The blockchain sector has gained massive popularity in recent years and has been evolving continuously ever since. A blockchain is a distributed ledger technology (DLT), one among many other distributed ledger technologies and some of these promises to provide more advantages as compared to blockchain.
A Hashgraph is one such distributed ledger technology gaining momentum as it claims to be more secure, efficient, and faster than blockchain. This blog compares the two distributed ledger technologies by explaining what blockchain and Hashgraph mean, their working, and how they stand apart. You can understand how the technologies differ and why pursuing blockchain as a career will work to your advantage.
What Is Distributed Ledger Technology?
Before diving into the comparison, we will start with understanding distributed ledger technology (DLT). DLT is a technical infrastructure that allows participants to communicate through the network to reach a consensus. It refers to allowing simultaneous access and record updating of multiple entities in an incorruptible and immutable manner.
The key feature of DLT is its decentralized approach. It enables participants to transact through a digital database securely. A distributed network means that no single entity has the authority over transaction control and decision making. In this approach, instead of providing one entity (individual or group) with absolute power, it is distributed among the network. It records transaction details in multiple places at the same time.
A distributed ledger technology ensures integrity, transparency, and security of transactions as it ensures that all participants have a copy of their immutable records with no central authority. However, do note that NOT all DLTs have the same features.
What Is Blockchain?
One of the most talked-about forms of distributed ledger technology is Blockchain. It is defined as a decentralized distributed ledger technology that stores transactional records in blocks, and it is accessed by the participants globally over the network. Every time a transaction is added, it becomes another block and forms a chain. It creates an unchangeable record of transactions that can never be erased. Blockchain uses cryptography to provide security to the blocks of records, and the owner has a track of the record through which he can trace it. Blockchain forms a peer-to-peer network where participants can communicate among themselves over the network.
Blockchain technology allows verification without having to depend on third parties. The transactions are in chronological order; therefore, all blocks are time-stamped. Businesses can pre-set conditions using smart contracts, meaning automatic transactions are activated only when the conditions are met. The technology supports the append-only approach; and makes its database immutable, which means that records, once written, cannot be changed or discarded. This proves to be an advantage in problems that require immutability, such as voting, supply chain management, and the banking and finance industry.
Blockchain technology is used by Bitcoin, which was the first-ever cryptocurrency created, and Ethereum, which is the second-largest cryptocurrency and the second generation of blockchain technology.
What Is Hashgraph?
Hashgraph or Hedera Hashgraph is a data information and consensus algorithm that adopts concepts such as gossip about gossip and virtual voting to achieve faster and secure transactions. It claims to overcome the gaps left by blockchain. It is also a peer-to-peer platform that eliminates the need for complete transactional operations.
Hashgraph is known for its speed as it can handle thousands of transactions per second and verify over a million signatures per second. It can be called the new generation of blockchain and may well take over blockchain technology by proving its worth and authenticity.
Hashgraph does not use miners to validate transactions; instead, it uses a directed acrylic graph, which helps in time sequencing the transactions without dividing them into blocks. It utilizes a protocol known as gossip about gossip to send information between nodes in a network. The nodes send data to random members in the network with the history of the previous transaction; this results in the circulation of all the information among all the members.
Hedera Hashgraph has a cryptocurrency of its own called HBAR. It is used to build peer-to-peer payment systems, decentralized applications, develop micropayment solutions, and protect the network.
4 Differences Between Blockchain and Hashgraph
- Open-source vs. Patented
Blockchain is an open-source DLT platform and therefore has many people contributing to building cryptocurrencies and utility tokens. Some blockchain enthusiasts have earned the trust of institutes and played up to blockchain’s decentralized nature after defining their quality.
However, Hashgraph is based on a patented algorithm owned by Swirlds. Therefore, any new entry will have to pass through Swirlds.
- Faster transactions
Hedera Hashgraph uses the gossip about gossip protocol to provide faster transaction speeds as it requires less information to propagate with more events taking place. It can process up to 500,000 transactions per second.
The speed of transactions in blockchain depends upon the implementation of protocols such as Hyperledger, or solutions such as cryptocurrency, blockchain platform such as Ethereum, Corda, and more. However, it is slower than Hashgraph, offering speeds of 100 to 10,000 transactions per second.
Blockchain’s block approach makes it difficult for miners to work on it, as when two blocks are mined at the same time, they have to decide on a single block. This means that the other block gets discarded, and the efforts are wasted.
As Hashgraph doesn’t use the block approach, it is considered 100% efficient since it doesn’t face such problems. No resources are wasted or discarded as all events that are gossiped about to the network are reserved.
- Consensus mechanism
Blockchain uses various consensus algorithms depending upon cryptography and currencies. Some of the popular algorithms used by blockchain are Proof-of-Stake, Proof-of-Elapsed Time, Proof-of-Work, Practical Byzantine Fault Tolerance, etc.
Hedera Hashgraph uses virtual voting to gain network consensus. It does not require other algorithms as it can provide low-cost and high performance without failure. Plus, it doesn’t need high computation power and electrical supply.
Hashgraph certainly has various benefits such as efficiency, speed performance, etc., the platform is not yet launched. As a result, experts are unable to determine its true potential. Therefore, we cannot consider the promises made by Hashgraph unless it is publicly released and its implementation prospects are tested. Even though Hashgraph claims to be decentralized, it is only theoretical as the outer government still controls its pace. There are no preventive measures taken to avoid malicious actions and activities caused by the nodes. The history of transactions is limited to a short number meaning that Hashgraph cannot track the record if it has a long history. However, blockchain has been around long enough to prove its potential, and various sectors have benefitted from its features. Therefore, it has the edge over Hashgraph as it overcomes the drawbacks faced by Hashgraph.