain completes another epoch, this change is also transmitted to other shards.

Right now, all network activity is concentrated in Beacon Chain, and shards 1, 2, and 3 are virtually unused, although they generate blocks uninterruptedly. In the current configuration, Harmony can achieve 2,000 transactions per second. If the load grows, the number of shards can be increased.

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

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

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

As of September 2022, ONE’s total supply is over 13.15 billion coins, and there is no maximum issuance size limit. The network issues approximately 441 million ONEs each year to reward validators, which equates to an annual inflation rate of 3%. But, since the mechanism of transaction fees burning works, the actual inflation is directly related to activity on the network.

The main ways of using ONE cryptocurrency are:

• Paying transaction fees (less than $0.0005 per transaction);
• participation in management and development of the project by means of DAO system;
• stacking.

Harmony supports three standards of user tokens, completely similar to Ethereum standards: interchangeable HRC-20, and non-interchangeable tokens (NFT) – HRC-721 and HRC-1155.

ONE cryptocurrency staking.

In the Harmony blockchain, the number of available validator slots has increased several times according to the needs of the network and now exceeds 800. However, of these, there are just over 150 active validators.

Validators must have at least 10001 ONE coins in their wallet. Coin holders transfer their ONEs to selected validators in exchange for a certain share of the rewards for the block. As of mid-September 2022, ONE stacking returns on delegated cryptocurrency are over 9% per annum.

An important difference between EPoS and DPoS is the special reward distribution mechanism, which encourages decentralization. The yield of nodes with fewer ONEs in the steak turns out to be higher than that of large validators. This encourages managing nodes, each with a small steak, rather than a single large node.

How many projects are in the Harmony ecosystem

Activity in Harmony began growing rapidly in 2021 at the same time as major competitors – EVM-compatible networks Polygon, Avalanche, Fantom, BNB Chain and others.

According to DeFi Llama as of September 2022, there are about 60 DeFi protocols running on this blockchain. In total, more than 200 decentralized applications have already been launched on this network. Compatibility with EVM made it easy to integrate successful Ethereum projects into Harmony.

Among the major protocols working in the Harmony network are the decentralized exchange SushiSwap, the Aave linking service, the Synapse and Router Protocol crosschain bridges, and the Beefy yield aggregator. The GameFi segment is represented by blockchain games DeFi Kingdoms, Defira, MarsColony, Knight & Peasants, Moon Robots and other projects.

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

Networking activity also declined many times over. While January 24, 2022 over 5.3 million transactions per day were processed, in September the average number of transactions does not exceed 250 thousand per day, and the number of active wallets is about 10 thousand. And the aforementioned blockchain game DeFi Kingdoms accounts for almost 50% of activity on the network.

The big blow for Harmony was the attack on the Horizon crosschain bridge, from which the project has not yet been able to fully recover.

Horizon crosschain bridge hack and $100 million in cryptocurrency theft

On June 23, 2022, hackers managed to hack the Horizon Ethereum Bridge, resulting in about $100 million in cryptocurrency being stolen from users.

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

2/ We are providing one FINAL opportunity for the actor(s) to return stolen assets with anonymity. Our FINAL term is below.

— Harmony 💙 (@harmonyprotocol) June 30, 2022

A month after the incident, the Harmony team published a reparation plan. It included a hardfork 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, the community has been discussing a new recovery plan, which involves issuing a special management token and creating a DAO based on it, called Recovery One Foundation.

Harmony’s key partners and project perspectives

In 2019, when Harmony’s core network was launched, its key developer began partnering with several leading crypto projects. Harmony’s partners then included:

• Chainlink, a decentralized blockchain oracle network;
• Ankr, a decentralized computing environment and platform for business applications.
  In addition, Harmony has actively partnered with cryptocurrency wallet teams and stacking providers.

In April 2019, Harmony partnered with securities tokenization platform Nomica, which intended to use the blockchain to record digital token ownership information and automate its management.

In the fall of that year, Harmony Protocol unveiled a $300 million fund designed to grow the ecosystem through the end of 2025. Of that amount, $180 million was earmarked for developer grants, and $50 million to fund 100 regional DAOs. It was also planned to hold 10 hackathons for developers and launch incentive programs for liquidity providers and partners.

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

• Harmony Venture Network – finding strategic investors;
• Harmony Talent Network – attracting developers, designers and other specialists to the Harmony ecosystem;
• Harmony Advisors Network – consulting experts in the areas of corporate structure, finance, tokenomics, law, etc.
• Harmony Services Network – a carefully selected list of service providers for blockchain companies, from smart contract audits to liquidity providers.

However, as early as June 2022, the Harmony Protocol team announced a partial suspension of the fund due to large losses incurred as a result of the Horizon Bridge attack.