Blockchain vs Hashgraph: A Comparison: The Universal Revolutionary Impact
Distributed Ledger Technologies (DLT)
Worldwide finance is changing. As computers and digital technologies trickle into our modern life, there is change everywhere. There is no better example that Distributed Ledger Technology (DLT) being used in both hashgraph and blockchain currently. Now I could give you a two-hundred-word explanation of exactly what a DLT means. But this article is not about that. Your expectation should be a comparison between blockchain and hashgraph, which means you know what DLT is. I include this component to make this article as self-contained as possible. That is, you should be able to read through the article and the added material and understand this technology completely at your level. For those of you who are not aware of this revolutionary technology, a video is worth a million words. I am extremely cramped for space (I can write a two-thousand word article about blockchain or hashgraph alone without having to catch your breath) so if you don’t know what DLT is, watch the video below:
Chain Reaction: Distributed Ledger Technologies (DLT) explained
This video will walk you through the incredible change that will happen to society in the next decade. For those of you who want a quick glance: Distributed Ledger Technology is a new system of keeping transaction records in a way that solves the triple entry book-keeping problem (Google it). This solution that was first proposed with the bitcoin cryptocurrency research paper published in 2008 by a Mr. ‘Satoshi Nakamuto’. That paper was a decade ahead of its time.
In traditional accounting, records were centralized with multiple layers of security. In DLT, records are replicated in numerous nodes. Yes, you read that right, replication. The data integrity is protected by a mechanism of cryptographic hashing. That guards against fraud and theft. The replication prevents falsification. The chained hashing guarantees integrity. And the distributed nature of the algorithm guards against DDoS attacks.
What do all those facts imply? Well: just that a centuries-old accounting system is going to be replaced. With what? Completely automated transaction-record-keeping (smart contracts). And that too with a fraction of intermediary agencies compared to what we have now. The world is going to change!
Comparing DLT Tech
Now, I had a choice. I could explain blockchain, hashgraph, and then do a section comparing both with merits and demerits. But the chances are, that if you are reading this, you already fully know what blockchain and hashgraph already are. So, to cut to the meat of this article, the comparison, here are two more five-minute videos each, explaining blockchain and hashgraph for readers who are new to the terminology.
The reason I have adopted this approach is that I want to be as simple and as articulate as possible. What do we want to read about? Blockchain vs. Hashgraph. But for those completely new to the topic, here are short (< 5min) videos explaining the crux of both
How does a blockchain work – ‘Simply Explained’
And this video link below explains the hashgraph, in an even simpler manner
We are going to present this in the simplest way possible – column-wise! And then look at various features in order of interest.
Blockchain vs Hashgraph Features
The identity of the inventor of the Bitcoin cryptocurrency and the blockchain implementation to support it has always remained a mystery. We know that under the pen name of ‘Satoshi Nakamuto’, on 31 October 2008, a link to a paper titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. Who Satoshi Nakamuto was is a perennial conspiracy theory topic. However, regardless of all the secrecy, the cryptocurrency was issued and the blockchain industry adopted. While blockchain has several issues – transaction times, latency, excessive energy consumption – the idea of a decentralized financial entity scenario was a novel discovery. The rest, as they say, is history.
Hashgraph Inventor – Leemon Baird
Leemon Baird is an innovator who worked in Distributed Ledger Technology and understood its long-term scope. He spent two years designing and perfecting a distributed voting consensus algorithm that was Asynchronous Byzantine Fault Tolerant, at that time, a first in the field. Along with Mance Harmon, he founded the Hedera Hashgraph company and now many of the largest and most influential companies in the world like Microsoft, Google, and IBM are among the governing council that regulates Hedera Hashgraph. Sceptics maintain that the performance claims are yet to be tested in the industry. However, preliminary investigation has been massively positive in favour of the claims. And if the numbers and statistics are supportive of the claims, then watch out, because the financial world will be turned upside down.
Update: In August 2020 over 200 companies are running on the public mainnet of the Hedera hashgraph. Until now, all functionality has been excellent. It would not be premature to conclude that we are at the beginning of a revolution bigger than Bitcoin was. This will change everything!
Blockchain has been around for 10 years. Hence there are many companies using it in the industry, as either public (any applicable user), private (within companies) and hybrid implementations (variations of both together). Despite all of blockchain’s problems (latency time, inefficiency, slow transaction speed), a number of corporations run blockchain solutions.
Hashgraph is a new phenomenon and is just beginning to take off. They can be strictly private, or, by using the company Hedera alone, public. Leemon Baird holds the patents to the hashgraph algorithm and gossip about gossip mechanism. This may seem a restriction for open source advocates. However, licensing the technology adds stability and reliability in the future to companies that will use it
There are a lot of blockchain solutions in the market. Bitcoin runs on Proof-of-Work. PoW is basically solving a cryptographic algorithm problem by every competing node in the blockchain. The first to find the solution is awarded the reward in bitcoin. This means that all the work done by the millions of competing nodes have gone in vain. The inefficiency is massive. Ethereum has shifted to Proof-of-Stake. PoS means that the amount of cryptocurrency you can mine is based upon the amount you already have. Unlike PoW, the reward comes in the form of transaction fees. There are many variations on these two concepts in the industry according to each cryptocurrency, of which there are over 5,000 as of August 2020.
Hashgraph Consensus and Consensus-as-a-Service
Consensus is the killer feature of the hashgraph algorithm technology. Hashgraph uses virtual voting through the gossip about gossip to build a directed acyclic graph (DAG). Using an algorithm that is Asynchronous Byzantine Fault Tolerant by design (Leemon Baird devoted two years to work on this concept), when over two-thirds of the nodes agree as to which node on which a transaction should be stored, it reaches finality and the new transaction is added to the graph. Thus, there is no mining and no waste in energy resources.
Consensus-as-a-Service is where Hedera Hashgraph truly shines. The Hedera Consensus Service can be ‘plugged into’ any DLT network or blockchain that requires a consensus mechanism. This is a historic milestone in cryptocurrency and DLT technology. Expect Hedera Consensus Service to be used in many distributed ledger technologies. It solves their biggest problem in the most optimal and efficient way.
Mining Bitcoin wastes energy on an exponential scale. At any given time, there are millions of Bitcoin mining devices, all solving the same problem (a subset of problems) with hash cryptography. The first one to the solution is given the reward. All the other miners? Used energy redundantly, since there can only be very few winners among a massive number of miners. When computing cooling became too expensive to offset with the price of Bitcoin, many in the industry shifted to Iceland. Currently, mining is performed using ASICs (Application Specific Integrated Chips) that are not only expensive – they also take a lot of power. Currently, the cost of Bitcoin mining daily is as much as the entire country of Switzerland. And most of that work will be useless, since it’s a winner-take-all situation. Environmentalists have called Bitcoin mining ‘the biggest energy disaster of the 21st century’. Because of the current energy crisis, Bitcoin is trying to shift to a PoS (Proof-of-Stake) mining mechanism. Only time will tell what the future holds.
The hashgraph is actually an unfair competitor in the efficiency category. It was designed mathematically in such a way that all calculations would be optimal, and the efficiency is exactly 100% – no more, no less. The Gossip about Gossip mechanism assign transactions to nodes with minimum processing power. Efficiency was one of the key considerations in Dr Baird’s agenda during the design of Hashgraph. For this reason, Hashgraph is sometimes referred to as Blockchain 3.0, with Ethereum as Blockchain 2.0, and Bitcoin as Blockchain 1.0.
One of the biggest problems that blockchain faced when dealing with live systems was that transaction speed was slow. This meant that it would not be uncommon for a Bitcoin transaction to arrive at finality (time taken for a block – a new transaction – to be added to the chain) to be well above 3 hours. Ethereum had a finality time in minutes. In real life, if blockchain was going to be used in all the industries in which it held such promise, it would need to process at least 25,000 transactions per second. Blockchain, as a distributed verified transaction storage system, could be applied almost anywhere. But if the transaction speeds and finality times were this long, there would be no chance of it ever being practical replacement to existing systems. At least – until Hedera Hashgraph came along.
One of the biggest features of hashgraph was the speed at which transactions could me processed. While the figure on the website is 500,000 transactions per second, in practice, the speed is limited only by the bandwidth and the number of nodes in the network.
This changes everything. Now any industry that requires data storage, smart contracts, cryptocurrency, cloud file storage, or transaction processing can use Hedera Hashgraph tech and gain decentralization, automation, lesser transaction costs, less manpower requirements – in a nutshell, all the benefits that come with blockchain.
Over 200 dApps are already released on the Hedera mainnet, and 26 companies participated in the initial launch. The world is changing. If we want to adapt and survive or even thrive, so must we
Hashgraph – A Better, Faster, Practical, Cheaper, Simpler Blockchain
I sincerely hope that this has been an illuminating read for you. For once, the hype is dead on target. Hashgraph really does give you all the benefits of blockchain without any of its drawbacks. And we can expect variants of DLT to also appear in the market. There are only two directions. Forward and upward. The tokenization concept in cryptocurrency gives you unlimited power to do or accomplish practically any cause, any passion, any business, and any charity.
There has never been a more opportune time to be an entrepreneur, especially in the Hedera Hashgraph space. And the big companies are sitting up and taking notice. A list of the latest companies to enter the Hedera Governing Council is given below:
When Google and IBM both take such interest in any technology, it means that its future is bright. Very bright.
Just as apps on mobiles became the biggest consumer industry for IT, now, dApps (distributed apps) running on Hedera Hashgraph will completely transform the way we live and breathe and sleep and eat. dApps are the future. It has never been a more exciting time to work as a Hashgraph developer.
All the best to a long and fulfilling career!
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Hashgraphs are also a kind of dispersed ledger technology. Even a hashgraph is a patented algorithm which guarantees that the benefits of the blockchain (decentralization, supply, and safety through using hashing) minus the disadvantage of reduced trade rate.
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