Blockchain’s emphasis on security and validity comes at the price of transaction speed, and experts are saying bottlenecks could pose significant problems down the road. Enter Hedera: a cryptocurrency startup that believes it has the answer in the form of their new blockchain-killer, Hashgraph.
Ever since cryptocurrency burst onto the scene a decade ago, several contending technologies have been vying for categorical supremacy. While the majority of competitors focus on providing their take on Bitcoin, the underlying technology, the blockchain, has remained mostly the same. Despite Bitcoin’s many strengths, there’s one issue in particular that seems to worsen as the cryptocurrency continues to grow in popularity and usage: speed. A new cryptocurrency startup called Hedera thinks it has the solution with something called Hashgraph. Whereas blockchain can process about 10 to 25 transactions per second, Hashgraph is said to be able to process hundreds of thousands of transactions per second.
While 10 to 25 transactions per second may initially sound fast, consider there are currently over 13 million bitcoin users processing thousands of transactions at any given moment. The result is a bottleneck, which experts are saying could be the death of Bitcoin altogether, and it’s the reason why Bitcoin transactions now take an average of 78 minutes to complete.
Hedera argues that that needs to change.
So how is this new technology so much faster? Mance Harmon, CEO and co-founder of Hedera Hashgraph, explains that the technology’s speed is thanks to a different mathematical approach known as the directed acyclic graph (DAG).
Blockchain vs. Hashgraph
Blockchain is essentially a string of transactions that all require validation, referred to as Proof of Work (POW).
This system requires that each block of new information added to the chain is confirmed before any additional blocks can be formed. Furthermore, a block cannot be created without significant computational power, which is designed to make blockchain networks resilient to DDoS attacks. It is also separate from the crypto-wallet; it doesn’t matter how much cryptocurrency you hold, what matters here is computing power.
While the blockchain is much more secure as a result, the resources needed and the “one block at a time” structure slows the process considerably. DAG is different. Using a “graph” of transactions, Harmon told Forbes that Hashgraph instead processes transactions “in parallel, as opposed to linearly,” dramatically speeding up processing times.
Hedera believes this is crucial to making cryptocurrency viable in gaming, the stock market, and micropayments, which allow for very small payments across a wide variety of applications. There’s also the added benefit of Hashgraph being “unforkable,” ensuring longevity by guaranteeing it will remain, in co-founder Mance Harmon’s words, “one platform with one currency forever.”
Traditionally, forking is seen as a way for organizations unhappy with a given cryptocurrency to create offshoots of their own. Even Bitcoin hasn’t been immune to forks—it’s the reason we have Bitcoin Cash, Bitcoin Gold, and Bitcoin Private, all which were born out of the original Bitcoin.
Hedera sees this as an obstacle to mainstream adoption.
“The hard forks that Bitcoin and Ethereum have experienced have arguably damaged the network effect of their corresponding currencies, creating confusion and uncertainty in the marketplace. Similarly, the explosion of altcoins (and the dubious legitimacy and value of many of them) does not engender the necessary confidence in businesses and consumers considering adopting cryptocurrencies,” Hashgraph’s most recent white paper reads.
While anyone will be able to develop applications on top of the Hashgraph platform without a license—and even view the code itself—Hedera will enforce its patents to ensure a competing platform is not developed by piggybacking off their work.
The governance system is also quite different. Hedera is using a similar strategy to the Visa credit card system where no member has any more influence than the other. Up to 39 members will make up the council, and be comprised of leading companies across a wide range of industries, although Hedera has not yet made any announcements as to whom they might be.
The advantages of Hashgraph
So what are the most important benefits to using Hashgraph over the blockchain?
- Speed: The capability of Hashgraph to handle processes in parallel is a major selling point. The modern marketplace can’t wait 80 minutes for transactions to settle. According to Hedera’s tests, Hashgraph processes resolve in a matter of seconds, making it more broadly usable.
- Stability: There will always be only one Hashgraph. With the possibility of “forking” taken out of the equation, those who adopt Hashgraph won’t have to worry about disgruntled cryptocurrency users breaking away and creating a direct competitor that potentially harms the value of Hashgraph. Hashgraph’s key technologies are patent-protected.
- Security: Hashgraph is asynchronous Byzantine Fault Tolerant, which allows the various nodes to reach a consensus that new information added to the ledger is authentic even if some members are acting maliciously. The term comes from the so-called Byzantine Generals Problem, a fictitious historical event where a portion of the army is traitorous.
The disadvantages of Hashgraph
Despite the many promising benefits of Hashgraph, the technology isn’t perfect. Hashgraph does have considerable drawbacks, which could prevent it from dethroning blockchain overnight.
- Unproven: Hashgraph has not yet been proven in the real world. While Hedera has conducted tests internally, there is no public ledger or cryptocurrency using the technology. At this point, touting it as the de-facto “blockchain killer” is still premature.
- Proprietary: Some may find Hedera’s decision to make Hashgraph a closed platform as an affront to the “open” nature of the crypto movement in general. That could very well hinder development on the platform among crypto developers.
- Bitcoin’s Strength: Despite a host of ‘alt-coins,’ Bitcoin remains the de-facto cryptocurrency. Regardless of the challenges presented by bottlenecked speeds, it is rapidly gaining worldwide acceptance, and investors may be skeptical of new technologies. If Hashgraph does eventually overthrow blockchain, it will be in a matter of years, not months.
What are your thoughts on Hashgraph technology and its potential to replace blockchain? Do you believe it can be done? Or is blockchain already primed to be the reigning champion of cryptocurrency?
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