This post is part of a series which started yesterday with “Bit Brain’s not-so-little guide to Holochain – Part 1” (an introduction to Holochain). Part 1 is necessary reading before carrying on with this post. Today we look at what is probably the most important part of how Holochain works: the characteristics of, and differences between Holochain, Holo, Holo fuel and HOT.
Bit Brain’s not-so-little guide to Holochain – Part 2
Holochain, Holo, Holo fuel and HOT
Now that we’ve warmed up, let’s get into a little more detail:
Don’t go to CoinMarketCap and search for “Holochain” – it isn’t there. But what you will find is “Holo” and/or “HOT”. This is confusing, for several reasons. Analogy time:
Ethereum is a builder coin or platform. The native currency of the Ethereum blockchain is called “Ether” though many people call it “Ethereum” as well. Ether uses the ticker symbol “ETH”. The Holochain/Holo/Holo fuel/HOT situation is something like that – I’ll try to explain:
Holochain: The underlying data sharing and validation protocols fabric upon which applications run, i.e. – the builder platform.
That was easy, now it gets decidedly trickier:
According to the Holo greenpaper, Holo is:
- The organization acting as both infrastructure provider and primary reserve account for the Holo Ecosystem.
- The technology created to enable shared hosting on top of Holochain, bringing it to mainstream participants.
- The crypto-credit used to purchase hosting in the shared Holo Ecosystem.
… none of which really explain it nicely.
According to Bit Brain, Holo is:
- The software interface layer between applications and the Holochain network. – For the sake of simplicity I would call it a “Holochain runtime engine“. (If you don’t know what a runtime engine is, then don’t worry, it’s not important that you do.)
- The colloquial name sometimes given to the Holochain currency.
…which brings us to:
Holo Fuel: The native cryptocurrency (they prefer the terminology “crypto-credit”) part of the Holo system.
That’s enough for now, we’ll get to “HOT” later.
I appreciate the ambiguity in the disambiguation section, the term “Holo” does appear to be used in some cases where “Holo fuel” would be more technically correct. As I am not a member of the community I can’t answer authoritatively on why this is, but I suspect that “Holo” crept into common usage in the same way that people talk about ETH as “Ethereum” when technically they should say “Ether”. This diagram of the network architecture may help to make things a little clearer. As you can see they also refer to the currency as “Holo” as do CoinMarketCap.
The “Reserve Account” (pentagon located middle-left) is a special type of account. There may be others later, but the initial Reserve Accounts will be created by Holochain itself. The operation of such accounts is a story within itself, so I will not elaborate on that beyond saying that reserves act as a volatility smoothers, a potential source of Holo for those who need to buy it with fiat currencies and a way to redeem Holo earned by hosting. The purpose of reserves is to ensure the smooth running of transactions on the Holochain.
Holochain has a whitepaper, as does Holo. Holo also has a greenpaper.
The Holochain Whitepaper linked to from the Holochain website creates a bad first impression. Not the content itself, which is fit for purpose, but the fact that it has “Draft” plastered all over it as well as annotations referring to changes which have yet to be made. Naughty Holochain, I award you a black mark for that. The latest available revision of the paper is from 6 March 2018. I’m not going to go into the detail of the Holochain whitepaper. It’s a very technical document, comprised mostly of formulae and comparisons between the Holochain, Bitcoin and Ethereum systems. Unless you are a big fan of equations, I suggest that you give the Holochain whitepaper a miss. To me the Holochain whitepaper reads more like a bluepaper than a whitepaper.
On the other hand, the Holo whitepaper is typical of what one might expect of a cryptocurrency whitepaper. Unfortunately it’s also not complete yet, but appears to be about 99% done. The unfinished sections should not deter you from reading it so long, it’s a good paper. It’s well written and the flow is logical, successfully maintaining the golden thread throughout the document. The introduction provides the “problem statement” (Holochain’s raison d’être), whereafter the Holochain itself is described. They then discuss Holo as a currency, including some broad quantifying data, which adds substantial value to the document. There is also a very interesting section about automated functions on the chain, functions that other cryptos would typically employ smart contracts for, but which Holochain can handle by design. The details of these functions are beyond the scope of this article, but interested parties may find out more about them by searching the Holo whitepaper for “selective automation”. The final chapter (barring the conclusion) deals with security. It is interesting to note some of the many security features inherent to the Holochain architecture; for instance: since consensus is not required across the network for verification of transactions, a 51% attack is not possible on Holochain. Perhaps the likes of Ethereum Classic and Bitcoin Gold should be giving the guys at Holochain a call…
As it is a greenpaper, I don’t see much value in you reading the Holo greenpaper, simply because the whitepaper is available. The greenpaper was published in March 2018 and much of its contents can now be found in the Holo whitepaper.
As a cryptocurrency, Holo (technically “Holo fuel”) is different to what you are used to with other cryptocurrencies. The concept of “coins” or “tokens” is not the same as what it is in a blockchain. Instead of transactions taking place to move coins or tokens from one wallet to another; with Holo there is no “movement” that takes place, it’s more of an “agreement”. If I pay you 100 coins on a traditional blockchain, then those 100 coins are marked as “removed” from my wallet, sent to the mempool to be hashed, and then deposited into the destination wallet address. It may take several “confirmations” before it is agreed across the network that the coins have indeed been sent from A to B. This is the traditional consensus mechanism.
If I pay you 100 coins using Holo, then my wallet and your wallet agree that I will just lower my balance by 100, while you increase yours by 100. The effect is the same and the transaction is still secure and verified, but it’s a lot easier than the traditional blockchain method. It even has an advantage over Proof of Stake blockchain systems which don’t require armies of miners to hash their blocks. Holochain has an advantage because transactions don’t require the consensus of several nodes, only consensus between the two wallets.
Because consensus does not have to be reached across the chain for a transaction to take place, one might think that Holochain sacrifices security for speed, but this is not the case. The same blockchain principle of dual-key cryptography (where each wallet has a private and a public key) is still used by Holochain. Both wallets sign the transaction and add it to their local ledger of transactions. Transactions on Holochain are all saved as both debits and credits, just like the traditional double-entry ledger system of accounting. Because of this, Holo can’t be sent to someone without them knowing about it, they have to approve and countersign the transaction.
Holo is never created, destroyed or burnt. The system continues to run by ensuring that total debits = total credits. In fact (and this is rather novel) the net currency supply of Holo is always zero! (Read page 8 of this if you think that I’m talking rubbish: https://holo.host/currencypaper). This is known as a mutual credit currency. I must say that I like the idea. I try to avoid being resistant to change (which is a standard human trait) and I will support whatever works well. In concept this sounds advantageous to me.
Very interesting is how Holochain pegs a value to their Holo currency. They link it to computing power – the cost of hosting, processing and transmitting transactions. This is similar to the peg system that Opacity employs (previously called Oyster Pearl before their owner pulled an exit scam – yes, I was invested in it). One should realise that just because it is pegged does not mean that it is static, merely that the pegs acts as a stabiliser, thereby mitigating the effects of crypto volatility. Each host can set their own prices for transactions, but this will normalise across the network for obvious economic reasons. As an outsider I consider this system to be feasible. From what I’ve seen so far, Holochain could become incredibly successful, which would drive demand for Holo and cause a price rise as hosts raise transaction costs across the network. On the other hand, a pegged currency will struggle to enjoy the meteoric, rapid rises of some cryptos in the past (often referred to as “Mooning”) – but perhaps that’s not a bad thing at all. Slow growth is always more sustainable than hype-based rapid growth. I surmise that this may make Holo less attractive to day traders and swing traders due to the reduced volatility, but I don’t consider that to be a bad thing either.
Halfway there! By now you’re hopefully building up a good picture about what Holochain is all about. In Part 3 we’ll analyse Holochain as a business entity – don’t miss that! We’ll also look at a few peripheral bits and pieces of Holochain. See you then!
Yours in crypto
“The secret to success: find out where people are going and get there first”
~ Mark Twain
“By this means (fractional reserve banking) government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.”
~ John Maynard Keynes