Bitcoin, the digital currency based on blockchain technology, was introduced in 2008. It offered a new monetary network that relied on distributed ledger technology (DLT), a peer-to-peer network that presented a superior computing model to industries. This move to a trust layer for the internet is hampered by issues such as scalability, efficiency, and interoperability. In response, Hashgraph, created by Swirlds co-founder and CTO Leemon Baird, offers an alternative to blockchain, boasting features such as security, fairness, cost, and speed. The aim of this article is to highlight the differences between blockchain and Hashgraph as DLTs.
What Is a Distributed Ledger Database?
A distributed ledger database is a ledger of shared contracts and transactions that are synchronized and maintained across different nodes and locations, eliminating the need for a central authority. All information on the distributed ledger is stored securely and kept immutable using cryptographic techniques. Centralized ledgers are vulnerable to cyber-attacks, but DLs are difficult to attack because all nodes have to be attacked simultaneously. Blockchain and Hedera Hashgraph use different data structures and consensus mechanisms to maintain their respective distributed ledger databases.
What is Blockchain?
Blockchain is a distributed ledger technology that uses a peer-to-peer network to record and verify transactions. Each block in the chain contains a set of transactions that are verified and validated by the network’s nodes. Once validated, the block is added to the chain, creating a permanent record of the transaction. The data on the blockchain is secured by cryptography, making it immutable and tamper-proof.
Consensus Mechanisms in Blockchain
Consensus mechanisms are an essential aspect of blockchain technology. They ensure that the network is secure, and transactions are verified and validated before being added to the chain. Some of the popular consensus mechanisms used in blockchain include:
1- Proof of Work (PoW)
Proof of Work is a consensus mechanism that requires network nodes to solve complex mathematical puzzles to validate transactions and add new blocks to the chain. This mechanism is popularly used in Bitcoin and other cryptocurrencies.
2- Proof of Stake (PoS)
Proof of Stake is a consensus mechanism in which validators are chosen based on their contributions to the network. The validators are responsible for verifying and adding blocks to the blockchain.
3- Proof of Elapsed Time (PoET)
Proof of Elapsed Time is a consensus mechanism that uses a fair lottery system to prevent high energy consumption and resource utilization. This mechanism is commonly used in permissioned networks, where participants have to identify themselves before joining the network.
4- Leader-based Consensus
In a leader-based consensus mechanism, a leader computer is responsible for sending out transactions to be added to the chain. The members of the network send their transactions to the leader, who then orders them before adding them to the chain.
5- Economy-based Consensus
Economy-based consensus mechanisms rely on economic rationality to manage consensus. These mechanisms try to imitate how an economy works without dealing with the chaos of a real-world economy. In this mechanism, a vote can be done to add blocks, and a fine may be imposed if you vote for a block that no one else votes for.
6- Voting-based Consensus
In a voting-based consensus mechanism, all nodes in the network must verify blocks together and manage the ledger. This mechanism requires nodes to be familiar and flexible to work together to validate transactions and add new blocks to the chain.
Blockchain: The Immutability of Smart Contracts
Smart contracts deployed on the blockchain network are immutable. This means that once they are written on the blockchain, their code and address cannot be changed. However, it is possible to use a new contract instead, which is similar to modifying a smart contract.
One approach to using a new contract is to have an intermediary smart contract hold the current active smart contract’s address with a function called “delegate call.” This would redirect all the transactions and calls to the active version.
Another solution is to extract the information from the previous contract, add it to a new one, and update the address to show your users the new version.
What is Hedera Hashgraph?
Hedera Hashgraph is a distributed ledger technology platform that is rapidly gaining traction. It is a direct competitor to blockchain technology and is touted as the next big thing in the world of distributed ledgers. Unlike blockchain, which uses a linear chain structure, Hedera Hashgraph uses a graph-like structure, making it faster, more secure, and more efficient.
Gossip about Gossip and Virtual Voting
Hedera Hashgraph relies on two key mechanisms to bring consensus to the network: Gossip about Gossip and Virtual Voting. Gossip about Gossip is a communication mechanism that ensures all data has been circulated to all members of the network. Each node transfers or syncs information from one node to another random node, which builds a graph of connections.
Using the Gossip about Gossip mechanism, each node in the network can predict what the other node knows, which leads to virtual voting. The virtual voting algorithm does not allow voting messages to be sent across the network, and each member has information about what another member would have voted, even without voting.
Hedera Consensus Service
The Hedera Consensus Service is available on the Hedera Mainnet, which allows developers to create verifiable timestamps and ordered events for any application. This service is particularly useful for applications that require transaction ordering without middlemen, privacy controls specific to the application, high output with conclusiveness in ordering, and auditability in real-time.
Hedera Hashgraph Platforms
Hedera Hashgraph has released an open-source SDK for developers in Java, which allows them to build Hedera Hashgraph applications. The SDK supports three services on the platform, including File Storage, Smart Contracts, and Cryptocurrency. It offers all the necessary tools for creating public/private key pairs and signing transactions.
Hedera Hashgraph recently announced the second phase of the Community Testing Program for the Hedera Platform. This testing program allows users and developers to test various network capabilities before the mainnet opens for access. In collaboration with phase II testing, the company would make Android and iOS versions of the Hedera wallet, Hedera Browser Extension, and WordPress plug-in open source. These applications will be used in the community testing phase to test P2P micropayments and allow developers to create use cases for the Hedera network services.
Transaction Confirmation Methods on Hedera Hashgraph
Once a client makes a transaction on the Hedera, they may seek acknowledgment that the transaction was added to a consensus state. Hedera Hashgraph offers the following confirmation mechanisms that anyone can choose from: Response and Receipt.
Response confirmation mechanism involves submitting a transaction to a specific node with a request that the transaction should be submitted to the network. The node will quickly check the transaction and respond with the client’s result before it is submitted. If a check is found to be “OK,” the node will add the transaction to the network. The response sent by the node to the client is a confirmation that the honest node will add the transaction subsequently to the network.
Receipt confirmation mechanism involves submitting a transaction to the network and successfully reaching a consensus. Nodes will know that fact and make a “receipt” for it. The client who sends the transaction can ask a node for the transaction status by querying for the receipt. A receipt provides minimal information – whether the transaction was added to the consensus state successfully or not and the identifier of the object.
HBARs: Hedera Hashgraph Cryptocurrency
Hedera Hashgraph is a platform that utilizes a utility token called Hbar. The purpose of Hbar is to provide token holders access to distributed applications based on the Hedera Hashgraph network. Hbar is known for its fast transaction speed, enabling micropayments, and offering low network fees. Additionally, users who contribute to the launch of nodes on the network are rewarded with Hbars. The Hbar cryptocurrency has various use cases, including digital content monetization and influencer activity monetization.
Hashgraph vs Blockchain: Which Technology is the Future of Distributed Ledgers?
Distributed ledger technology has revolutionized the way we think about trust and transactions. Blockchain has been the undisputed leader in this space for years, but a new contender has emerged: Hashgraph. In this article, we will compare Hashgraph and Blockchain and explore the unique features and benefits of each technology.
Hashgraph: The Better Consensus Mechanism
Hashgraph is a distributed ledger technology that works on a data structure similar to blockchain. However, it has a better consensus mechanism that offers the benefits of blockchain without its limitations. The Hedera Hashgraph algorithm does not require Proof of Work or Leader Based Systems. This means it can deliver low-cost and high performance without a single point of failure. Additionally, Hashgraph does not require high computation power or electrical supply, making it an energy-efficient alternative to blockchain.
Transaction Speed: Hashgraph vs Blockchain
Transaction speed is a crucial metric in any distributed ledger technology. Every blockchain platform has a different speed in terms of transactions per second. For example, Bitcoin can make 7-10 transactions in a second, Ethereum has the potential to perform 15-20 transactions per second, and Hyperledger Sawtooth can make thousands of transactions in a second.
Hedera Hashgraph outperforms all these platforms by allowing hundreds of thousands of transactions per second. The information travels exponentially, which means that it can handle a vast amount of data and deliver fast transaction times.
Fairness in Transaction Processing
Hashgraph offers a fairer approach to transaction processing than blockchain. In blockchain, miners can choose the order of transactions, delay them, or even stop them from entering the block if necessary. This can create a bias in the transaction processing, which can lead to unfair outcomes.
In contrast, Hashgraph uses a consensus of timestamp, which prevents individuals from changing the order of transactions. This ensures that all transactions are processed fairly, without any manipulation or interference.
Limitations of Hashgraph
Hashgraph is a promising technology, but it also comes with some limitations. Currently, the technology has only been deployed in private and permission-based networks. It is still to be tested and explored in a public network. In the Gossip about Gossip technique, when a node passes information to another node, there are chances that the closest nodes are malicious, which may prevent the passage of information to other nodes.
Conclusion
Hashgraph and blockchain are both groundbreaking technologies that have revolutionized the way we think about trust and transactions. However, Hashgraph offers a better consensus mechanism, faster transaction speed, and fairer transaction processing. Although Hashgraph is still in its early stages and has some limitations, it holds great promise for the future of distributed ledger technology. As more businesses and organizations explore this technology, we can expect to see exciting new use cases and applications emerge.
