What is Harmony (ONE)?

Blockchains like Ethereum are moving towards sharding and proof-of-stake consensus mechanism to securely scale their network and process exponentially more transactions while keeping lower transaction fees. While Ethereum is still in the transition phase, Harmony became the first blockchain to successfully implement sharding in a proof-of-stake blockchain network back in 2020. Now that Harmony is ahead of Ethereum in terms of sharding implementation, you might be curious to know what is Harmony and how does Harmony work?

Harmony is a secure, scalable, decentralized, and privacy-focused layer-1 blockchain that enables developers to build decentralized applications easily. The Harmony blockchain processes transactions within 2 seconds and costs 100 times lower gas fees than Ethereum. 

To achieve this, Harmony network is divided into four independent parallel blockchains called 'shards' where validators who stake a certain number of ONE tokens are chosen randomly to process transactions. If you are wondering what is ONE, it is the native cryptocurrency of the Harmony blockchain that is used to pay for transactions as well as participate in staking and governance on Harmony. 

What is Harmony: Key Points - 

• Harmony was founded in 2018 by Stephen Tse, who held principal positions in Google, Apple, and Microsoft before creating Harmony. 

• Harmony is fully compatible with Ethereum and has partnerships with prominent names in the blockchain space such as Sandbox, SushiSwap, Chainlink, AnySwap, Curve Finance, etc. 

• A transaction on Harmony takes only 2 seconds to complete as compared to 15 seconds - 5 minutes on Ethereum, 6 seconds on Cosmos, and 60 seconds on Polkadot. 

• Harmony has decentralized applications for different use-cases like Cross-chain bridges, NFT marketplace, blockchain-based domains, and many more dApps. 

• Participation in the Harmony network is relatively inexpensive. You require only 100 ONE tokens to become a delegator and 10,000 ONE units to start validating blocks on Harmony. 

How does Harmony work?

Even though Harmony is inspired by blockchains like Ethereum. Harmony is not an exact copy of an existing blockchain with some modifications. Harmony is built from the ground up. The Harmony network implements novel technologies at each stage of the transaction – right from assigning validators to broadcasting new blocks – to achieve its three core values of security, decentralization, and privacy. 

As discussed, Harmony network is divided into four parallel blockchains or shards namely Shard 0,1,2, and 3 to divide the workload and process transactions faster. Shard 0 is the Beacon Chain of Harmony that has additional responsibilities like accepting stakes whereas Shards 1,2, and 3 are typical parallel blockchains that process transactions and store their independent state. Each Harmony shard is currently limited to 250 validators per shard.

Now that you are well-versed with the infrastructure of Harmony, let us understand how does Harmony work under the hood - 

Sharding and Consensus 

To start with, people willing to become validators on Harmony stake the required amount of ONE tokens. Validators receive voting shares proportional to their staked tokens. Instead of assigning validators based on shards, Harmony randomly distributes voting shares to different shards to prevent malicious behavior. To allocate shard membership fairly, Harmony uses distributed randomness protocol (DRG), a combination of Verifiable Random Function (VRF), and a Verifiable Delay Function (VDF). 

In the Harmony network everyone in the network agrees on a transaction's validity using Practical Byzantine Fault Tolerance or PBFT consensus protocol. Here, a node is selected as a leader while other nodes act as validators to vote on producing new blocks of transactions. 

The validators who vote on transactions are periodically rotated and the voting shares are redistributed. The time interval (say 24 hours) during which the sharding structure is fixed and the shard is governed by the given validators is called an epoch. After an epoch, the validators are randomly rotated. 

Increasing efficiency

Harmony introduces several improvements for different stages of its transaction validation process to achieve higher efficiency and scalability. For example, in their PBFT consensus, instead of directly collecting votes from validators, the leader executes a multi-signature signing process to collect validator votes to reduce the complexity of communication between different validators.

Validators joining the Harmony network do not need to download the entire Harmony blockchain, thanks to Harmony's Fast State Synchronization. In this technique, the first block of an epoch is linked with the first block of the last epoch allowing nodes to sync to the current state of the block as quickly as possible by simply tracing cryptographic signatures across blocks in an epoch. Such synchronization makes it easier for validators to join the Harmony network. 

EPOS and security implementations 

Harmony uses Effective Proof-of-Stake (EPOS) to ensure a secure staking process. EPOS follows the traditional validator and delegator model with a slight twist. 

Here's how Harmony works with EPOS –  Validators pledge 10,000 ONE to process transactions on Harmony to earn block rewards and transaction fees whereas users with small capital can stake 100 ONE and become delegators by delegating their voting power to validators. Unlike other proof-of-stake blockchains where validators with more stakes earn more, Harmony's EPOS protocol penalizes validators with a significant stake to create a more decentralized network. 

Other security measures of the Harmony protocol include stake slashing and resharding. As the name suggests, in stake slashing, any malicious behavior by the node will result in their stake being slashed. Whereas resharding refers to securely rotating voting shares and validators after each epoch. 

What is ONE - Token Utility

ONE tokens are the native utility token that power the Harmony ecosystem. You can use ONE tokens to transact on the Harmony network and stake it to become a delegator or validator to earn block rewards and a share of platform fees. ONE tokens are also used to participate in Harmony's governance, but you need to become a validator to vote on proposals or table a new proposal on Harmony. 

Harmony Team and History   

Harmony protocol was founded in early 2018 by Stephen Tse. Before founding Harmony, Stephen served as a researcher at Microsoft, an infrastructure engineer at Google, and a principal engineer at Apple. Other founding and core team members include prominent names like Rongjian Lan (ex-Google), Sahil Dewan, Nick White, Li Jang, among others. 

To get Harmony off the ground, the project raised a total of $28.5 million in three funding rounds and the mainnet was launched in June 2019. However, it wasn't until May 2020 that Harmony opened its network for validators and delegators to stake ONE tokens and participate in the Harmony network. Later in July, Harmony launched a $7 million grant for applications building on its platform. By the end of 2020, Harmony was making headlines with its partnership announcement with Sandbox and the launch< of its cross-chain bridge to Ethereum.  

About ONE tokenomics 

According to Messari, the initial supply of ONE was capped at 12.6 billion. Coingecko suggests that the total supply of ONE currently stands at over 13 billion tokens. 

Out of the total supply, 22.4% of ONE tokens were sold in the seed funding round while 12.5% were allocated for the launchpad sale. From the remaining supply, 16.9% ONE tokens were given to the Harmony team members, 24.6% were kept for protocol development, and 21.8% tokens were reserved for ecosystem development. Moreover, Harmony set aside roughly 505 million ONE tokens from the protocol development allocation to incentivize early participants via their Node Round sale.

Speaking about ONE token issuance, Harmony releases 441 million ONE tokens every year for distributing staking rewards. To cushion the inflationary release schedule, Harmony network burns all the ONE tokens received as transaction fees. 

Moving on to token usage, ONE is used to pay for transaction fees, participate in staking, and vote on governance proposals. Stakingrewards.com data suggests that more than 40% of ONE tokens are staked on the network. 

How is ONE minted?

ONE is an inflationary token. While the initial supply of ONE was capped at 12.6 billion, every year Harmony mints 441 million new ONE tokens to compensate for staking rewards on their platform. This is how new ONE tokens enter into circulation. 

Typically, the sell pressure on ONE increases when token holders, delegators, validators, etc sell significant amounts of ONE in the open market. Moreover, there is also a huge influx of ONE tokens into circulation when Harmony announces different grants and funding initiatives.

How is Harmony winning the scalable blockchain race?

The above comparison table compares Harmony with other scalability solutions and blockchain networks on parameters like gas fees, economic security, transaction finality, etc. Although Harmony falls behind some of its EMV-compatible competitors, it wins in areas like transaction finality. Let's discuss in detail how Harmony fares when compared with other scalability solutions. 

Faster and inexpensive transactions 

Harmony is hands down one of the fastest blockchains out there. With its unique sharding architecture, Harmony manages to process transactions within two seconds. Along with instant transactions, the transaction cost also plays a major role in driving adoption. Transactions on Harmony cost only $0.0001 making it suitable for mass adoption. 

DeFi and Metaverse Focus

The Harmony blockchain is also hopping on the DeFi and metaverse trends with projects like daVinci and DeFi Kingdoms. With DeFi Kingdoms having over $11 million in TVL on Harmony and daVinci platform growing from 5,000 artists in September 2021 to over 11,000 artists as of July 2022, the NFT and DeFi ecosystem on Harmony seems to be thriving. The growth of projects on the Harmony platform will eventually push it ahead in the race of prominent blockchain networks.  

Cross-chain capabilities and grants 

Seamless transfer of assets between different blockchains will bring interoperability to Harmony and give it a competitive advantage over others. Harmony currently has an Ethereum bridge with its trustless bridge to the Bitcoin network and other cross-chain bridges in its roadmap. Harmony has also announced a $300 million grant for developers to accelerate its ecosystem development. 

Harmony partnerships & investors 

Harmony raised a total of $23.5 million in private sales, according to Messari. The investors include Anmi Group, Blockchain Assets, BTC12 Capital, Continue Capital, Hayek Capital, HM Capital, Binance Labs, Coin Fund, Digital Asset Capital Management, FBG, SNZ, WanxiangHashkey, etc. 

Harmony has also partnered with names like SushiSwap, DeFi Kingdoms, Gitcoin, Band Protocol, and Chainlink.

A deep dive into Harmony strengths, weaknesses, opportunities, and threats (SWOT analysis) 

Strengths 

The biggest highlight about Harmony is that it is the first blockchain to successfully implement sharding in a proof-of-stake powered network. As discussed in the how does Harmony work section, Harmony uses unique security, scaling, and communication mechanisms to achieve under 2 second transaction finality at near zero transaction cost. Another stand-out feature of Harmony is its 100% compatibility with Ethereum and its growing ecosystem of dApps that include cross-chain bridges, NFT marketplaces, .crypto domains, decentralized exchanges, etc. 

Weaknesses

Harmony is not without flaws. Since its launch, Harmony has been operating validator nodes on the network and accumulating rewards while the public staking program was announced in May 2020. The amount of tokens Harmony earned and the official wallet addresses of the Harmony Foundation, the company behind Harmony was not known until they released their transparency report in February 2021. Moreover, despite labeling itself as a sharded blockchain, only one shard is active on Harmony even after 3 years of the main net launch. The remaining three shards remain unoperational as they show zero transactions in the Harmony block explorer. 

Opportunities 

With its existing cross-chain bridge to Ethereum and the other trustless bridges in development like the Bitcoin bridge, Harmony can grab a significant share of the cross-chain finance market. If we talk about ONE potential, if Harmony delivers on its roadmap ONE token might see more adoption from crypto investors. 

Threats 

The biggest threat to the Harmony network is the security loopholes. In November 2020, over 25 million ONE tokens went missing from 9 wallets. Recently in June 2022, Harmony's Horizon bridge was exploited and $100 million worth of funds were stolen. Such security incidents raise concerns about Harmony's security practices. 

Harmony Roadmap

Harmony has detailed its 'Vision 2026' wherein they have laid down a plan to scale the existing Web3 infrastructure for DeFi and NFT using technologies like zero-knowledge proofs and funding thousands of DAOs via their grants. If we talk about what is Harmony protocol's short-term goals for 2022, the project aims to become the leading solution for cross-chain assets, collectibles, identity, and governance. 

In 2022, Harmony is focusing on increasing adoption, interoperability, decentralization, and researching on leading scaling solution zero-knowledge proofs. Some notable upgrades in the Harmony roadmap include building a trustless asset transfer bridge to Ethereum, incorporating efficient cross-chain communication, supporting finance products on wrapped Bitcoin, etc. 

Harmony updates, news, and highlights 

In 2021, Harmony skyrocketed its ecosystem growth with major milestones and collaborations. The first quarter brought major attention to Harmony after it became fully compatible with Ethereum and provided native support for BEP20 as well as BNB assets. Moving on to Q2 2021, the leading decentralized exchange SushiSwap launched natively on Harmony and the project entered the NFT space with the launch of daVinci NFT marketplace. Harmony also released its native blockchain domain called Crazy.ONE and Harmony Network Governance App to decentralize its governance. 

In the latter half of 2021, Harmony announced integration with Chainlink,brought WBTC on Harmony and launched a bridge to Ethereum's leading layer-2 solution Polygon via AnySwap, a prominent cross-chain protocol. Harmony ended the year with a collaboration with leading DeFi protocol Curve Finance and a whopping $300 million grant for developers.

Is Harmony the next Ethereum?

While it is true that Harmony became the first blockchain to launch a sharded proof-of-stake blockchain, it is difficult to undercut Ethereum considering the scale of the Ethereum network and its expansive ecosystem which consists of nearly 3,000 decentralized applications.

Harmony will continue to grow and co-exist with Ethereum and other blockchain solutions while competing to climb up the leaderboard. If Harmony delivers on its roadmap, fixes its security issues, and continues adding prominent blockchain solutions to its dApp store, Harmony can soon position itself as one of the leading EVM-compatible blockchains 

Where to buy ONE?

You can buy ONE on OKX using USDT in under five minutes. To get started with OKX, create your OKX account using your email or phone number. 

If you hold USDT in an external wallet or on an exchange, send it to OKX by selecting 'Deposit' under the 'Assets' tab. Otherwise, directly buy USDT using your preferred fiat currency using credit/debit cards or your favorite third-party payment provider. Once you have USDT in your OKX account, visit our trading page, select 'ONE/USDT' trading pair, and place a market order to buy ONE instantly using USDT stablecoin. 

How to safely store ONE tokens? 

OKX wallet is one of the safest to secure your ONE holdings from malicious attackers. After you buy ONE on OKX, we automatically send your ONE tokens to your OKX wallet. You can also move ONE from your OKX account to a Harmony compatible wallet. Harmony wallets include 1Wallet, Guarda, Staking4All, Frontier, and Blits, to name a few. 

Here's how to withdraw ONE to an external wallet - 

1. Login to your OKX account and select 'Withdraw' from the 'Assets' menu on the top-right. 
2. On the balance withdrawal page, select the cryptocurrency (in this case Harmony) and select the withdrawal method and blockchain network. 
3. Enter your Harmony wallet address, input the withdrawal amount, and complete the withdrawal process.

If you are still unsure, check this comprehensive step-by-step guide on how to deposit and withdraw crypto from OKX. 

How to stake ONE and earn rewards?

Run a validator node 

You can run a full Harmony node by staking ONE tokens and earn block rewards and transaction fees. Setting up your Harmony node is a bit technical and involves steps like creating a server, deploying a node, and creating a validator. Read this comprehensive guide on how to become a validator on Harmony to set up your validator node. 

Become a Delegator 

Harmony also enables you to delegate ONE tokens to a validator or multiple validators using their staking dashboard. To begin with, visit Harmony's staking interface, and click on your preferred validator profile to get details like its total stake amount, delegated stake, etc. Once you select a validator, click 'Delegate', input the amount you wish to delegate, and confirm the delegation by confirming the signature request in your crypto wallet. 

Your rewards will show up in the reward balance section. You can claim your rewards by clicking on the 'Claim Rewards' button. 

FAQs about Harmony

1. I hold USDT tokens. Can I trade it for ONE on OKX?

Yes, you can instantly swap your USDT tokens for ONE on OKX spot markets. First, you need to send your USDT balance to your OKX account by selecting 'Deposit' under the 'Assets' tab on the top-right of your OKX dashboard. Now, choose 'Transfer' from the 'Assets' menu and move your USDT tokens from your funding account to your trading account. In the last step, visit our trading terminal, select ONE/USDT pair, and fill out the buy form to exchange your deposited USDT tokens for buying ONE. 

1. How much can I earn by staking ONE token on Harmony?

Staking rewards are not fixed. Factors like validator performance, total stake on the network, and the efficiency of the validator determine how much staking rewards you will earn. Nonetheless, to get an estimate of staking rewards, visit Harmony's staking dashboard and look for the median expected return (from the last 30 epochs). 

1. How to send Ethereum-based cryptocurrencies to Harmony?

Harmony's Horizon cross-chain bridge enables you to swap Ethereum-based ERC-20 tokens for Harmony's HRC-20 tokens. To use the Horizon bridge visit the Horizon web page and connect your MetaMask and ONE Wallet. You should now be able to see your Ethereum and Harmony wallet address along with their token balance. To exchange ERC-20 tokens for HRC-20 select 'ETH > ONE', select the token you wish to swap, specify the exchange amount, and confirm your MetaMask transactions to complete the swap. 

1. Which dApps are deployed on Harmony?

The Harmony ecosystem has a list of decentralized applications from domains like DeFi, NFT, Cross-Chain Finance, etc. Some popular dApps include SushiSwap, daVinci, DeFi Kingdoms, etc. 

1. Can I vote from different wallets on Harmony?

Yes, if you hold funds in distinct wallets, you can use all those wallets to vote on Harmony.