Blockchain vs Hashgraph
Summary: The decentralized financial revolution was clearly kicked off by the invention of Bitcoin and blockchain distributed ledger technology (DLT). The ability to remove third parties from peer-to-peer transactions will have immense disruption in the financial and commercial markets with digital services.
However, in the process of gaining widespread popularity and attention, blockchain design has been stifled by its own design limitations. For global adoption of digital currencies and ledgers, speed, scale and security have to be optimal.
All blockchains suffer from the trilemma, which states that speed, scale and security cannot be optimized without reducing one or two of them in the process. For instance, in order for Bitcoin to globally scale into a daily useful network in commerce it has to become incredibly faster than 7 transactions per second (TPS).
The Lightning Network is a proposed solution, but in order to provide high-speed in transactions, it reduces security to nothing more than legacy payment systems. Bitcoin and all other blockchains are incapable of resolving the trilemma, and are therefore limited from true global enterprise adoption.
Hedera Hashgraph is a public DLT that is capable of solving the trilemma, by providing high speed (100K TPS), with perfect security (aBFT) and global scale even before sharding (splitting databases into regions or sectors). Understanding these fundamental properties is critical in predicting what cryptocurrency will be best in market in the coming years.
Blockchain: A blockchain is a data structure that bundles a group of transactions into ‘blocks’ that are then ‘discovered’ in a distributed network and added to a ‘shared’ chain. This chain of blocks, forms a nearly immutable history of all transactions and occurs at each and every node in the network. A similar analogy is like DNA in cells, each and every cell in the human body shares the same information. In blockchain, all nodes know the same information by scanning their copy of the shared blockchain.
Blockchain Consensus: Bitcoin uses a proof-of-work mechanism (PoW) to achieve consensus, by allowing random nodes the ability to solve a difficult math problem, create a block and gossip it to the network. The first to win the game, solve the block and send it out receives an amount of Bitcoin (currently 12.5 bitcoin/per block). Consensus in a distributed network is an agreement of thousands of computers on what the exact blockchain accounts are and what each user has inside them.
Blockchain Security: Within this design, a high level of security is created because of the nature of the unchangeable, or immutable ledger. In order to reverse a transaction or change the data in the blockchain, a user would half to convince more than 51% of the network that it is correct. Since this is a difficult challenge, blockchains are considered secure. However, because of the PoW mechanism, an immense amount of electrical power is wasted in the math puzzle solving step. As of 2019, Bitcoin uses as much electricity as the entire country of Ireland on a daily basis. Additionally, the blocks that Bitcoin uses are only produced every 10 minutes to slow the network, which leaves its speed at just 7 TPS. Speed is sacrificed for security in Bitcoin, trilemma once again.
Blockchain Speed: In order to scale, Bitcoin must use off-chain transactions (much less secure) in an elaborate database payment structure that has many limitations in regard to liquidity. This lowered security system for increased speed is again the trilemma that all blockchains must battle with. Without achieving maximum speeds as fast as legacy payment services, like the Visa network (ave. 2700 TPS, max 57K TPS), blockchain will never be mass adopted. Additionally, if Bitcoin through the Lightning Network achieves speed and scale, security will be markedly lowered to legacy systems for most of the network.
Other blockchain designs, such as the Ethereum network have increased speed, similar security and slightly improved scale in contrast to Bitcoin. However, the Ethereum network can only perform 15-20 TPS, much less than anything feasible for commerce. The highest speeds reported are in Ripple, 1-2K TPS, but are still a far cry from the Visa network. Many believe that these fundamental problems with DLT design are the chief reasons that cryptocurrency has not become globally adopted by enterprises and everyday users.
Hashgraph: The breakthrough technology of the Hashgraph algorithm is in the alternative data structure used instead of a blockchain, called a direct acyclic-graph (DAG). By allowing transactions to flow freely without being shoved into blocks, transactions in the Hedera network occur as fast as the internet can send them. Using a proof-of-stake (PoS) model reduces the cost of nodes, and uses minimal electricity. This also allows simple users to stake hbars to nodes and earn without having to own expensive computers like with blockchain.
Hashgraph Consensus: The Hedera public DLT allows consensus to occur with minimal power use by using a Gossip protocol (random sending of information to nodes) and a Virtual Voting mechanism. These are challenging concepts to grasp and are discussed elsewhere in more depth. The result of the Hashgraph consensus is that total network consensus can occur in seconds, cost little in fees and electricity, achieve top security and perfectly defeat the trilemma of blockchain.
Hashgraph Security: The security of Hashgraph is aBFT which means that every transaction in the network achieves a majority of finality in seconds with 100% assurance of consensus, or agreement. This is a property not found in any public DLT and will be completely necessary for large financial institutions to transaction billions of dollars in a bank-grade security network.
All blockchains fall short of this security feature and are considered either BFT or pBFT, never fully arriving at full finality, only the probability of it over time and with additional confirmation blocks. Hashgraph uses one transaction with no additional confirmations necessary.
Hashgraph Speed: Hedera is one of the rare platforms to boast an actual main net test with proof of 100K TPS. This is as fast than the Visa Network, which at maximum processes approximately 57K TPS on busy shopping days. It is quite obvious that the ability to process this level of throughput alone in each and every shard in the network will set Hashgraph apart from the rest and usher in enterprise adoption.
Hbar cryptocurrency transactions may be the fastest, fairest and most scalable digital currency on market. No blockchain will ever be able to perform at this level, with the same security and efficiency. There is simply no justifiable comparison between Hashgraph and Blockchain based on these performance metrics.