‍

Hedera, launched in 2018, is a decentralized, open-source distributed ledger technology (DLT) designed to provide a fast, secure, scalable, and fair platform for digital transactions and decentralized applications (dApps). It uses a directed acyclic graph (DAG) data structure and a unique hashgraph consensus algorithm to achieve high throughput, predictable costs, and rapid transaction settlement without compromising security. The network's consensus mechanism, built on the "gossip about gossip" protocol, ensures that all nodes collectively determine transaction order and validity by sharing information efficiently. This guarantees a consistent and accurate ledger state across the network while maintaining low latency. 

Hedera continues to solidify its reputation as a versatile and forward-thinking platform, advancing blockchain adoption across diverse industries. In the second half of 2024, Hedera launched new products and services, including Hedera Asset Tokenization Studio, positioning it as a leader in areas such as real-world asset (RWA) tokenization, decentralized finance, data integrity, and artificial intelligence (AI). 

Central to these advancements is Hedera’s integration with emerging technologies like AI, which enhances decision-making and automation in key sectors such as healthcare, finance, and climate action. Additionally, Hedera's focus on data integrity and governance solutions underscores its commitment to fostering trust and reliability in digital ecosystems. The launch of projects like EQTY Lab’s Verifiable Compute highlights the key role that Hedera DLT plays in this emerging field.

The network's significant upgrades, including enhanced smart contract functionalities and token management features, reflect Hedera's dedication to empowering developers with intuitive tools while maintaining robust security standards. 

This report explores Hedera's latest developments, focusing on its integration with AI, advancements in regulatory-compliant solutions, and roadmap updates that pave the way for a decentralized future. By examining these achievements, we aim to provide a comprehensive understanding of Hedera’s contributions to blockchain innovation and its impact across industries.

Crypto x AI

Artificial intelligence, a cornerstone of modern computer science, empowers machines to perform tasks that typically require human intelligence. In the cryptocurrency domain, AI enhances security measures, automates processes, and improves user experiences. 

The convergence of artificial intelligence (AI) and blockchain represents a pivotal juncture in the evolution of technology. While these two innovations have individually garnered significant attention, their combined potential is poised to redefine how data is processed, secured, and utilized across sectors. AI, as an autonomous system capable of learning, decision-making, and adaptation, gains new dimensions when paired with blockchain’s immutable and secure data infrastructure. Together, these technologies enable applications that address some of the most pressing challenges in data integrity, privacy, and scalability.

One notable intersection between AI and blockchain lies in large language models (LLMs). These models, which process extensive datasets to understand and generate human-like text, have transformative applications in blockchain. LLMs can automate complex tasks such as smart contract creation and enhance natural language processing for blockchain platforms, improving user interfaces. The training and fine-tuning of these models mirror human learning processes, beginning with pre-training on vast, unlabeled text datasets to learn linguistic patterns and relationships. Fine-tuning then tailors these capabilities to specific tasks, enabling more precise outputs. However, the computational intensity of training LLMs presents ethical and practical concerns. The dominance of large companies in AI development raises risks of centralization, potentially leading to restrictive practices and monopolistic control. Integrating blockchain into this ecosystem mitigates such risks by decentralizing data storage and computation, promoting transparency and equitable access.

Machine learning (ML), a subset of AI, plays a central role in enabling systems to learn and perform tasks without explicit programming. ML models operate through systematic pipelines involving data collection, training, and inference. These models adopt diverse learning paradigms—supervised, unsupervised, and reinforcement learning—to interpret data and execute tasks effectively. Supervised learning uses labeled datasets for guidance, while unsupervised learning autonomously identifies patterns within data. Reinforcement learning relies on trial-and-error feedback to refine decision-making, excelling in sequential tasks like robotics and strategic games. Understanding these methodologies is crucial for navigating AI’s growing influence across industries.

Hedera x AI

Data Integrity

Data integrity—the accuracy, consistency, and reliability of data throughout its lifecycle—is essential for effective decision-making in today’s digital landscape. Maintaining data integrity involves protecting data against both physical and logical risks. Both types are critical to ensuring accurate, reliable, and available information.

• Physical Integrity: Protects data from risks to its physical storage, such as hardware failures, natural disasters, or power outages. Without adequate protection or backup systems, organizations risk permanent data loss.
• Logical Integrity: Ensures data remains consistent and unaltered as it moves through systems. Logical integrity prevents unauthorized modifications due to human error, transfer issues, or malicious intent.

Businesses encounter several challenges that compromise data reliability, ranging from human error to systemic vulnerabilities. Mistakes such as incorrect entries, misplaced decimals, incomplete data, biased inputs, or accidental deletions can significantly affect accuracy.. Cybersecurity threats, including malware, hacking, and insider attacks, further jeopardize data integrity. Dependence on physical storage introduces risks of hardware failures, leading to potential data corruption or loss. These issues highlight the need for robust strategies to safeguard data reliability.

By anchoring data to a decentralized ledger such as Hedera, institutions, enterprises, and individuals are able to introduce an auditable, actionable, and transparent data provenance layer from which previously untapped value can be realized. These unique insights and programmability bring new levels of accountability and control to data - an industry that is notoriously opaque.

Verifiable Compute: EQTY Lab, NVIDIA, and Intel

Verifiable Compute - the first hardware-based solution to govern and audit artificial intelligence workflows developed by EQTY Lab in collaboration with industry leaders Intel and NVIDIA - is set to revolutionize AI by introducing trusted explainability, accountability, and observability at scale for our digital, connected, and increasingly AI-driven economy.

By integrating next-generation hardware from Intel and NVIDIA directly with the highly scalable Hedera Consensus Service for trusted timestamping, Verifiable Compute will provide unique, tamper-proof, and first-of-their-kind certificates of authenticity and compliance for independent verification of AI training, inference, and benchmarks at runtime, setting new industry standards for enterprise AI solutions.

With the implementation of this groundbreaking solution, every operation performed on compatible Intel CPUs and NVIDIA GPUs will be immutably recorded on the Hedera network, enabling silicon-backed auditability, smart contract orchestration, and enhanced compliance capabilities - true showcases of how distributed ledger technologies are delivering real-world value.

In development for over two years in collaboration with government agencies across the US, UK, Europe, and the Middle East, Verifiable Compute has been built from the ground up to align and dynamically comply with emerging AI regulations across the globe. As AI continues to cement itself as a core pillar of the digital economy, Verifiable Compute is strongly positioned to bring much-needed transparency, accountability, and usability to the notoriously opaque industry using Hedera.

EQTY Lab and ClimateGPT

As artificial intelligence advances and new challenges arise, regulators are increasingly prioritizing the responsible development and deployment of these technologies. In response, EQTY Lab has introduced a groundbreaking solution that leverages Hedera to enhance transparency and accountability in AI systems. Their AI Integrity Suite employs cryptographic techniques and blockchain technology to meticulously document the origins and characteristics of large language models (LLMs). By creating an immutable record of every stage in an AI model’s development, this solution ensures a robust audit trail, making it nearly impossible to tamper with the model’s history. This approach delivers a new standard of transparency and security for AI innovation.

EQTY Lab’s AI Integrity Suite provides enterprises with tools to oversee and validate AI development. Two core components drive this solution:

1. Lineage Explorer: Tracks and visualizes AI workflows in real time, including data selection, model training, and refinements.
2. Governance Studio: Enables rule enforcement for AI processes, ensuring models adhere to organizational and regulatory requirements.

Every stage of AI development is cryptographically recorded on the Hedera Consensus Service (HCS). This immutable record establishes an auditable chain of custody, allowing organizations to:

• Verify model authenticity
• Monitor changes and benchmarks
• Demonstrate compliance with regulators

The result is a transparent and accountable AI development process, reducing risks while aligning with emerging regulations.

The application of EQTY Lab's technology could revolutionize how companies and regulators interact with and oversee AI technologies. By providing a transparent method to track and verify the components and behaviors of AI models, stakeholders can ensure these models are used safely and ethically. Furthermore, this approach aligns with global regulatory trends focusing on the safety and reliability of AI systems, as underscored by initiatives like the U.S. Commerce Department's new AI Safety Institute.

Looking to leverage its new technological unlocks within the world of climate science, EQTY Lab recently unveiled ClimateGPT on the Hugging Face community AI platform. ClimateGPT, developed in collaboration with Erasmus.AI and trained by Apptek, represents a new AI-led approach to tackling environmental issues. It is an ensemble of task-specific AI models that aims to enhance the reliability and transparency of climate data. This model supports over 20 languages and incorporates a substantial foundational model that consists of 7 billion parameters and more than 300 billion climate-specific tokens. Notably, the entire training process is powered by renewable energy, underscoring the project's commitment to sustainability.

ClimateGPT, a collaboration between EQTY Lab and the Endowment for Climate Intelligence (ECI), demonstrates how transparent AI frameworks can address critical challenges. Focused on unbiased climate analysis, ClimateGPT records every step of its training and development on the Hedera network, ensuring:

• Immutable documentation of workflows
• Attribution of data sources
• Transparent reporting of model modifications

The model provides users with targeted insights across natural, social, and economic domains, setting a new standard for AI integrity. This initiative highlights EQTY Lab’s ability to combine transparency, accuracy, and collaboration to solve global challenges.

By incorporating Hedera’s blockchain technology, EQTY Lab ensures that ClimateGPT adheres to the highest standards of data integrity and security. This integration empowers developers to build and deploy AI-driven applications with confidence in the authenticity and accuracy of the data being used.

EQTY Lab’s framework paves the way for transparent, accountable AI systems that meet the demands of evolving regulations. By integrating verifiable records into every stage of AI development, businesses can ensure compliance, build trust, and adopt AI with confidence.

Guardian 3.0

ClimateGPT isn’t the only innovative idea aimed at helping fight against climate change. ​​As climate reporting becomes increasingly complex, Hedera Guardian 3.0 emerges as a transformative tool, powering the world’s largest open-source library of digitized climate methodologies. By replacing outdated systems reliant on PDFs and spreadsheets with an advanced rule-based workflow engine, this upgrade delivers unprecedented accuracy and efficiency to environmental data management.

Traditional systems often fall short in meeting the demands for transparency, traceability, and immutability in ESG reporting. Hedera Guardian 3.0 bridges this gap by introducing enterprise-focused enhancements, including:

• Real-time analytics and visualization tools for actionable insights.
• Fine-tuned permission settings for secure collaboration.
• Full API access to integrate seamlessly with existing systems.

These innovations enable organizations to achieve their sustainability goals with greater confidence, cementing Hedera Guardian as a leader in sustainable innovation.

To foster continuous growth and development, Hedera Guardian’s ecosystem receives robust support through two key initiatives:

1. Community Bounty Program: Funded by the HBAR Foundation, this program offers quarterly rewards of up to $25,000 to developers who enhance the platform’s open-source codebase.
2. Methodology Bounty Program: Led by Exponential Science, this initiative funds the creation of up to 50 digitized methodologies over two years, offering $5,000 per methodology.

The latest version introduces advanced features tailored to meet enterprise demands. It offers enhanced data access through the Indexer and API, enabling scalable retrieval of climate data and extracting valuable insights from static documents. Built on a microservices architecture, the solution delivers enterprise-grade scalability, supporting global workloads with advanced security through Hedera blockchain smart contracts. Seamless integration with third-party platforms like AWS Key Management, Google KeyVault, and IPFS ensures flexibility for diverse enterprise ecosystems. Policy workflow enhancements, including reusable policy modules, group consensus decisions, and tagging, streamline usability and compliance tracking. Additionally, selective data disclosure leverages encryption to protect confidential information while granting authenticated access for audits.

Hedera Guardian 3.0 represents a paradigm shift in climate data management, enabling organizations to meet regulatory demands and sustainability goals with confidence. Combining cutting-edge technology with a collaborative, open-source approach paves the way for a future of transparency, efficiency, and impactful climate action.

ProveAI

​​Prove AI AG, the creators of the Prove AI governance solution, have made a significant pivot by building their flagship product exclusively on the Hedera network. This partnership represents a leap forward in addressing the pressing challenges of AI governance, particularly in transparency, security, and compliance. By leveraging Hedera’s enterprise-grade blockchain environment, Prove AI aims to redefine how organizations govern AI training data while ensuring compliance with emerging regulations like the EU AI Act and NIST standards.

The integration of Prove AI with Hedera offers enterprises critical tools to manage AI-related risks. Prove AI enables secure multi-party access to AI training datasets, maintaining a tamper-proof digital log of all access and modifications. This ensures accountability and auditability for regulators and stakeholders alike. Additionally, Hedera provides a robust foundation for storing auditable data, allowing organizations to track ownership, manage liability, and ensure compliance with evolving AI standards. These capabilities are especially crucial for high-risk AI applications, where transparency and trust are paramount.

This strategic alignment underscores Hedera's commitment to supporting innovative enterprise solutions. The Hedera ecosystem, with its emphasis on scalable, secure, and decentralized governance, is an ideal platform for such advancements. This collaboration not only enhances AI governance but also sets a benchmark for building trust in AI-driven innovations, ensuring the future of AI is both powerful and ethical.

Acoer

The integration of AI and blockchain technologies is transforming the healthcare sector by addressing long-standing issues such as data silos, lack of interoperability, and security vulnerabilities. Acoer, a pioneer in this space, utilizes the Hedera network to develop a robust and secure ecosystem for healthcare data management. Acoer’s platform specifically tackles the inefficiencies in healthcare data by breaking down data silos and enabling seamless sharing among patients, researchers, and providers. It uses the Hedera network to create immutable logs that ensure data integrity, automate complex data workflows, and establish transparent governance frameworks. These features allow healthcare stakeholders to collaborate while maintaining strict compliance with privacy regulations securely. By leveraging blockchain’s decentralization and transparency, Acoer not only enhances the reliability of health data but also fosters innovation and efficiency, paving the way for better patient outcomes and a more interconnected healthcare ecosystem.

‍

Hedera Development in 2024

Hedera’s ongoing commitment to enhancing its developer ecosystem was evident this quarter through three significant network upgrades: V0.51, V0.52, and V0.53. These updates introduced new features and tools that simplify development and enhance security, all while demonstrating the Hedera developer community's relentless activity and ability to ship improvements. Below are a few charts from Electric Capital’s yearly Developer Report, demonstrating the number of Hedera developers, their activity throughout the year, and their positioning compared to other similar chains.

Key Upgrades

The V0.51 upgrade (July 17) introduced HIP-206 and HIP-906, pivotal improvements to the Hedera Token Service (HTS) and Account Service system contracts. HIP-206 added atomic transfer capabilities for HBAR and HTS tokens, enabling seamless interaction with fungible and non-fungible tokens directly through smart contracts. This enhancement eliminated the need for token wrapping, reduced costs, and supported native royalties on the EVM, streamlining asset interactions for developers. HIP-906, on the other hand, introduced HBAR-specific functions like hbarAllowance and hbarApprove within smart contracts, simplifying workflows for granting approvals. These features addressed common challenges in DeFi and token marketplaces, eliminating context switching and unlocking new use cases.

The V0.52 upgrade (July 31) brought initial support for HIP-904, which introduced the TokenReject function. This functionality empowered users to reject unwanted tokens by transferring their balances to the treasury, effectively managing token holdings and safeguarding against scams or malicious airdrops. The feature supports multiple rejections in a single transaction while bypassing custom fees and royalties. By offering users greater control over their token portfolios, HIP-904 significantly improved the token management experience and user security.

The V0.53 upgrade (September 11) continued refining developer tools with HIP-719, HIP-850, and HIP-993. HIP-719 enabled proxy contracts to manage token associations and dissociations, providing a familiar syntax for developers accustomed to ERC-20 and ERC-721 standards. HIP-850 introduced the ability to update NFT metadata while tokens are held in the treasury, ensuring secure modifications during asset custody. Finally, HIP-993 enhanced record stream readability, adding detailed auto-creation fees, unified child consensus times, and improved transaction tracking. These enhancements simplified development workflows and laid the groundwork for further improvements in transaction efficiency.

Together, these upgrades position Hedera as a more developer-friendly, secure, and scalable platform for building next-generation decentralized applications, reinforcing its leadership in blockchain innovation.

In Development and 2025 Roadmap

HIP-904: Streamlining Token Airdrops and Associations on Hedera

HIP-904 introduces a groundbreaking solution to reduce friction in token airdrops and enhance user control over token management on the Hedera network. By removing the need for recipients to pre-associate tokens, this proposal simplifies the process of sending and receiving both fungible and non-fungible tokens. Airdrop senders can now automatically create associations on a recipient’s account during the transfer by covering the association fees. This eliminates prepayment for unused token slots, making the process more intuitive and cost-effective for both developers and users.

HIP-904 introduces a “pending token transfer” concept to protect account holders' sovereignty, allowing users to claim desired airdrops or reject unwanted tokens through transactions such as TokenClaimAirdrop and TokenReject. This ensures that users retain full control over their wallets while addressing spam and malicious fee concerns. Automatic token association settings can also be configured as zero, limited, or unlimited, providing greater flexibility based on individual preferences. Additionally, senders can cancel pending airdrops using the TokenCancelAirdrop function.

While offering security benefits, the traditional token association model on Hedera has been a source of friction for web3 use cases. Pre-association requirements often create a poor user experience, especially for retail users accustomed to receiving unsolicited tokens on other chains. This complexity has hindered adoption and introduced barriers for developers migrating from EVM-compatible chains. HIP-904 addresses these challenges by enabling seamless token transfers, reducing onboarding complexity, and introducing a new level of user empowerment.

Beyond improving airdrop functionality, this proposal enhances token portfolio management. Users can efficiently reject unwanted tokens or opt for unlimited airdrop associations to receive tokens without additional steps. These improvements not only streamline workflows for token issuers but also enhance wallet usability for end users, ensuring a balance between innovation and user protection. By simplifying the token association process, HIP-904 sets a new standard for user experience and scalability in decentralized ecosystems.

HIP-514 Update: Enhancing Token Management for Smart Contracts

HIP-514 enabled smart contracts to manage tokens, but a key functionality was missing: the ability to update or remove custom fees associated with a token. This proposal addresses that gap by introducing two new system contract functions to the Hedera Smart Contract Service (HSCS), which will expose existing logic from the Hedera Token Service (HTS) as defined in HIP-18.

In decentralized applications, it is common for contracts to create tokens with custom fees. Over time, the need may arise to modify or remove these fees. However, the current version of the HSCS lacks the capability to update or remove these fees, limiting flexibility for token creators and developers. By building on the existing functions available through the HSCS, this proposal aims to extend the capabilities of smart contracts without introducing a completely new approach. The addition of two separate functions—updateFungibleTokenCustomFees and updateNonFungibleTokenCustomFees—will provide the needed functionality while distinguishing between fungible and non-fungible tokens. These two types of tokens have different fee structures: fungible tokens support Fixed and Fractional fees, while non-fungible tokens support Fixed and Royalty fees.

This update ensures that token creators have greater control and flexibility over their tokens, particularly in evolving decentralized scenarios, without the need for complex workarounds or additional processes.

Conclusion

Hedera is at the forefront of innovation: from enhancing data integrity and climate reporting to enabling advanced AI governance and compliant stablecoin development, Hedera’s ecosystem offers transformative tools for tackling some of the most pressing challenges of our time.

The network’s seamless integration with AI, as exemplified by EQTY Lab’s AI Integrity Suite and ClimateGPT, showcases its potential to foster transparency, accountability, and sustainability across diverse sectors. Meanwhile, Guardian 3.0 underscores Hedera’s commitment to addressing environmental and regulatory demands with scalable and forward-thinking solutions. Its continuous development and roadmap further reinforce its position as a developer-friendly platform that supports innovative decentralized applications.

As Hedera evolves, it is setting new standards for blockchain and AI integration, data management, and tokenization. By driving transparency, efficiency, and collaboration, Hedera is not only shaping the future of blockchain technology but also unlocking new opportunities for industries navigating the digital frontier.

‍

‍

‍

Disclaimer: This report was commissioned by Swirl Labs. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.