Can hashgraph unseat blockchain as the favoured tech for cryptocurrencies?
Even as individuals and companies are trying to wrap their heads around, and take advantage of, cryptocurrencies such as bitcoin and ethereum and the underlying technology called blockchain, a new kid on the block named hashgraph is challenging the dominance of blockchain—a distributed ledger technology (DLT) that has been around for almost a decade.
US-based start-up Hedera Hashgraph insists that unlike blockchain, hashgraph can provide the speed required for multiplayer gaming, stock market transactions, micro payments, food and in-app purchases.
With blockchain, which is finding favour with financial institutions and even manufacturing firms in India, each participant has a copy of the ledger’s data that contains the most recent transactions or changes, thus reducing the need to establish trust using traditional methods.
“Hashgraph has all these features,” insists Paul Madsen, technical lead at Hashgraph, and is also capable of processing hundreds of thousands of transactions per second, compared with bitcoin (less than 10 per second) and ethereum (less than 25 per second).
Hashgraph further offers “consensus time-stamping”, according to Madsen, which prevents an individual from affecting the consensus order of transactions—by not allowing anyone to manipulate the order of transactions. On the other hand, “a miner (in the blockchain world) can choose the order in which transactions occur in a block, can delay orders by placing them in future blocks, (and) even stop them (users) entirely from entering the system”.
Madsen points out that if two miners create two blocks simultaneously, the community will eventually select one and discard the other, resulting in wastage of efforts. “In hashgraph, no container (block) is discarded,” he adds.
Over the next couple of years, Hedera Hashgraph hopes to introduce “a viable cryptocurrency—one that has seconds of latency like a credit card and not an hour as in bitcoin; one that has fees of pennies and not $10 dollars; and one that users will be willing to use because its value is stable and not wildly fluctuating based on speculation”, says Madsen.
Experts perceive hashgraph as a promising technology and one that has fewer limitations when compared to blockchain but add that it’s too early to predict whether hashgraph will unseat blockchain.
For one, blockchain is a more proven technology than hashgraph. Jaspreet Bindra, senior vice-president, digital transformation at Mahindra Group, points out that large banking, financial services and insurance (BFSI) firms and governments across the world are increasingly testing blockchain proofs of concept (or PoCs).
“For example, Mahindra Group successfully tested a bill discounting product on blockchain while Niti Aayog is building and testing Indiachain for a PoC around educational degrees, certificates,” he adds.
Bindra, however, acknowledges that while blockchain is “excellent in terms of consensus-driven security and trust, along with provenance, the very consensus-building attribute of blockchain slows it down considerably”.
“Large public blockchains like bitcoin can only process 7-8 transactions per second, as opposed to Visa’s 30,000-50,000 per second, for example. This is because each proof of work has to be ratified by consensus across all participants or nodes. Therefore, most enterprises tend to go build private blockchains, with fewer nodes and consensus points, rather than using public blockchains. While this improves speed and scalability, the very properties of blockchain—trust, security, vulnerability to DDOS (distributed denial of service) attacks—get diluted,” explains Bindra. He believes that hashgraph “seems to solve this problem through some very clever algorithmic treatment and architecture”.
Jayanth Kolla, founder and partner of research and advisory firm Convergence Catalyst, acknowledges hashgraph is one of the leading technologies among Directed Acyclic Graph (DAG)-based blockchains. “It belongs to the third generation, or what we call ‘Blockchain 3.0’ group”.
Hashgraph, he notes, is also a one-of-the-family of blockchain technologies designed on FFM—fast, feeless, and minerless—concept. DAG-based blockchain technologies including hashgraph remove miner from the equation using “gossip about gossip” protocols, in which the machines on the network spread the transaction information and verify and authenticate, instead of the “gossip” protocol used by blockchain and ethereum where there is a dependency on the miner to solve the puzzle, verify and authenticate the transaction. This enables hashgraph to handle 4,000 transactions per second.