Every blockchain wants to be harder, better, faster and stronger—but only one can be the best. Harmony is an underdog, but can it defy the odds?
Updated Jun 22, 2022
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Patience is wearing thin for many DeFi users who've long awaited Ethereum proof of stake merge. Ethereum is the best blockchain for executing smart contracts, but its slow speeds and high costs have led some crypto enthusiasts to other networks for their crypto needs.
Harmony is one of many EVM-compatible blockchains that aims to deliver the Ethereum of tomorrow today through proof of stake and sharding. Let's get into how Harmony plans to do this and what the ONE coin is all about.
Harmony is a proof of stake (PoS) sharded blockchain that's compatible with Ethereum smart contracts. The goal of Harmony is to deliver the same utility as Ethereum but with faster transactions and lower fees, all while being scalable, secure, and decentralized, thus solving the blockchain trilemma. Despite being a lesser known blockchain, Harmony's native ONE coin is a top 100 crypto, and it has one of the fastest growing metaverse development ecosystems.
Harmony's ONE coin is used for staking, governance, and paying for transaction fees. Validators must stake at least 10,000 ONE to participate in network consensus, which includes submitting and voting on proposals to change or upgrade the network as well as validating transaction blocks. Validators get rewarded in transaction fees and newly minted ONE coins, and those who don't hold 10,000 ONE can delegate ONE to another validator and earn part of their staking rewards, which are currently around 8% APY.
Harmony uses a variation of PoS called effective proof of stake (EPoS) which gives the largest validators less rewards to disincentivize a single validator from staking a lot of ONE. EPoS is a measure to maintain sufficient decentralization, and this is especially important since there are only 1,000 Harmony validators. Harmony runs 100 validator nodes with the other 900 slots open slots to external validators, and the protocol also uses slashing to punish validators who act maliciously.
The main way Harmony aims to provide faster, cheaper transactions is through sharding, which means partitioning the blockchain in order to process more transactions simultaneously. Harmony consists of four shards and each one is validated by a set of 250 nodes that are randomly selected. Harmony's verifiably random selection of validators for every shard allows that network to remain secure as it scales to handle higher transaction throughput.
Harmony claims to be capable of handling around 2,000 transactions per second (TPS), which is much higher than Ethereum's TPS (still in the double digits). What's more, Harmony's developers are also working on integrating zero knowledge rollups. A ZK rollup infrastructure upgrade could make Harmony even faster and cheaper while introducing new privacy capabilities—giving it a serious edge over competing smart contract platforms.
Harmony wouldn't live up to its name if it wasn't able to interact with other blockchains. So, you can rest assured that Harmony's interoperability app, called the Horizon bridge, natively enables assets to flow freely from Harmony to Ethereum and the Binance Chain. Harmony is also integrated with third party bridges, so you can transfer assets to or from almost any popular blockchain.
Tokenomics are something that can make or break proof of stake blockchains, and Harmony is no different. Proper distribution of the ONE token is important for keeping the network secure and safe from attackers, so it's crucial that the over 12 billion ONE coins in circulation stay (mostly) in the right hands. Harmony also has a burning mechanism that removes part of each transaction fee from circulation (similar to Ethereum), but ONE is far from deflationary.
Over 2.1 billion ONE was awarded to the Harmony team on a vesting schedule ending December 2022 and the over 2.7 billion tokens set aside for ecosystem operators will finish vesting in May 2025. The rest of the initial ONE supply was used for the seed sale, initial exchange offerings, and protocol development, totaling around 7.71 billion. Finally, the 441 million ONE rewarded to network validators every year consist of newly minted ONE and Harmony transaction fees.
Harmony's mission to be the faster, cheaper alternative to Ethereum is an uphill battle. We've already got Cardano vs Solana duking it out over the Ethereum-killer title. Even beyond those two massive projects, this is the value proposition touted by almost every smart contract blockchain competing against Ethereum. Despite lack of adoption and poor price action, Harmony is setting itself up for success by appealing to a broader usebase by developing new features rather than relying on flashy marketing.
With several metaverse gaming projects building on Harmony, it will be interesting to see how the network handles the stress of multiple demanding applications. The blockchain gaming possibilities will only broaden when Harmony introduces ZK rollup privacy features, but first the network has to prove it can scale. Currently, only three of Harmony's four shards are processing transactions. Until all four shards become fully active (and decentralized), we can't know for certain whether Harmony is truly the quickest, cheapest smart contract blockchain.