Hashgraph and Blockchain are the two most popular distributed ledger technologies dominating the crypto world. But when it comes to the best, which one should you prefer for your business?
Updated 20 October 2023
VP – Pre Sales at Appventurez
The popularity of Blockchain needs no introduction, especially when it comes to storing and transferring data securely. It is a distributed ledger technology that has taken the business by storm.
It is reported that global spending on Blockchain-based solutions is projected to rise from $4.5 billion in 2020 to approximately $19 billion in 2024. The potential of this technology is so massive that its significance has spread to almost every industry; be it Blockchain in healthcare or agriculture.
Up until 2017, the crypto market was predominantly under the influence of Blockchain. However, a paradigm shift occurred with the emergence of Hedera Hashgraph technology, commonly known as Hashgraph, as an alternative distributed ledger technology (DLT). Conceived by Leemon Baird in July of that pivotal year, Hashgraph introduced a revolutionary approach, aiming to address certain shortcomings associated with Blockchain. Despite the disruptive entry of Hashgraph, Blockchain continues to be the favored choice for businesses in most scenarios. This leads us to the ongoing debate of Hashgraph vs. Blockchain in the realm of distributed ledger technology, with the lingering question of which will emerge victorious.
In the competitive landscape of blockchain app development services, both technologies present their own set of advantages and disadvantages. It becomes imperative for businesses to carefully weigh these factors before deciding on the most suitable option. Let’s delve deeper into these considerations to unravel what each technology brings to the table for enterprises.
Before moving towards these distributed ledger technologies, a quick question for you – do you know what distributed ledger technology is? Let’s discuss this.
So, a distributed ledger technology (DLT) or database consists of a digital system where transactional records are kept and managed in a decentralized form across multiple places simultaneously. DLTs are much better than traditional ledgers in many ways, such as:
Besides all these advantages, DLTs are comparatively much safer as the intruders and cyber attackers need to target all the nodes simultaneously, which is a tough nut to crack. However, in order to maintain a distributed ledger, both Blockchain and Hedera Hashgraph solutions need different kinds of data structure models and mechanisms.
In the past few years, Blockchain has been a buzzword, particularly in the financial sector. Since its inception in 2008, it has developed at an unprecedented level to become more accessible and user-friendly. But exactly, what is it?
So, Blockchain, as the name suggests, is a network of blocks consisting of systems linked to each other through ‘nodes’ in the form of chains. This structure maintains and distributes transactional records across the entire network of systems being part of the Blockchain.
One of the reasons for the popularity of this distributed ledger technology is that it is highly secured and manipulating data becomes almost impossible. All the transactions need to be validated with the digital signature of the owners, which helps authenticate the transactions and protect them from meddling. The best part is, that everyone can see the records, but no one can tamper with them.
Analyzing the role of Blockchain in transforming the digital world, it’s understandable that this technology is doing wonders out there. However, one question might turn up in your head – how does Blockchain technology work exactly?
Since it is predicted that Blockchain has a bright future in the business world, it becomes crucial to demystify this technology. Therefore, let’s discuss the workings of Blockchain in brief.
So, Blockchain is primarily a combination of three critical components:
The cryptographic keys consist of two types of keys – Public and Private. Each participant in a Blockchain system contains this set of two keys, which is mainly used to generate a secure and unique digital identity reference.
The secured identity created with these keys is the most crucial part of transactions occurring in a Blockchain system. That’s why the role of public and private keys becomes prominent in order to conduct a successful transaction between two parties.
Now you might be wondering what’s the role of digital signature in the Blockchain. Well, the unique identity you produce using the cryptographic keys is known as the ‘digital signature’ in the world of crypto.
This digital signature is introduced into the P2P network. A massive group of individuals, equally authoritative enough, use this digital signature to make an accord regarding transactions and other related issues. Once a deal is authorized, a mathematical verification process is used to validate it, which further results in a successful transaction between two participants connected in the same network.
Besides the three critical components mentioned above, Blockchain also follows a consensus mechanism that includes:
The growth of Blockchain technology is rising at a CAGR value of 56.3%. In fact, it is reported that it might hit the $164 billion mark in the next six years. Such an extraordinary rate of growth clearly indicates how beneficial Blockchain technology could be across industries. The following section will highlight some benefits of Blockchain technology in the digital domain.
Blockchain does not work like centralized bodies, such as banks, where the sole power lies only within the regulatory authorities. Rather it is a decentralized system, meaning the control and decision-making power is distributed among all the participants in the Blockchain. In simple words, all the transactions are processed with the mutual consent of all the members, leading to a seamless and secure transactional system.
As mentioned earlier, Blockchain technology leverages the digital signature feature in order to authorize a transaction. Since these signatures are unique, transactions occurring in a Blockchain system are fraud-free and almost impossible to be corrupted by intruders.
One of the best things about Blockchain technology is that the data stored in the databases is immutable. It means no one can alter or reverse a transaction. Due to this, the need for any third-party authorization gets eliminated, which in turn accelerates the processes.
Elimination of intermediaries to store, manage, and authenticate transactions minimizes the need for additional resources. Consequently, the cost per transaction decreases.
In a Blockchain system, criteria can be set through programming which when triggered, automates the creation of systematic activities, such as events and payments.
Although Blockchain is developing every day, completely understanding it still feels challenging. Below are some of the cons of Blockchain that might give it a setback.
To make the transaction system and database highly secure, Blockchain uses complex verification algorithms, such as Elliptic Curve Digital Signature Algorithm (ECDSA). This process of verification can be exhausting and cumbersome at times as the user identity is verified at each node in the Blockchain.
It has indeed been almost one and a half decades since the inception of Blockchain, but still, there are a lot of unexplored things associated with it. Also, the transaction verification and processing stages are tricky, due to which it needs a good deal of technical proficiency to put up and manage a Blockchain system.
The current model of Blockchain and its platforms can only manage a particular amount of transactions per second. However, when this technology will grow more extensively, it might face issues regarding scalability and cost management.
You already have an idea that Blockchain is a decentralized system that challenges other traditional financial institutions in terms of power and authority. However, one drawback it brings along is that there is no consensus on how financial transactions will be regulated anyway. This creates a hindrance for startups based on Blockchain technology to start as obtaining necessary approvals becomes difficult.
It has been just five and a half years since Hashgraph was invented, but its collaboration with several tech giants, such as IBM, Swirlds, etc. shows how commendable it is.
Hashgraph is another type of DLT and consensus algorithm that was created as an alternative to Blockchain. However, the primary objective of this technology was believed to be overcoming the drawbacks Blockchain had faced, and is still facing.
Hedera, the company that developed Hashgraph, has designed it to provide a faster, safer, and more efficient means of reaching consensus in a decentralized network.
This technology leverages the Directed Acyclic Graph (DAG) structure for storing and maintaining data. Besides that, it uses an amalgamation of voting and gossip mechanisms to achieve mutual consent among nodes linked to a network quickly and efficiently. In fact, many experts have reported that Hashgraph is more secure than traditional Blockchain technology and capable of processing thousands of transactions per second.
The transactions in a Hashgraph system are analyzed based on their position in order with respect to other transactions. Moreover, only active nodes in the system verify and confirm the transactions, unlike Blockchain in which all the nodes present in the network take part.
In order to provide a more detailed overview of how Hashgraph works, here are all the stages involved in the process:
Each and every node in a Hashgraph network creates an event. These events can represent any type of action in the network.
As the name suggests, all the nodes in the network broadcast events to their neighbors.
As the name suggests, the information regarding the events is propagated across the network with the help of the ‘Gossip’ process. Gossip is nothing more than information regarding data. Speaking of a particular transaction, the data structure will consist of:
When the information regarding transaction data is transferred, it is known as ‘Gossip about Gossip’. All the information in a Hashgraph network is synchronized continuously using an event known as ‘Gossip Sync’.
The information obtained through gossip, and gossip about gossip, are used by the nodes to virtually vote for the event order. It assists the nodes in figuring out the correct order to be implemented in the network.
Once the virtual voting is done, the ordering of events is done through DAG, which makes sure that the chronology of the orders is systematically maintained. It is a crucial stage as it enables the network to reach mutual consent on the event orders.
This is the final stage where events are confirmed and included in the ledger based on the consensus obtained. This is how Hashraph development takes place.
Hashgraph is an advanced technology that leverages algorithms helping in making it faster and more efficient. Here are some of the pros of Hashgraph that can benefit businesses in several ways.
The gossip technique used in Hashgraph makes it faster by spreading limited information at the beginning of events. This consensus algorithm helps in reducing the time taken to complete a task, increasing the speed to process a transaction.
Developing a Hashgraph model is comparatively more affordable than building a Blockchain solution. For instance, the transaction fee in a Hashgraph-based model is under 1 cent. On the contrary, transacting a Bitcoin might cost you somewhat around $30.
Hedera Hashgraph claims itself to be backed by a reliable security solution known as asynchronous Byzantine Fault Tolerance (BFT). It protects the entire network system from malicious attacks, ensuring that events are not manipulated and recorded correctly.
Despite being fast and cost-effective, there are some areas where Hashgraph still lies behind its counterpart. Here are some cons of the Hashgraph consensus system:
Hedera Hashgraph solutions are yet to be adopted globally. Due to this, it is still not a feasible solution for developing mainstream applications.
Unlike Blockchain, which is an open-source technology, Hashgraph is owned and managed by a governing council of several MNCs and global entities, including Swirlds, which has a permanent seat. This makes it challenging, in fact, restricted for users to leverage it without the permission of the company.
From a financial perspective to a security aspect, the real-life applications of both Blockchain and Hashgraph are immense. The following section will highlight a few use cases of both these distributed ledger technologies.
Today, the applications of Blockchain go far beyond bitcoin and cryptocurrency. The features of Blockchain technology are impacting several industries, helping them enhance their products and services for consumers. Here are a few use cases of Blockchain technology:
One of the sectors where Blockchain technology is the most popular is Finance. Financial companies, no matter what size or scale, use cryptocurrency apps powered by blockchain to transfer money efficiently while reducing third-party transaction costs. Chainalysis and Circle are two companies in this sector that use blockchain technology for seamless money transfers.
Smart contracts work similarly to regular contracts; however, the former is enforced in real-time. In smart contracts, there is no need for middlemen, adding a sense of accountability for all the parties involved. This process saves both time and money for businesses. The two most popular companies that leverage smart contacts are Mediachain and Propy.
The ever-growing IoT market trends clearly show how beneficial IoT is, and by integrating it with other technologies like Blockchain, it can scale businesses to the next level. Blockchain-integrated IoT applications add an extra layer of security to their systems and make them more efficient. Helium and HYPR are two major companies leveraging blockchain for their IoT solutions.
With advanced file storage and smart contracts, Hedera Hashgraph is all set to enhance services in various industries including entertainment, real estate, finance, gaming, etc. Here are some popular use cases of Hashgraph:
The decentralized nature of Hashgraph can be used extensively in areas like polling; statistics collation and voting processes to be specific. Smart contacts used for voting systems build confidence in results as everyone can see the data and facts for themselves. This process reduces the cost of election activities and enhances results accuracy.
Hedera Hashgraph helps in building decentralized apps consisting of multiple platforms. Mingo is one such example that has put conversations of different social media channels together on a single platform. This dApp supports several popular platforms, such as Twitter, Facebook, Skype, Slack, Discord, etc., and prevents users from installing each one of them to connect with people worldwide.
Besides real estate and entertainment, Hashgraph can also prove to be useful in the healthcare sector. One such real-life example is Readydoc, a medical credentialing management solution by an American company Intiva Health that helps medical services providers streamline the credentialing process.
Although both Blockchain and Hashgraph are types of distributed ledger technologies, there are a lot of aspects in which they differ from each other. The following illustration will provide a comparison between Hashgraph and Blockchain.
Blockchain has been an underlying technology in the crypto world for over one and a half decades. On the other hand, Hashgraph is relatively a newer alternative, which has been there since 2017.
However, even in such a short span of time, Hashgraph has achieved a big round of applause for its hi-tech speed powered by its consensus algorithms. In fact, it can gain consensus in less than 3 seconds, which is way faster than Blockchain.
But it’s a long journey and Hashgraph still needs to get better to match the popularity of Blockchain. Moreover, considering the reliability, decentralization, security aspects, and use cases of Blockchain, it is still the preferred choice amongst developers. Also, the ever-changing Blockchain technology trends also show why it is still leading the domain of DLTs.
If you have made it until this point, you probably have made up your mind on which technology is dominating the current market and would be better for your business. However, the problem does not settle down here, as incorporating a distributed ledger solution like blockchain into your business process is a cumbersome task.
In such cases, the best option would be to get in touch with a professional blockchain app development company having relevant experience in the same area. At Appventurez, you can interact with a proficient team of highly experienced blockchain developers and get a top-notch and customized solution for your business.
The primary objective of the development team here is not just to provide you with a powerful app, but to scale up your overall business functionalities with blockchain implementation.
Q. Can Hashgraph replace Blockchain as a distributed ledger technology?
Although the popularity of Hashgraph is increasing day by day, its future still seems vague. There are a number of fields in which Hashgraph still needs improvement, such as reliability and decentralization, hindering its way to outshining blockchain.
Q. Between Hashgraph vs. Blockchain, which one’s faster?
Hashgraph is comparatively faster than Blockchain. Theoretically, it can process around 500,000 transactions per second, whereas Blockchain can reach up to 10,000 at max. However, practically speaking, these figures might change in specific situations.
Q. What are some use cases of Blockchain?
Blockchain is widely used in several industries to enhance productivity. For instance, in the healthcare sector, it can help store and manage medical records efficiently using unique patients’ identities. Moreover, leveraging cryptocurrencies, like Ethereum and Bitcoins can streamline business operations in terms of financial transactions.
Elevate your journey and empower your choices with our insightful guidance.
VP – Pre Sales at Appventurez
Anand specializes in sales and business development as its VP - Sales and Presales. He supervises the pre-sales process by upscaling on establishing client relationships. He skillfully deploys instruments such as cloud computing, automation, data centers, information storage, and analytics to evaluate clients’ business activities.
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