The constant debate we've seen in the crypto world has been Hashgraph vs Blockchain, but to truly dive into that comparison, we need to understand what both Blockchain and Hashgraph are.
Blockchain is a revolutionary technology that is set to disrupt virtually any industry that involves trust. It was popularized by its first successful use-case, bitcoin, and greatly expanded its capabilities when it gained scripting language support through the release of Ethereum.
This marks the beginning of an explosion of different use-cases for Blockchain technology from the financial sector, logistics, identity, and even governance. However, despite its innovative offerings and many benefits, it failed to gain mainstream adoption mainly because of its technological limitation to scale.
Many of the Blockchains we have today just do not scale enough to accommodate the sheer amount of transactions needed for mass adoption. This is because achieving scalability in a decentralized environment is a very challenging endeavor.
Bitcoin developers have been looking for ways on how to achieve this for more than a decade but failed to do so. The same can be said with ethereum, which shares the same consensus mechanism. Perhaps the limiting technology is the Blockchain itself, and developers should be looking for a blockchain alternative, a technology that is “block-less” such as Hashgraph.
Due to the popularity of bitcoin and the loose use of the term BLOCKCHAIN, we have associated Blockchain to all distributed ledger technology (DLT). There are, in fact, other types of DLTs that can be described as block-less blockchains for the simple reason they do not use blocks.
One such DLT is hashgraph, which is a Directed Acyclic Graph (DAG) type DLT. According to hashgraph proponents, it is better than Blockchain not only in terms of scalability but also in terms of cost. Hashgraph vs Blockchain, which is better? Let's find out.
What is Hashgraph?
Hashgraph has been described as a viable blockchain alternative; it does not have the same scalability limitation of Blockchain and has better energy-cost efficiency. Its main advantage comes from the very nature of its DLT design.
Instead of using blocks, Hashgraphs operate based on nodes and hashes. Nodes make transactions with each other, while hashes serve as proof for those transactions. It uses Asynchronous Byzantine Fault Tolerance (aBFT) or ‘gossip about gossip protocol” and Virtual Voting to achieve consensus.
Blockchain, on the other hand, uses a chain of blocks to record transactions on its network. These blocks are created when consensus is reached using the different types of consensus mechanisms in the different blockchains.
An excellent example of a blockchain network is Ethereum, which currently uses Proof-of-Work (PoW) consensus protocol. This involves cryptographic mining through a series of complex mathematical calculations to determine who will be allowed to write the next block and get rewarded in doing so.
Hashgraph vs Blockchain Direct Comparison
|Scalability: Beats Blockchain in almost every aspect||Scalability: Lacks the features Hashgraph possesess|
|Decentralization and Security: Lacks the test of time and approved security measures.||Decentralization and Security: Has been online for years and has gotten his security tested before.|
|Cryptocurrency: Great Functionalities and Features||Cryptocurrency: Great Functionalities and Features|
|Development Tools: Loads of apps constantly coming out||Development Tools: Loads of apps constantly coming out|
|Decentralized Applications and Partnerships: Pretty new to the crypto world and lacking decentralized apps like Blockchain||Decentralized Applications and Partnerships: A lot of decentralized apps ready to use.|
Breaking it down
We have identified 8 categories to compare the two distributed ledger technologies. These are scalability, decentralization, security, cryptocurrency, smart contracts, development tools, dApps, and partnerships.
The following paragraphs will explain every category and compare the two DLTs. At the end of each section, we choose which between the two wins. We can also consider a section a draw when there is no clear winner in that category.
In terms of scalability, there is no doubt that Hashgraph beats blockchain hands down. Blockchain transactions are recorded chronologically, which means no new transactions can be triggered while previous transactions have not been finalized or confirmed.
This serves as a major bottleneck design for blockchains. Hashgraphs, on the other hand, supports parallel transactions. This means multiple transactions can be processed at the same time. Hashgraph claims that it can process 250,000+ transactions per second (TPS) by parallel processing.
Blockchains like Ethereum are only capable of doing around 25 TPS with some newer generation blockchains pushing 4,000 TPS like EOS. While there are several blockchain projects hard at work to find solutions for horizontal scaling (parallel processing), none has reached 250K TPS.
Ethereum will soon launch the next iteration of its network dubbed as Ethereum 2.0, which has been rumored to be able to achieve 25,000 TPS. EOS is also releasing an updated protocol called EOS 2.0, which claims to be 4x-16x faster than its current version. However, despite these improvements, it still pales in comparison with what Hashgraph has to offer.
Scalability wise Hashgraph wins this round as it offers a more scalable platform compared to Blockchains which has yet to develop solutions that can offer the same level of performance.
Decentralization and Security
Decentralization and security are perhaps the most important characteristics of any distributed ledger technology. In terms of these two characteristics, nothing can beat Blockchain. The quintessential Blockchain, despite its limited functionality, is bitcoin's Blockchain, which uses the PoW consensus mechanism.
It is widely considered the standard for decentralization and security. Throughout its lifecycle, it has never been compromised or down. The worst that has happened to it so far is network congestion, which saw transaction delays and bloated transaction fees.
Hashgraphs, on the other hand, has its decentralization mechanism, which we have discussed earlier in the form of aBFT with virtual voting. These are relatively new security and consensus mechanisms that have not yet passed the test of time, unlike Blockchain. Looking at another critical angle, Hashgraphs is not open-source.
It is a patented technology that is owned by Swirlds Corporation, a company created by Leemon Baird, the creator of Hashgraph. By virtue of this, we can say that Hashgraph has a lower degree of decentralization in this respect and has not demonstrated enough proof that it can last the test of time.
During its decade long existence, Blockchain has proven itself an effective technology that is secure and decentralized, which is the main value proposition of the technology. Hashgraph has yet to prove itself, and its patented technology cast doubts on the significant influence of the patent owners on the technology. Security is directly tied to decentralization, and since Blockchain is more decentralized, it edges out Hashgraph.
Cryptocurrency and Smart Contracts
The Hedera Hashgraph platform utilizes a Hashgraph crypto coin called Hbar. It serves as the primary utility token of the distributed ledger technology. Hbar is fast and offers low network fees, which makes it ideal for micropayments, especially in various online micro monetization models. Hbar is also used to reward node operators on its network.
Blockchain, on the other hand, also offers its utility tokens that leverage the various blockchains in the industry. It is up to the various project developers to determine the different use-cases of their native token, which can range from being a medium of exchange, a right to vote, or governance token.
In addition to this, both DLTs offer Smart Contracts, which extends the functionality of each of the two DLTs. While not all blockchains offer smart contracts, many of the newer blockchains are platforms that have their implementation of Smart Contracts. Most smart contracts are immutable, meaning there could be no upgrades of changes that can be done on them.
The only way to introduce revisions or updates is by making an entirely new one. Hahsgraph, however, presents an optional mechanism to enable “binding arbitration.” which means changes can be introduced to its smart contract if necessary if several parties agree.
In terms of cryptocurrencies and smart contracts capabilities, we believe that it is a draw as both hashgraph and Blockchain offer the same functionality and features. Hashgraph offers “binding arbitration” to make upgrades, revisions, or reversals in smart contracts while this is a novel feature; there are blockchain projects that are developing similar features.
To help developers build on its DLT, Hedera Hashgraph has released an open-source Java software development kit (SDK) that offers three services offered on its platform, which include cryptocurrency, file storage, and smart contracts. The Hashgraph SDK contains examples of the three services offered, which can be easily modified to get an application up and running easily.
Moreover, it provides an effective introduction of the Hashgraph API as well as all the necessary tools for generating private and public keypairs and to sign transactions digitally. This is on top of its capability to run smart contracts written on Solidity, allowing smooth migration for Eth dapps.
The inclusion of Hashgraph to support Solidity is an acknowledgment and recognition that most of the relevant and high-profile decentralized applications (dapps) reside in the Ethereum smart contract platform, which is a blockchain-based DLT.
While Hashgraph may have a substantial scalability advantage over blockchain-based DLTs, there are many projects in the industry that are exploring horizontal scaling (parallel processing) through various sharding techniques. Also, Blockchain can use the Proof-of-Stake consensus mechanism to do away with the expensive and seemingly wasteful Proof-of-Work algorithm.
Developers are the life-blood of any distributed ledger technology. They are the ones that produce different decentralized applications (dapps). With that being said, both Hashgraph and Blockchain offer their developers the necessary tools to enable them to create and develop timely and useful apps.
Decentralized Application and Partnerships
Hedera Hashgraph is a relatively new DLT, and, understandably, there are not many hashgraph applications out there. This is perhaps the reason why Hashgraph added support to Solidity, to enable blockchain developers smooth migration to its platform.
As it stands, there are very few decentralized applications running on Hashgraph right now, and there has not been any high-profile blockchain project that has migrated into its platform. Hence we can safely say that as far as dapps go, Blockchain is still king.
However, the potential of Hasgraph applications cannot be ignored, especially when there are so many high-profile companies joining the Hedera Hashgraph governing arm. It is relatively safe to say that some or many of these companies will leverage the technology of Hashgraph to deploy their DLT, be it public or private.
But then again, the value proposition of Blockchain is to offer alternative products and services that are not controlled or influenced by companies, offering a fairer and more inclusive monetization model as well as more transparent and censorship-resistant.
The partnership of Hashgraph with high-profile companies could be seen as a double edge sword as it can also be considered one of Hashgraph's disadvantages. Most of the companies that joined Hashgraph governing body become members not because their values or missions resonated with the ideals of decentralization.
Instead, leverage the technology for better operational efficiencies or cut down costs or at a marketing ploy to show its investors, users, and supporters that they are at the forefront of emerging technologies.
On the other hand, to achieve mass adoption and to go mainstream, DLT companies will need the help of established and influential institutions to get the word out to the masses. This means they will have to work with companies they plan to disrupt or ultimately replace. We can see this happening with bitcoin, where it increasingly intersects with traditional finance to propagate itself.
Blockchains have more decentralized applications and hence is the clear winner in this aspect. In fairness to Hashgraph, its journey has just begun, and more dapps may launch on its platform over time, but for the time being, Blockchain takes this round. In terms of Partnerships, we believe that it is a draw, like Hashgraph, some blockchains also have many high-profile partnerships look at the Ethereum Enterprise Alliance.
This DLT only won in one category out of the eight categories we used in this review. This was in the scalability category. It lost to Blockchain in three categories while drawing the remaining categories.
This DLT wins in 3 categories, decentralization, security, and dApps or decentralized applications. Blockchain and Hashgraph draw in cryptocurrency, smart contracts, dev tools, and partnerships.
Hashgraph Pros and Cons
Blockchain Pros and Cons
Hashgraph VS Blockchain: Final Verdict
Summing it all up, we can see that Blockchain comes out on top. The only category that Hashgraph won is scalability. While this is an essential aspect of any Distributed Ledger technology, other aspects are as important, which Blockchain dominates.
Hashgraph is still very new, and only time will tell if it will be able to beat Blockchain in the other aspects of our comparison. What do you think? Please tell us in the comments sections in this article.