Hashgraph Vs Blockchain – Distributed Ledger Technology (DLT) Guide

Distributed ledger technologies have made great strides in digital transactions and data management. As such, we’ve been seeing a constant debate of hashgraph vs blockchain across the entire blockchain industry. These novel advancements have made digital transactions more transparent, secure, and efficient. 

However, some variance lies in how they achieve these major feats. These differences are based on their consensus mechanisms, security features, and network architecture. 

So, what sets the blockchain apart from the hashgraph? 

Find out in this article as we take a deep dive into the inner workings of these two major distributed ledger technologies. 

Hashgraph vs Blockchain: A Match-up Between Two Prominent Examples of Distributed Ledger Technologies 

Here’s a simple analogy: 

Imagine keeping track of your expenses in a shared notebook with your buddies to monitor your finances. Instead of having one person oversee everything, each friend in the group has a copy of the book. Therefore, they make sure that their copies are similar and write every purchase in their notebook. This implies that the same data is available to everyone in the same way. Falsifying or altering their records without others knowing is, therefore, nearly impossible or challenging, at the very least.

At its core, Distributed Ledger Technology does this. The term refers to a digital system in which transactional records are kept in several different places rather than one central location. The Blockchain and Hedera Hashgraph are prominent examples of this groundbreaking technology. 

Let’s dig deeper. 

DLTs operate on a peer-to-peer network where every participant, referred to as a node, keeps an identical copy of the ledger. The node here is similar to each friend’s notebook in the earlier analogy. To guarantee that everyone is aware of the most recent information, changes made by one node are shared with all other nodes. Because everyone can independently check transactions, this simultaneous updating promotes transparency and confidence among participants.

In theory, that sounds pretty straightforward. But how does a Distributed Ledger Technology actually work? 

DLT protects all recorded data using cryptography, which is one of its primary characteristics. This is a secret code that can only be decoded by authorized individuals. Transactions entered into a distributed ledger are encrypted using this technique, which prevents unauthorized parties from altering or tampering with the data.

Once information has been entered into the ledger, it cannot be changed or deleted. This property is called immutability. This is similar to writing entries in that personal finance notebook with permanent ink, meaning every entry made in that book will remain there indefinitely. 

Of course, for something that will remain permanent, it is important to implement processes that verify the authenticity of whatever is to be added. It’s like ensuring that all friends agree before making an entry into your shared personal finance notebook. Distributed Ledger Technologies ensure this through a process known as Consensus. This is the mechanism by which all nodes agree on the current state of the ledger, and the rules that govern how data is added and validated are built into the technology itself.

DLT is being used in several industries, including supply chain management, healthcare, and banking, to improve participant confidence and expedite procedures. For instance, businesses can follow goods from point of origin to point of destination in supply chains without having to worry about false claims or misplaced documentation. 

More specifically, DLT offers several advantages over traditional centralized systems. Some of them include: 

• Transparency: All parties can view the data on a distributed ledger technology, thus resulting in fewer disagreements.
• Security: Hackers find it far more difficult to launch an attack without a single point of failure, such as a central server. For instance, it is difficult to alter the entries made in the personal finance notebook because you’ll have to alter all the different versions with each friend. 
• Efficiency: Since there are no middlemen like banks or brokers involved, transactions can be completed more quickly.
• Cost-effectiveness: DLT can drastically reduce transaction costs by doing away with middlemen. 

Now that we have a good idea of how distributed ledger technology works let’s explore its most prominent examples in blockchain and hashgraph. 

What is Blockchain?

This specific type of Distributed Ledger Technology (DLT) arranges data into “blocks” that are connected to one another to create an ongoing “chain.” This technology eliminates the need for a central authority by enabling numerous network members to keep an identical and shared record of transactions. 

As expected of any DLT, the blockchain functions like a digital notebook, where everything written is locked in place and cannot be edited or removed. However, blockchain platforms distinguish themselves from other DLTs by functioning uniquely.

Related Read: What is Blockchain Technology

Here’s how Blockchain works:

1. Data is stored in blocks: Every transaction or piece of data entered into the blockchain is stored in blocks alongside a special identification number called the hash. This hash serves as a digital fingerprint and ensures that every block is unique.
   
2. Blocks are linked to each other: To establish a chronological chain, each new block references the hash of the one before it. Because changing its hash would break the chain if someone attempted to change any information in an earlier block, this connection is essential for making tampering immediately identifiable.
   
3. Decentralization: Blockchain disperses copies of the complete ledger among numerous computers or nodes, as opposed to depending on a single database managed by a single organization (such as a bank). This feature improves the blockchain’s security and resilience since each node independently verifies and updates the ledger. 

Many companies use this blockchain ecosystem protocol for developing highly secure and resilient platforms in various industries, such as healthcare and supply chain management.

4. Consensus methods: Nodes must use consensus methods to agree on the legitimacy of transactions before appending new blocks to the chain. This procedure guarantees that all blockchain copies stay reliable and synchronized, thus making enterprise blockchain development projects more reliable. 

These meticulous procedures give the blockchain the following special benefits:

• Decentralization
• Quicker Transactions
• Enhanced Security
• Traceability
• Transparency

However, despite these numerous benefits, the blockchain still has some fundamental flaws. Some of them include: 

• Scalability Flaws
• Energy Consumption
• Complexity and Integration
• Privacy Concerns
• Regulatory Uncertainty

Many other scientists and enthusiasts have attempted to create new and better forms of distributed ledger technologies in an attempt to remedy these flaws. One of the most notable examples is the Hashgraph created by Hedera co-founder and chief scientist Dr Leemon Baird. 

Let’s examine what this DLT is all about and how it compares to the “almighty” blockchain.

What is Hashgraph?

Developed to substitute for conventional blockchain systems, Hashgraph is a Distributed Ledger Technology (DLT) that functions as a data structure or consensus algorithm. Like other DLTs, like the blockchain, Hashgraph functions as a decentralized ledger that stores and encrypts data. However, unlike the blockchain, which arranges data into blocks connected in a linear chain, the Hashgraph algorithm uses a Directed Acyclic Graph (DAG) structure. 

We’ll discuss this more later. However, for now, it is important to know that this novel architecture allows for the processing of several transactions at once rather than one after the other, which makes transaction processing much quicker and more effective.

Hashgraph’s end goal is the same as every other DLT: It stores data or transactions, secures them using cryptography, restricts access to them, and verifies the stored data. However, it approaches these tasks in a quite different way. 

How does hashgraph work?

The hashgraph algorithm functions according to the following protocol. 

• Gossip-about-gossip protocol: DLTs keep all nodes within the network informed about all the important changes. However, Hashgraph does this using a novel technique known as “gossip about gossip.” 

Similar to gossiping, nodes—participants in the network—share transactional information with one another in this system. As soon as one node finds out about a transaction, it promptly notifies its neighbors. Thanks to this quick information spread, all nodes are updated nearly instantly.

• Events and Timestamps: Every bit of data exchanged between nodes is referred to as an “event.” Whether it’s a date, a digital signature, transaction data, or a cryptographic hash of earlier occurrences, they are all examples of details included in an event. 

In contrast to blockchain, which bundles transactions into blocks and processes them sequentially, this structure enables numerous transactions to be recorded simultaneously.

• Virtual Voting: Once all the nodes in a network are aware of an event via the gossip-about-gossip protocol, they agree on the order of transactions through virtual voting. 

Every node uses the timestamps it receives from other nodes to determine the median timestamp for every transaction. This collective agreement guarantees fairness by ensuring that the network isn’t being controlled by a single node. 

• Asynchronous Byzantine Fault Tolerance (aBFT): Hashgraph uses asynchronous Byzantine Fault Tolerance (aBFT) as its consensus process. This mechanism offers strong security and resistance to harmful attacks. 

The property of being “fault-tolerant” implies that even if some nodes in a hash graph network maliciously try to prevent a consensus, the honest members or nodes of the network can be guaranteed to reach a consensus on the order or timing of transactions. As such, the system can still operate properly and come to a consensus even if up to one-third of the nodes malfunction or behave dishonestly.

Owing to these novel techniques and processes, hashgraph has indeed been able to solve some of the flaws associated with other DLTs like the blockchain. As such, it has the following advantages: 

• High Scalability: Remember we mentioned earlier that the blockchain architecture sometimes makes it difficult to meet scaling user demands? 

Hashgraphs are far faster than conventional blockchains like Bitcoin or Ethereum because they can process an astounding 500,000 transactions per second.

• Fast Transaction Speed: Thanks to the effective gossip protocol and virtual voting methods, transactions are completed with 100% certainty nearly instantaneously.
• Low Transaction Fees: Unlike Bitcoin, which charges fees ranging from $10 to $30, Hashgraph’s transaction fees are usually less than 1 cent.
• Fairness: A hash graph lowers the possibility of centralization or manipulation by one party by guaranteeing that every transaction is handled in the order that it is received.
• Energy Efficiency: Hashgraph’s techniques are far more energy-efficient than blockchains that depend on energy-intensive consensus mechanisms like Proof of Work (PoW), which makes them ecologically friendly. 

Nonetheless, hashgraph still presents its own unique drawbacks. They include: 

• Limited Adoption: Although there are obvious advantages to using hashgraph over the blockchain, the technology just hasn’t quite caught on yet. This lack of traction could lead to a shortage of tools and resources for developers.
• Complexity: From the gossip-about-gossip protocol to the asynchronous Byzantine Fault Tolerance mechanism, wrapping one’s head around the techniques used by hashgraph might take some doing. New developers may find it difficult to understand the underlying technology and consensus method, which could put up obstacles to entry.
• Legal and Regulatory Uncertainty: Similar to many other new technologies, Hashgraph is subject to legal and regulatory concerns that could affect its uptake.
• Network Effects: Hashgraph’s ecosystem is still developing, so it might take some time for it to attain the same network effects as more well-established blockchain technologies.

From all indications, hashgraph represents a significant improvement in distributed ledger technology. It stands out for its creative use of virtual voting and gossip protocols, but it also has particular adoption and complexity issues. 

But are these improvements worth ditching the blockchain for? 

Let’s examine the major differences between these two wonderful distributed ledger technologies to see which options are best suited for different use cases. Knowing these distinctions makes it easier to see how Hashgraph might enhance or perhaps replace some of the uses that blockchain technology has historically provided.

Differences Between Hashgraph and Blockchain

These two excellent distributed ledger technologies vary greatly in terms of their overall effectiveness, security strategies, consensus processes, and organization.

The difference between hashgraph and blockchain can be summarised as follows:

1. Data Structure

The blockchain arranges information into linearly connected chunks called blocks, and every block is appended to the chain in a particular sequence. Furthermore, each block contains a collection of transactions, which are processed one after the other. Because the blocks need to be processed one after the other, the blockchain is often associated with slow transactions. 

However, hashgraph, on the other hand, links transactions in a more intricate and non-linear fashion by using a Directed Acyclic Graph (DAG) structure. This greatly improves speed and scalability by enabling the processing of several transactions at once.

2. Consensus Mechanism

Different blockchains, like Bitcoin and Ethereum, maintain consensus on their networks using different methods; thus, there is no single consensus methodology. However, these specific types of consensus mechanisms are different from those used by Hashgraph.

Some of them include the following: 

• Proof of Work (PoW) which often needs a lot of processing power to verify transactions. It is the consensus mechanism used by Bitcoin. 
• Proof of Stake (PoS): With this consensus mechanism, the quantity of coins that validators own determines which ones are selected. 

On the other hand, the hashgraph uses virtual voting and the gossip protocol to reach a consensus. This technique eliminates the need for large computational resources by allowing nodes to share information quickly (by gossiping) and forecasting the votes of other nodes based on the information they receive through gossip. 

3. Scalability and Transaction Speed

Different blockchains have significant differences in transaction speeds. For instance, Ethereum processes roughly 30 transactions per second (TPS), whereas Bitcoin processes about 7 TPS. Although they can reach faster speeds, more recent blockchains, such as Solana, still have scalability issues as demand grows.

On the flip side, Hashgraph claims it can process up to 500,000 TPS, which is significantly faster than conventional blockchains. Its parallel transaction processing capability makes more scalability possible, particularly for large-scale systems.

4. Security 

 While the blockchain protects data with cryptographic methods, hashgraph uses asynchronous Byzantine Fault Tolerance (aBFT). The cryptographic methods used by the blockchain ensure that every block is impenetrable, and changes to the data render the block’s signature invalid by warning the network of possible security holes. 

On the other hand, aBFT records all network events and enables real-time comparison with historical data versions. This technique ensures that the system’s integrity is maintained even if certain nodes behave maliciously.

5. Level of Adoption

Since the introduction of Bitcoin in 2009, blockchain technology has gained popularity in several sectors, such as supply chain management and banking. As such, it features a robust network of community-driven support. 

Compared to blockchain, hashgraph is very young and has not been widely adopted. The public version, Hedera Hashgraph, has fewer applications across industries and is still in development.

6. Fairness

The blockchain relies on miners to process transitions. As a result, miners have more control over transaction ordering according to their computational capacity or network states, which may result in fairness issues on blockchain networks. 

On the other hand, hashgraph uses consensus timestamps to arrange transactions and randomly assign nodes in an effort to promote fairness. This guarantees that transaction processing cannot be manipulated by a single node.

Conclusion: Choosing Between Hashgraph and Blockchain

So, which do you think is the better choice between Hashgraph and Blockchain? 

Frankly, this decision comes down to your particular requirements and the demands of your application. 

Blockchain is perhaps a better choice if your project needs a well-established technology with enormous developer support. However, Hashgraph offers a strong substitute if speed, scalability, and efficiency are your top priorities. 

Still caught in the middle? 

You can reach out to the awesome Blockchain Consultants at Debut Infotech for insightful advice and specialized knowledge. As a trustworthy blockchain development company, they can assist you in determining your particular demands, help you choose the best technology to achieve your strategic objectives and attend to any development requirements you might have.

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