If you are trying to compare Hyperledger vs Ethereum, it’s important to understand the differences. Blockchain or more appropriately called Distributed Ledger Technology (DLT) has captured the attention of many, including multi-billion companies who are always on the hunt for the next tech unicorn that might turn out to be their next cash cow. We have seen this before during the early internet days where every internet-related company was being snapped up left and right, while few survived, those that did become the multi-billion businesses they hailed to be such as most of the FAANG companies.
Without a doubt, Ethereum remains the preferred smart contract platform in the entire industry. Aside from having the first-mover advantage, it has attracted top-notch projects to built on top of its platform giving the Ethereum network a unique advantage of having the most diverse, comprehensive and relevant collection of decentralized applications (DApps) to date. Despite Ethereum’s current and persisting scalability challenges blockchain developers continue to build in this platform and with the advent of Ethereum 2.0, this trend will likely continue.
Hyperledger vs Ethereum
With all the success surrounding Ethereum, one would expect that many high-profile companies would have started building their DApps on Ethereum, but reality, most companies have not but instead prefer to use a different type of distributed ledger technology, one that is more private and one that in essence, more centralized which is called the Hyperledger. This might be the first time you have heard of this blockchain since it is not listed in your usually blockchain data sites like Coinmarketcap, Messari or Coingecko for reasons you will learn later on this article. In this article, we’ll do a Hyperledger vs Ethereum comparison so you can decide which one is better for you.
So which one is better? Well, that is exactly the question we will try to answer in this article as we discuss the different aspects of these two distinct distributed ledger technology. We have selected 10 different characteristics which we think will best differentiate the two DLT as well as give you a better understanding of each technology.
Let us start by comparing the very nature of the blockchain of Hyperledger and Ethereum. When talking about blockchains you will always hear topics about decentralization, transparency, security, censorship resistance and non-reliance to any intermediary or centralized authority. This might be true for a public blockchain but not for a private blockchain. With that being said the biggest difference between Hyperledger and Ethereum is the fact that the former is a private blockchain and the latter a public blockchain.
A public blockchain or permissionless blockchain is a type of blockchain that does not require permission from any centralized entity or any intermediary. It is a type of blockchain that adheres closely to the aforementioned characteristics, most especially to being decentralized. Decentralization is perhaps the most important characteristic in a DLT. It is what makes them so unique and revolutionary, without it we will find it hard differentiating blockchain technology from a regular database.
A private blockchain that is also commonly referred to as permissioned blockchain does not necessarily follow the generally accepted characteristics of a type of blockchain that has been popularized by bitcoin and other cryptocurrencies. This type of blockchain has selective decentralization or degrees of decentralization. They can be likened to a regular database where some of its parts have been decentralized. Many companies prefer this type of blockchain as it gives them more control, better scalability and the ability to keep parts of their blockchain data away from the prying eyes of its competitors.
Another Characteristic that differentiates Hyperledger and Ethereum is their Consensus Protocols. Ethereum uses the same consensus mechanism of bitcoin, Proof-of-Work (PoW). This makes it one of the most secure and decentralized blockchains in the whole industry. While it has its advantages PoW has drawn flak for the huge amount of energy it uses and its inability to scale to accommodate mass adoption. This is one of the primary reasons why many companies are reluctant to use Ethereum to develop DApps.
On the other hand, Hyperledger does not have a single consensus mechanism in place. Developers can create their consensus mechanism. This is made possible through the modular architecture of Hyperledger. The amount of flexibility it offers makes it an ideal platform for different industries to build on which may have different requirements in terms of scalability, security, and function. However, if developers are not keen on developing the consensus mechanism they can use BFT consensus protocol which is said to be the default mechanism for Hyperledger.
Ether (ETH) is an integral part of the Ethereum as it serves as the main currency of the network and functions as “Gas” to pay for transactions on its blockchain. Unlike Ethereum, Hyperledger does not have any cryptocurrency in place and we would not be surprised if it will not have one soon; not until the cryptocurrencies reach a certain level of maturity in terms of regulations and compliance standards. A better use case for Hyperledger would be the tokenization of Securities instead.
Tokenize securities will sit well with many companies and more importantly with regulatory agencies like the U.S. Securities and Exchange Commission. This takes away a lot of guesswork and debate whether a cryptocurrency is a security or not as it declares itself as such from the very beginning. This will limit the possible run-ins with SEC which may, later on, declare a cryptocurrency as security like some projects that conducted an ICO in 2017. So long as no law exempts cryptocurrencies of being securities they are always a risk that they might be identified as a security by the US SEC.
Applications and Transaction Types
It is quite clear that Hyperledger and Ethereum have different approaches in leveraging distributed ledger technology. This stems from the fact that each of these technologies caters to different types of users. Ethereum is quite generic on its scope and caters to a wide range of purposes. However, Ethereum is seen to be more ideal to handle B2C applications than Hyperledger as the former do not require permission to participate in transactions. Conversely, the latter is geared towards B2B applications as participants would likely require permission to secure sensitive business information or transactions.
Understandably, Transactions in Hyperledger will likely be private which goes opposite to Ethereum where all participants can access the ledger of transactions. Hence Hyperledger consensus participation will be limited for participants if at all implemented. While Ethereum may seem to be a better option for a more transparent and inclusive blockchain it must be noted that most businesses have in their best interest to keep its data and the data of its users private, especially in an environment where bad actors are increasingly becoming highly sophisticated.
Ethereum has been credited as the first blockchain-based platform to offer a Turing complete smart contract programming language. The programming language used is the Solidity programming language. It is only widely used and known within the blockchain community but relatively obscure to the wider software developer community. Developers who are new in the industry will likely need additional time or training to familiarize themselves with Solidity. On a brighter side, Solidity is fast becoming the standard programming for blockchain development as many projects aside from Ethereum are now supporting the language.
In line with Hyperleder’s modular design and the aim of standardizing distributed ledger development, it supports popular programming languages such as Go, Java, and Node.js. In doing so developers who have worked on other software projects would have a familiar environment to work with. This will enable them to concentrate on designing and creating decentralized applications rather than spending time learning Solidity or making standard libraries not available on Ethereum’s programming language out of the box.
Both Hyperledger and Ethereum boast some of the most impressive partnerships in the whole distributed ledger technology industry. Many of these industry partners are members of both Ethereum and Hyperledger consortium such as Microsoft, Accenture and, J.P. Morgan, hence we can conclude that from a business partnerships standpoint they are pretty much equal. Of course, the level of partnerships depends on what they plan to accomplish in the said platform. Take for example JP Morgan which instead of using Hyperledger or Ethereum blockchain, they used Quorum (A private blockchain based on Ethereum) to experiment with distributed ledger technology.
The impressive and growing list of partners for both distributed ledger technology providers demonstrates the immense potential of DLT or blockchain technology. This also shows the growing awareness of the emerging technology which many believe will be an integral part of the realization of Web 3.0 and enabling technology of the industrial revolution 4.0. While the two have distinct blockchain have distinct proper we believe that both will play a significant role in this technological evolution.
It is not hard to notice that most community members in Hyperledger are well-known and established organizations and institutions. This is not surprising as it is mainly focused on the enterprise blockchain applications. Ethereum, on the other hand, has its enterprise consortium with the founding of the Enterprise Ethereum Alliance in 2017. Many of the founding members of this organization are already members of the Hyperledger consortium. However, being a multipurpose, generic blockchain for all types of decentralized application there is a whole other community that Ethereum caters to.
These are the different blockchain start-ups that have built their decentralized application on Ethereum. Many were born and funded during the ICO boom of 2017 or have been supported by private companies like ConsenSys, which was founded by one of the founders of Ethereum. Interestingly ConsenSys is one of the founding members of Hyperledger. This goes to show that Hyperleder and Ethereum gene pool is more intertwined than what we might want to believe. Nonetheless, Ethereum seems to have a far more reaching market scope than Hyperledger.
Compliance and Regulations
Since most Hyperledger-based projects will unlikely utilize cryptocurrencies the possibility of them running in trouble with regulatory bodies is highly unlikely. The same cannot be said with Ethereum projects with some have already been deemed by the U.S. SEC as unregistered securities. As we have said earlier there is still no existing law that definitively categorizes cryptocurrencies as not securities. While cryptocurrency supporters and proponents have been pushing cryptocurrency-friendly legislation nothing significant has been passed into law.
We can, therefore, say that if we compare the two blockchains Hyperledger would be a safer choice for now in terms of compliance and regulations, the only reason being that they don’t usually deal with cryptocurrencies. Depending on how you look at it it might be an advantage to Hyperledger but at the same time can be its greatest weakness. It all depends on how you look at it and how the developers will use the technology.
Hyperledger vs Ethereum: Conclusion
Ethereum would have blown Hyperledger out of the water for having a private blockchain which for many blockchain purest does not make sense at all. However, we must understand that as distributed ledger technology evolves so does its use cases and the entities that might want to use them. Hence, we have concluded that the better blockchain depends on the industry and type of decentralized application they will be used on. As we have said earlier in this article businesses would not want a blockchain that is completely transparent for reasons we have already said above and they would need something that would scale.
On the other hand, Ethereum, like it or not, cannot scale to accommodate the sheer number of transactions when it hits mainstream usage. There have been efforts to make it more scalable but that remains to be seen. At its current form, it is hard to imagine enterprises wanting to deliver scalable blockchain solutions deploying their DApps on Ethereum. Surprisingly, many Startups still deploy on Ethereum despite its scalability problem which we believe is just riding on Ethereum’s popularity.
What about you? Which do you think is better, Hyperledger or Ethereum? Please post your answers and reactions to the comments section of this article. We are always interested to hear the opinions of our readers and engage in a constructive and meaningful discussion.
Jesus Cedeño is a certified doctor turned cryptocurrency expert, writer, and investor who lives in New York City. Jesús specializes in cryptocurrency product reviews, tutorials & technical analysis. Follow him on LinkedIn to stay up to date on his latest work on blockchain, decentralization and crypto investments.