Bitcoin came into existence in 2008 and introduced a digital currency to the world which was based on the blockchain. The technology introduced a new monetary system that utilized the distributed ledger system.
Relying solely on a peer-to-peer network, the distributed ledger technology (DLT) presents a better model which could help industries harness computing power like never before. As we are moving ahead of the client-server compute model, we have come closer to the new trust layer of the internet.
The transition is still limited due to the problems yet to be solved around scalability, efficiency and interoperability. Founded by Leemon Baird, the co-founder and CTO of Swirlds, Hashgraph has come as an alternative to the blockchain with its features like security, fairness, cost and speed.
This article is intended to understand the difference between the two different DLTs, i.e., Blockchain and Hashgraph.
We shall first discuss what distributed ledger database is and how it is different from the centralized ledgers.
What is a Distributed Ledger Database?
A distributed ledger database is described as the ledger of any transactions or shared contracts, synchronized and maintained in decentralized form across different locations and people (nodes), eliminating the need for a central authority.
All the information on the distributed ledger (DL) is stored securely and accurately, kept immutable using cryptographic techniques. While the centralized ledgers are prone to cyber-attack, it is difficult to attack DLs because all the nodes will have to be attacked and manipulated simultaneously.
Underlying the distributed ledger technology is the Blockchain and Hedera Hashgraph, which use different data-structure and consensus mechanism to maintain Distributed Ledger Database.
What is Blockchain?
The blockchain is a first generation Distributed ledger technology, working on a Sequential Data Structure which forms a sequence of Blocks.
Every time a new block is generated gets added on top of the last block.
Each block contains a set of transactions.
Blockchain relies on consensus mechanism such as ‘Proof of Work’ or ‘Proof of Stake.’
Proof of Work: It is the consensus mechanism which requires solving a puzzle by computation to bring a consensus in the network and secure the block.
Proof of Stake: It is a consensus mechanism in which a creator/validator is chosen to verify and add the block to the blockchain.
The blockchain keeps track of a validator and randomly selects one by the wealth and wealth age.
What is Hedera Hashgraph?
Hedera Hashgraph is based on Distributed Ledger technology like Blockchain that works on Graph like Structure where all the nodes communicate their information to each other, and their communication is reported by building a graph of connections.
All the information or data is stored in events.
It relies on ‘Gossip about Gossip’ and ‘Virtual Voting’ mechanism to bring consensus to the network.
Gossip about Gossip:
Gossip means to transfer or sync information from one node to another random node.
In Gossip about Additional Gossip information, i.e., the previous information along with the new data is transferred from one node to another arbitrary node.
Using Gossip about Gossip mechanism, each node is already aware of what the other node knows, and each node can predict what the other node would vote, which results in electronic voting or virtual voting.
Blockchain technology is a reliable digital ledger that can record everything of value. Any information held in Blockchain is synced across the network and is incorruptible.
Hashgraph Vs Blockchain
|Consensus||Proof of Work||Virtual Voting|
|Security Mechanism||Cryptographic Hashing||Asynchronous Byzantine Fault Tolerance|
|Speed||100 to 1000 transaction based on the protocol implementation like ethereum, hyperledger etc.||200,000 transaction per second|
|Asynchronous Byzantine Fault Tolerance||Few implementation in Hyperledger are Byzantine Fault tolerance ready.||100% compliance|
Blockchain ensures that the data is not stored at an individual location and controlled by the single entity.
On the other hand, Hedera Hashgraph is also a distributed ledger technology that works on the above data structure and a better consensus mechanism that gives the benefit of Blockchain without its limitations.
The Hedera Hashgraph algorithm does not require Proof of Work or Leader Based Systems, and can also deliver low-cost and high performance without a single point of failure.
Also, Hashgraph does not need high computation power and electrical supply.
Blockchain network is capable of 7 -10 transaction per seconds whereas Hedera Hashgraph allows more than 250,000 transactions per second, as the information travels exponentially.
Hedera Hashgraph also proves to be fairer than Blockchain as miners can choose the order of transactions, can delay them or even stop them from entering the block if necessary. But in Hashgraph, a consensus of a timestamp is used preventing individuals from changing the order of transactions.
Hashgraph is a promising technology, but it also comes with some limitations.
Currently, the technology has only been deployed in private and permission-based network. It is still to be tested and explored in public network.
In 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.
The technology behind the Hedera Hashgraph is exceptionally intriguing, but its real potential and effectiveness will only be known once it is released to the public and non-permission based network.
At LeewayHertz, we have a created a workforce that has been building distributed ledger applications for multiple industrial use-cases.
Talk to us to discuss your project requirement.