Hashgraph VS Blockchain - A Detailed Comparison (2024)

The worldwide arrival of Blockchain was marked by the introduction of digital currency in the form of a cryptocurrency named Bitcoin. Cryptocurrencies like Bitcoin, which emerged as a new monetary network, use decentralized control as compared to general centralized control in traditional banking systems. By relying solely on the peer-to-peer network, Distributed Ledger Technology (DLT) presents a better model for businesses to harness computing power like never before.

Till now, the transition to DLT is limited due to various reasons such as scalability, efficiency, and interoperability, but Hedera Hashgraph comes as an alternative.

Below we shall be discussing the various features and differences between two Decentralized Distributed Ledger technologies – Blockchain vs. Hashgraph.

What Is a Distributed Ledger Database?

A Distributed Ledger Database or Distributed Ledger Technology can be described as a ledger of any transactions or shared contracts that are synchronized and maintained in a decentralized form across different locations and people. A Distributed Ledger Database stores the information in it securely immutable using cryptographic techniques, and DLs are much more difficult to attack as all the nodes will have to be attacked and manipulated simultaneously.

To maintain a Distributed Ledger Database, both the blockchain development service and Hedera Hashgraph use different types of data structures and consensus mechanisms.

What is Blockchain?

Blockchain technology is the earliest generation of Distributed Ledger Technology (DLT) that works upon a sequential data structure that forms a chain of blocks.

Blockchain banks upon several mechanisms like –

Proof of Work

To bring a consensus in the network and secure the block, this mechanism requires solving a puzzle by computation. This mechanism is also known as mining, while the network’s nodes are known as miners. Here to validate transactions add new blocks and win rewards, the members/nodes of the network have to solve these puzzles.

Proof of Stake

This mechanism works on a basis where a creator/validator is chosen to verify and add blocks to the Blockchain, and they are chosen based on their contributions to the network.

Proof of Elapsed Time (PoET)

This mechanism follows a fair lottery system to prevent the network from high energy consumption and resource utilization. In this consensus algorithm, network participants have to identify themselves before joining the network. In this algorithm system, there are fair winning chances, and it is generally used over permissioned networks.

Leader based Consensus

As the name suggests, here in this mechanism, members in the network send transactions to the leader computer, who in turn sends out the transactions to be added to the chain.

Voting based Consensus

In this mechanism, all nodes must be familiar and flexible. Here in such networks, all nodes have to verify blocks together and manage the ledger.

Economy based Consensus

This mechanism works upon the idea of economic rationality to manage consensus, as a real-world economy functions without dealing with chaos.

Here in this mechanism, you have to vote to add blocks, and you might have to pay a fine if you vote for a block for which no one else voted. On a similar note, you may even earn a profit if you vote for such a block for whom everyone voted.

Smart Contracts over Blockchain network

Blockchain developers explain that a blockchain-based Smart Contract is an agreement, a self-executing sort of contract between buyer and seller being directly written into lines of computer code. Such codes and agreements which control the execution and transactions are trackable but immutable. In case there is a need to modify it, a new contract can be used, which is similar to modifying a smart contract.

An intermediary Smart Contract can hold the current active smart contract’s address with a function “delegate call,” which will conveniently redirect all the transactions and calls to the active version. However, another alternative solution is to extract the previous contract information, add it to a new one, and update the address you want your users to see.

What is Hedera Hashgraph?

Hedera Hashgraph Platforms

Open Source SDK

Hedera Hashgraph has released an open-source SDK for developers in Java to build Hashgraph applications. This SDK supports three platform services: File Storage, Smart Contracts, and Cryptocurrency.

All the necessary tools for creating public/private key pairs and signing transactions are offered by this SDK.

Mainnet Testing Platform

The Mainnet Testing Platform is a program that allows users and developers to test various network capabilities before the actual mainnet gets opened for access. Recently, Hedera Hashgraph announced the second phase of the Community Testing Program.

Under phase II of testing, Hedera plans to make Android and iOS versions of the Hedera wallet, Hedera Browser Extension, and open-source WordPress plug-in. These applications would be used to create use cases for the Hedera network services test and P2P micropayments by the developers under the community testing phase.

Methods of Transaction Confirmation Over Hedera Hashgraph

In Hedera Hashgraph, when a client makes a transaction, they may seek acknowledgment about whether that transaction was added to a consensus state. So, to address it, Hashgraph offers the following mechanism to know about confirmation –

Response

In this scenario, the client submits a transaction to a specific node with a request added that the transaction should be submitted to the network. Before submitting, the node will quickly check the transaction and respond with the client’s result. This check is mandatory since it determines whether a transaction is structured or not. If it is structured and found “OK,” the node will add the transaction to the network, while the client can pay associated fees.

Subsequently, the honest node adds the transaction to the network, while the response is sent to the client with it. This confirmation makes the client confident that the transaction will change the consensus state.

Receipt

After the above-mentioned steps have been completed, the nodes make a “receipt” for the transaction done. Further, the client can opt to get the receipt for the same by asking random nodes for the transaction status by querying for the receipt.

A receipt displays the following information –

HBARs – Hedera Hashgraph based Cryptocurrency

HBARs are the utility tokens used in Hedera Hashgraph, which are used to grant access to token holders into Hashgraph-based distributed applications.

Being fast, allowing micropayments, and offering low network fees are some of the lucrative features of HBAR. Additionally, Hedera even rewards users with HBARs for contributing to the launch of the node on the network. There is a wide range of use cases of HBAR cryptocurrency like Digital Content Monetization and Influencer Activity Monetization.

Smart Contracts Over Hedera Hashgraph

Contrary to Smart Contracts, those once deployed over Blockchain cannot be modified whether one has to fix a bug or add new functionality and deploying a new contract to replace the old one is only the option.

Here in Hashgraph, an option is present to enable “binding arbitration” for smart contracts. But that doesn’t compromise with its immutability feature; rather, it allows change only if several parties designed by the smart contract developer agree. Developers have a choice to choose the contract’s subsequent mutability while deploying a smart contract on Hedera Hashgraph.

Pros and Cons of Hedera Hashgraph

Hashgraph is a distributed ledger technology that aims to provide a more efficient and secure alternative to traditional blockchain systems. Here are some pros and cons of Hashgraph:

Pros:

High Transaction Speeds:

Hashgraph claims to offer high transaction speeds, potentially surpassing traditional blockchain systems. This is due to its unique consensus algorithm called gossip about gossip and virtual voting.

Low Transaction Costs:

With faster transaction processing, Hashgraph may result in lower transaction costs compared to some traditional blockchain platforms.

Asynchronous Byzantine Fault Tolerance (ABFT):

Hashgraph claims to achieve asynchronous Byzantine fault tolerance, making it highly secure against malicious attacks and ensuring consensus even in the presence of faulty nodes.

Fairness and No Forking:

Hashgraph aims to eliminate the concept of forking by achieving consensus through a voting mechanism that ensures fairness in the order of transactions.

Energy Efficiency:

Hashgraph may be more energy-efficient compared to proof-of-work based blockchains like Bitcoin, as it doesn't rely on resource-intensive mining processes.

Decentralization:

Hashgraph strives to maintain decentralization, which is a key aspect of blockchain technology. It achieves consensus through the distributed nature of its nodes.

Security:

The ABFT consensus algorithm is designed to provide a high level of security, making Hashgraph resistant to various attacks.

Cons:

Closed Source and Patented:

Hashgraph's core technology is patented, and as of my last knowledge update in January 2022, it was not fully open source. This could limit its adoption and transparency in the development community.

Limited Public Information:

While Hashgraph provides technical papers and documentation, the level of transparency may not be as high as some open-source blockchain projects. This lack of full transparency could be a concern for some users.

Tokenization and Smart Contracts:

Hashgraph's focus is on providing a consensus algorithm rather than supporting a cryptocurrency or smart contract platform. This might limit its use cases in comparison to more versatile blockchain platforms.

Less Decentralization:

Some argue that Hashgraph is less decentralized compared to traditional blockchain systems, as the network relies on a smaller number of nodes for consensus.

Young Technology:

Hashgraph is a relatively young technology, and its long-term viability and scalability under real-world conditions are yet to be fully tested and proven.

Governance and Centralization:

The governance model of Hashgraph and potential centralization concerns may be debated, especially considering that the consensus algorithm relies on voting.

Network Effects:

The success of any blockchain or DLT system often depends on network effects. Hashgraph may face challenges in achieving widespread adoption and building a large user and developer community.

Hashgraph Vs Blockchain | Category wise comparison

Now, let’s see how Hashgraph vs Blockchain fare against each other in terms of various categories –

Copyright

It’s an open secret that Blockchain is an open-source technology to run over the DLT platform, and it can be contributed by many people to build utilities like cryptocurrencies and other utility tokens. Moreover, Blockchains have created their niche around some business houses due to their decentralized nature after defining their quality.

Whereas, Hashgraph is a patented technology owned by Swirlds, so as a new user, you have to pass through Swirlds.

Speed of transactions

In Blockchain technology, the speed depends upon the implementation of protocols such as Hyperledger Development or solutions such as cryptocurrency, Blockchain platforms such as Ethereum, Corda, and more.

Compared to Blockchain technology, to provide high transaction speed, Hedera Hashgraph uses the gossip about gossip protocol as it requires less information to propagate with more events taking place.

No doubt, Blockchain is way much slower than Hashgraph, which can process up to 500,000 transactions per second.

Efficiency

The efficiency of the Blockchain comes into question since it uses a block approach which makes it difficult for more than several miners to work on it, as at the same time, only blocks can be mined. While the other blocks that are being mined get discarded, and the efforts are wasted.

Compared to this, Hedera Hashgraph is much more efficient, as no resources are wasted or discarded. Here all events that are gossiped about to the network are reserved, which makes it 100% efficient.

Consensus Mechanism

The consensus mechanism in Blockchain relies upon cryptography and currencies. Blockchain experts conclude that the most widely used consensus algorithm used in Blockchain technology is Proof-of-Stake, Proof-of-Work, Proof-of-Elapsed Time, Practical Byzantine Fault Tolerance, etc.

To achieve the same network consensus Hedera Hashgraph platform uses virtual voting. Now in this mechanism, there is no need for other algorithms as they can provide low transaction costs and high performance without failure. Apart from that, even operating costs can be minimized as there’s no need for high computation power and electrical supply.

Conclusion

Currently, Hedera Hashgraph blockchain as a Distributed Ledger Technology stands as a promising technology, but it also faces limitations in some areas. As of now, Hashgraph awaits to be tested in a public network, as till now, it has only been used in private and permission-based networks.

Hedera Hashgraph’s faster transaction throughput and flawless security might look impressive, but to replace blockchain solutions, the real potential and effectiveness of Hedera Hashgraph must be proven. This only can be known once it gets released to the public and non-permission-based networks, and the same gets tried over the Blockchain sector over time.

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