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From Betamax vs VHS, to Blueray vs HD DVD, recent history is full of format wars, and it seems like we could have another one brewing.
Blockchain was catapulted into prominence following the meteoric rise of Bitcoin, with the cryptocurrency peaking in value last December at almost $20,000, and the blockchain market is projected to hit $2.3 billion by 2021.
Image Source: https://www.statista.com/statistics/647231/worldwide-blockchain-technology-market-size/
However, in true 21st century fashion, its path to the pinnacle of online security was never going to go uncontested, and now we have a blockchain competitor that’s dead set on becoming an industry leader.
Meet Hashgraph. Developed in 2016, it could be deemed Blockchain’s younger brother, but in reality, the two entities are more different than they first seem. So let’s compare and contrast, and work out which distributed ledger will come out on top of the latest ‘winner takes all’ format war.
Firstly, let’s take a deeper look at blockchain. While data has been cryptographically stored on chains of blocks for some time now, it wasn’t until Satoshi Nakamoto improved on the design of blockchain in 2008 ahead of the launch of Bitcoin that its potential began to be realised.
A blockchain is a distributed digital ledger that records transactions in a way that prevents records from being altered retroactively. Each record takes a form of a block, and all blocks are chained together chronologically, charting any changes that are made to the information they hold.
The supreme security offered by Blockchain in how data can be stored securely and distributed in a way that prevents tampering made it an appealing technology for the emerging cryptocurrencies market. Market leaders Bitcoin and Ethereum both use a blockchain to record transactions between users.
Blockchain also supports the use of smart contracts, which many experts are predicting could bring great benefits across many industries in the near future. Smart contracts can be proposed and executed without any need for human interaction, and could save fortunes in eliminating the need for mediators when conducting business transactions.
Fundamentally, Hashgraph is a fresh approach to blockchain mechanisms. It differs greatly from its counterpart in its interpretation of the distributed consensus with the intention of representing something of an upgrade on the current iterations of distributed ledger technology.
‘Upgrade’ is something of a buzzword for Hashgraph, which aims to better Blockchain on the counts of speed, scaling and security.
Hashgraph is dependent on two techniques to beat Blockchain’s processes – those are ‘Gossip about Gossip’, and ‘Virtual Voting.’
Gossip about Gossip works by attaching a small additional amount of information to a pair of hashes (gossip) that contain the last two people talked to. In doing this, a hashgraph can be constructed and updated whenever further information is ‘gossiped’ on each node.
When a hashgraph is ready, users will also be aware of the information that each node holds, and when specifically they learned it. Because of this, it becomes straightforward to know how a node would vote and this data could ultimately be used as part of a voting algorithm, and to find whichever transactions have reached consensus quickly.
Hashgraph promises to process transactions quicker and more securely than its older sibling in Blockchain – but is there a basis for this? And what pros and cons can be found between the two formats? Let’s take a closer look.
Blockchain is a fairly self-explanatory term. Blocks of information are stored in a chain with new blocks forming every time the data is added to.
Image Source: https://www.leewayhertz.com/hashgraph-vs-blockchain/
Hashgraphs however, are constructed to look more like webs. When a change is made to a hashgraph, one computer on the network will inform two random computers of the new information. Those two computers will then tell two computers each of the changes. This gives hashgraphs a structure akin to multiple avenues that are bound together by the ‘gossip’ each machine undertakes when alerting other computers to a change.
The art behind the ‘gossip’ that makes up hashgraphs is that it can be compressed into just one or two bytes of data – and the scaling involved in alerting machines to a transaction makes the updating of information run much quicker than blockchain.
Giving pace a chance
Blockchain-based cryptocurrencies like Bitcoin has the power to process transactions at a respectable rate of around seven-per-second. This is because blockchains are comprised of several nodes which are all required to process changes in tandem before a transaction is confirmed.
However, because of the way transactions are bunched together and then added synchronously to their respective blocks, it means that Blockchain’s processes ultimately take longer than they would need to using alternate technologies.
Enter hashgraph. Because of hashgraph’s reliance on the gossip protocol, where each computer is only tasked with communicating changes to two other computers – with the rate of communication growing exponentially when new nodes are added – the processing burden is lifted, resulting in little-to-no waiting time.
Hashgraphs are capable of processing 250,000 transactions per second. This represents a monumental improvement on the seven-per-second offered by the Bitcoin network.
Miners and micropayments
Possibly the most notable variation between blockchain and hashgraph is the former’s reliance on miners. This means that blockchain requires proofs like PoW (Proof of Work) and PoS (Proof of Stake) in order to process transactions.
For hashgraph, however, there is no need for such proofs. As all nodes contribute, there isn’t much need to incentivise miners through fees. This lack of incentivisation opens up great possibilities for micropayments to be leveraged via hashgraphs.
Essentially, small-scale transactions can be made via hashgraph with no processing fees in sight – a perk that was previously thought impossible through blockchain due to the presence of miners aiming to take too much of a fee for micropayments.
One key perceivable perk for Blockchain is that the technology is fully open source. hashgraph, however, is not. This means that Dr. Leemon Baird, the inventor of the hashgraph distributed consensus algorithm and the co-founder and CTO of Swirlds, decides who can use the distributed ledger and who cannot.
There is plenty of speculation around how hashgraph might action their status as a private network in the future, but their website explains their current status like this:
“The hashgraph data structure and Swirlds consensus algorithm provide a new platform for distributed consensus. The Swirlds hashgraph system achieves the goal of distributed consensus, but without the constraints of current blockchain technology. Swirlds provides distributed consensus while also being fair, fast, provable, Byzantine, ACID compliant, efficient, inexpensive, timestamped, DoS resistant, and optionally non-permissioned.”
Blockchain’s open source nature has also meant that organisations have been able to adopt the technology in a bid to offer enhanced security across the world wide web. One such example is Remme, an organisation that’s constructed its own REMChain technology to protect the most sensitive of data without the use of passwords. Another example is Acronis, which utilises blockchain to create advanced and swift backups for the delicate information that businesses hold.
The current stance of Hashgraph on open source technology is a big win for Blockchain, and its availability to be developed by third parties will likely be a draw for some users.
Both blockchain and hashgraph support decentralisation, but Techgenix argues that both technologies are guilty of being unable to offer complete decentralisation, regardless of how much each entity argues to the contrary.
As far as blockchain is concerned, there is always a trade-off between decentralisation and the rate of transactions that it supports. When a blockchain network grows, so too does the storage, bandwidth and computing power needed to support it. Eventually, and inevitably, the network becomes unwieldy, so only a few nodes can process a block – which ultimately defeats the notion that the distributed ledger is truly decentralised.
Hashgraph holds great potential to be a truly decentralised entity. Its gossip protocol means that the trade-offs that burden blockchain aren’t necessary here. However, the fact that the technology isn’t open source means that there’s a very real danger that the distributed ledger could transition into becoming a centralised entity in the coming years.
The clear winner
Well, actually, the winner of this head-to-head is open to interpretation. In the world’s first infamous format war, VHS beat Betamax to become the kings of the videotape boom of the late 1970s – but with the power of retrospect, experts have come to believe that the better technology lost out to its competitor.
The practicality and accessibility of VHS made them winners all those decades ago, and in the case of blockchain vs hashgraph, we may see a similar story emerge.
On paper, hashgraph is cutting edge, and is well-equipped to help develop the crypto market in ways that blockchain could never dream of. Faster processing times and the elimination of fees lends great potential for the all-important microtransactions market that some see necessary in making cryptocurrencies more accessible to everyday members of the public.
But blockchain technology has already prompted a number of high profile adopters, and earned widespread recognition for its pivotal role in the rise of Bitcoin in late 2017. hashgraph has a lot of catching up to do, and its current lack of open source accessibility may leave the distributed ledger hamstrung.
There’s no doubting that hashgraph has the potential to revolutionise both the crypto market and online security, and is the more powerful of the two ledgers – but its actions in the coming months in attracting adopters may well ultimately determine its eventual latitude.
CEO at Solvid and founder of Pridicto