With the rise of Hedera Hashgraph, blockchain vs.Hashgraph or Bitcoin vs.Hashgraph has been emerging as a popular debate topic. While both blockchain and Hashgraph are based on distributed ledger technology(DLT), there are considerable differences among them that have led to questions like, will Hashgraph replace blockchain? or why is Hedera better than blockchain?
To better understand the nuances of this debate and to figure out which is better among blockchain and Hashgraph, it is pertinent to understand blockchain, Hashgraph, and their benefits and drawbacks. The following article will help you with this by answering questions like what is blockchain, what is Hedera Hashgraph, and clarifying the difference between the two DLTs.
Blockchain is the most popular example of a decentralized public ledger. The technology consists of interconnected blocks or nodes that contain information about a particular transaction including its timestamp. A new block is added to the existing chain whenever a new transaction is successfully completed.
This creates a chain of blocks that can be viewed and verified by anyone on the network. The data stored in a block cannot be changed or deleted which helps establish openness and transparency. While cryptocurrency is the most popular use case of blockchain, the technology has applications in many other fields such as logistics, governance, real estate, and healthcare.
Pros of Blockchain Technology
Blockchain technology has found practical application in various industries due to the many benefits it provides. Some of its advantages are:
Security and Integrity of Data
A blockchain network is a decentralized network and tampering with it is very difficult. In other words, data once recorded in a block cannot be easily altered or modified by anyone. Blockchain ensures the safety and security of sensitive data which is what makes it such an attractive technology.
Blockchain technology facilitates peer-to-peer transactions eliminating the need for a third-party intermediary. People can directly negotiate with each other and conclude transactions. Blockchain is, thus, favored by people who value privacy above all.
Asset transfer and transaction settlement are way faster and easier on a blockchain network as compared to a traditional centralized system. It is an efficient tool for 24/7 asset transfer. Cross-border transactions too are cheaper on blockchains as compared to bank transfers that take many days and cost a significant amount to be settled.
Blockchain technology was created on the pillars of transparency and open access to information. As it is decentralized and a public ledger, any transaction can be easily tracked and verified on the network. This democratizes access to information and reduces the possibility of tampering with the records.
Cons of Blockchain Technology
While blockchain technology has multiple uses, it also has certain drawbacks that limit its adoption. Some such disadvantages are:
High Energy Usage
Blockchain technology is energy-intensive and has a heavy carbon footprint. The estimated global electricity usage for crypto assets is, for example, higher than that of countries like Argentina and Australia. Nature Climate Change has also reported that the projected Bitcoin usage could easily push global warming above 2*C in about three decades.
Scaling up to handle large transaction volumes is something that blockchain technology struggles with. It is estimated that Bitcoin’s blockchain can process about 7 transactions per second which is not enough to fulfill the demand of millions of transactions every day.
Use in Illegal Activities
Blockchain networks have a history of being used for less-than-legal purposes due to the high level of anonymity provided by them. Cryptocurrency, the most significant real-life use case of blockchain technology, is often in the news due to its use for activities like money laundering and terror financing.
Hedera Hashgraph is a consensus method that offers a different approach to distributed ledger technology. Patented by Swirlds, it is a data structure or consensus algorithm but not a complete system.
Hashgraph works on the basis of a graph-like structure where all nodes communicate with each other. A graph of connections is, thus, built to report the communication. It also has a utility token called HBAR that is used to access Hashgraph-based distributed applications.
To establish consensus, Hashgraph relies on two mechanisms:
Gossip about Gossip
Here, information is transferred from one node to another random node. This ensures that the data has been circulated among all the members of the network.
With Gossip about Gossip, each node is aware of what the other knows and can predict how the other node would vote. This enables virtual or electronic voting. In this algorithm, voting messages cannot be sent across the network but each member is aware of what the other would have voted.
Pros of Hedera Hashgraph
Hashgraph has an edge over other DLTs due to its low energy consumption. The storage required to maintain the live ledger is less than 1 GB and the transaction is available within minutes on it. Further, Hashgraph’s virtual voting system additional messages to be sent to nodes which makes it more efficient.
Hashgraph is relatively inexpensive as it does not follow the proof-of-work consensus mechanism. Running its nodes, thus, does not require expensive mining rigs. Individuals and organizations can simply run cost-effective hardware to use Hashgraph.
Hashgraph is quite secure as it uses Byzantine Fault Tolerance(BFT) to ensure that a single node cannot prevent the community from establishing consensus. Also, the consensus cannot be changed once it has been reached. Hashgraph is also DDoS resilient as it does not give any single node special rights or responsibilities to establish consensus.
Hashgraph has been developed on the principle of fair access. No individual can stop or delay a transaction from entering the system. Every transaction is assigned a consensus timestamp that is fair because a malicious node cannot corrupt it. There is no leader in Hashgraph who is given special permission to determine consensus timestamps.
What are the Drawbacks of Hashgraph?
While Hashgraph says that it is not fully centralized, the evidence is contrary to the claim. It has a centralized placing-at-one-place system with few enterprises involved in the process. This is in contrast to blockchain which is a fully decentralized technology.
Hashgraph is a patented product. The patent inhibits forking to maintain stability and prevent loss of network. On the other hand, not all patented technologies have a financial value which is why Hashgraph can turn out to be a liability for its users.
Blockchain vs. Hashgraph: Comparison of their top features
Blockchain stores data in interconnected blocks. These blocks are interconnected in a linear chain. On the other hand, Hashgraph uses the directed acyclic graph to store information. In both cases, however, each node keeps a copy of the ledger.
There are specific languages designed specifically for blockchain while Hashgraph applications rely more on universal programming languages. Solidity, developed by Ethereum, is an example of a programming language developed specifically to write smart contracts on a particular blockchain. Similarly, Cadence is a programming language developed specially for the Flow blockchain.
Different blockchains use different consensus algorithms. The most common ones, however, are Proof-of-Work(PoW) and Proof-of-Stake(PoS). PoW is used by Bitcoin where miners need to solve complicated math puzzles to add a new block to the chain.
In PoS, used by Ethereum, requires nodes to stake their coins to get a chance to validate transactions and add new blocks to the chain. It is a great alternative to PoW as it is way less energy-intensive as compared to the latter. PoS is used by many other blockchains such as Flow, Polygon, Avalanche, and Cardano.
Contrastingly, Hashgraph has its own Hashgraph algorithm with the Gossip about Gossip protocol. This is quite different from the consensus mechanisms employed by blockchains.
In Gossip about Gossip, one node shares all the information with another random node. The same process repeats with every node till everyone in the network finds the information. Thus, Hashgraph is much more energy efficient as compared to Bitcoin and Ethereum due to its unique consensus algorithm.
Along with energy efficiency, Hashgraph’s Gossip about Gossip and Virtual Voting features also help it increase transaction processing speed. As per Hedera, it can achieve transaction speeds of up to 10,000 transactions per second.
While the speed of blockchain differs from network to network, it is still considerably lower than Hashgraph. Bitcoin, for example, is estimated to have a transaction processing speed of 7 transactions per second.
Smart contracts can be created and implemented on both blockchain and Hashgraph. However, there are some differences between smart contracts launched on the two DLTs. Firstly, blockchain smart contracts are immutable. Once they are deployed, it is pretty much impossible to make changes to the code.
Hashgraph smart contracts, meanwhile, are also immutable but they are also optionally upgradeable. This means that developers can fix bugs, introduce upgrades, and resolve disputes even after the smart contract has been deployed.
Further, smart contracts on Hashgraph are processed in the order they are received while on Ethereum(the most popular blockchain platform for smart contracts), the gas price that you are willing to pay determines the order of processing smart contracts.
Blockchains typically use cryptographic hashing to secure the network. Plus, the very structure of blockchain networks makes them tamperproof. To alter the network, a hacker would need to not only modify a particular block but the whole chain which is nearly impossible.
Hashgraph secures its network with asynchronous Byzantine Fault Tolerance(aBFT). This ensures that consensus can be achieved even if malicious actors get control of the network and delete and slow down messages.
Hashgraph is in general more fair than blockchain. In a blockchain, miners can choose the order of transactions and can delay or even stop them. This is not fair for those directly or indirectly connected to the blockchain network.
On the other hand, Hashgraph allocates nodes randomly. It uses a consensus timestamp so that individual nodes are not able to change the order of transactions.
Will Hashgraph Replace Blockchain?
Hashgraph is a promising technology that claims to be faster, more efficient, and fairer than blockchain networks. It has several benefits that explain its growing popularity among individuals and organizations.
However, it is a patented technology that has till now only been deployed in private and permission-based networks. Blockchain technology is older and relatively more established than Hashgraph. Its utility and performance have been demonstrated and documented in public and permissionless networks.
Hashgraph’s full potential can only be known when it is tested in a similar setting. While it is a new and promising technology, it might not replace blockchain easily as the latter is public and has wider adoption rates. Hashgraph still has lots to do to catch up to the popularity of blockchain.