Blockchain vs. Hashgraph

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Blockchain vs Hashgraph, the two Distributed Ledger Technologies, are transforming data. They are changing how data is shared, verified, and secured in a decentralized manner for the better. While the two technologies operate in the same domain, their mode of operation is completely different.

Blockchain was introduced in 2008 with Bitcoin and had a different approach to data security through its ‘block-by-block’ structure. Hashgraph on the other hand came to light in 2016. IT follows the ‘gossip about gossip approach’ which makes it different from blockchain. This uses a linear structure to group transactions. So how are these technologies making businesses better and what are the key differences and similarities between Blockchain vs Hashgraph?

In this blog, we’ll dive into all these concepts and understand the intricacies of these two DLTs.

What is Blockchain?

Blockchain is a digital ledger technology that records data in a linear format, where each block contains several transactions. It is completely decentralized which means that it is shared across many computers in a manner that no single person owns or controls it. One of the unique traits of blockchain is that once data is shared and recorded, it cannot be deleted by anyone meaning that it turns into a permanent transaction. This makes it less prone to alteration by potential threats who can otherwise attempt to revise, alter or even remove the data recorded in the blocks.

Moreover, its ability to operate without a single authority enables faster transactions and lower costs. This allows its application in various niches including supply chain management, voting systems, and digital identity verification. Overall, it enhances trust and efficiency while eliminating overhead costs to streamline the entire process.

What is Hashgraph?

Hashgraph is another Distributed Ledger Technology, introduced in 2016, for securely recording data. While the main goal here is the same as Blockchain, the only difference is the manner of operation. Hashgraph works on the principle of ‘gossip about gossip’ wherein nodes (computers in the network) share data by passing along the information they know. Each ‘gossip’ transaction shares a message inside it, including a timestamp, a virtual signature, and cryptographic hashes.

The computer nodes also share the information source thereby authenticating the transaction.

Another important advantage of Hashgraph is that it eliminates the cons of blockchain, aiming to provide faster data processing speed and reduced costs. This is possible through a system called aBFT (Asynchronous Byzantine Fault Tolerance). This allows a network to agree on decisions and continue functioning properly, even with faulty nodes.

What are the Similarities Between Hashgraphs and Blockchain?

While Blockchain and Hashgraph have very different modes of operation, the end goal is the same for both. This can be understood by recognizing that developers created Hashgraph to improve the blockchain framework. Let’s take a look at some of the key similarities between the two DLTs.

Complete Decentralisation

Both Hashgraph and Blockchain operate as completely decentralized technologies, meaning no single entity controls how transactions are conducted or recorded. Instead, computer nodes carry information seamlessly, ensuring everyone can trust the transaction’s authenticity.

Moreover, authenticating each transaction significantly reduces the risk of fraudulent activity. Each node maintains a copy of the original transaction to ensure that even if one node goes down, the entire data remains uncompromised. As a result, both technologies offer a reliable and secure method of data processing. This builds long-term user trust and transparency.

Immutability

Immutability means that once the system writes a particular transaction, it never changes or alters it. This significantly reduces the risk of potential threats attacking the data. Moreover, since the data is permanent, the system will trace any attempt to alter or erase it.

This ensures long-term system transparency and it builds a sense of confidence and reliability amongst the users. This is particularly useful in sectors like finance, healthcare, and supply chain management. In these industries, transaction reliability is essential, and data compromise is unacceptable.

Scalability

Scalability in the context of Hashgraph and Blockchain refers to their ability to process and store large data sets without compromising security. Hashgraph utilizes its unique “gossip about gossip” approach, which allows for fast data sharing among nodes. In contrast, Blockchain relies on layer-2 solutions to enhance transaction throughput.

This ability to provide scalability plays a vital role in supporting real-world mobile applications across various industries. This includes finance and healthcare, where large volumes of data and rapid processing times are essential for success.

Key Differences: Blockchain vs Hashgraph

Feature	Blockchain	Hashgraph
Data Structure	A linear chain of blocks	Directed acyclic graph (DAG)
Consensus Mechanism	Proof-of-Work (PoW) or Proof-of-Stake (PoS)	Virtual Voting
Security	Strong cryptographic algorithms	Asynchronous Byzantine Fault Tolerance (aBFT)
Scalability	Limited	High
Speed	Relatively slow	Fast
Energy Consumption	High (especially for PoW)	Low

Both Hasgraph and Blochain have a wide range of differences that make them competitors in the DLT domain. Securing transactions and providing cost and process efficiency are their main goals but their underlying structures are very different. Let’s understand the key differences when it comes to both these DLTs.

Security

Hashgraph and Blockchain deploy two very different mentors for securing your transactions. Blockchain makes use of mathematical algorithms to secure the data in a linear format. In case a potential threat attempts to alter or remove the data, the system alerts the entire network enabling them to take necessary action against potential tampering.

Hashgraph, on the other hand, deploys a feature called aBFT, which stands for Asynchronous Byzantine Fault Tolerance, to ensure that your data is safe from potential threats. By tracing every transaction that occurs in the network, Hashgraph can improve previous transaction versions and take prompt action to enhance reliability and efficiency.

Making the right decision about which DFT will suit your specific business needs depends on the kind of security you require. For instance, a bank may opt for Blockchain technology because of its robust security measures and transparency when handling sensitive customer data. On the other hand, a supply chain company might choose Hashgraph due to its speed and efficiency in tracking multiple transactions simultaneously.

Consensus

Hedera Hashgraph and Blockchain use different methods to agree on transactions. Hashgraph uses a technique called virtual voting, which lets participants reach a consensus without sending individual votes across the network. Instead, each member looks at their copy of the Hashgraph to calculate the votes. This saves bandwidth and ensures everyone follows the same rules.

On the other hand, Blockchain does not go for any particular approach for reaching consensus; It depends entirely on the platform or cryptocurrency. Common methods include Proof-of-Work, where participants prove that they’ve done their part to validate transactions, and Proof-of-Stake, where validators prove they are providing value in the network. The best consensus method depends on the specific cryptocurrency and the needs of the user.

For instance, if a cryptocurrency focuses on being energy-efficient, it might choose Proof-of-Stake, but if it prioritizes security, it might opt for Proof-of-Work. Understanding these differences can help businesses select the right technology for their needs.

Which one is the right fit for your business?

With the above-mentioned similarities and differences, a better understanding of what the two DLTs are has been provided. The question remains, which one is the best for your business in this BlockChain vs Hashgraph debate?

Let’s understand this with the help of a few quick references.

You can opt for Hashgraph if you need a DLT that offers:

Fast Data Processing

Hashgraph processes data at high speeds, easily handling between 250 to 50,000 transactions per second. This demonstrates its exceptional efficiency. This makes it better for your business if you need real-time data processing such as financial systems or supply chain management.

Moreover, fast data processing will also reduce user wait time thereby building long-term customer loyalty.

Minimum Environmental Footprint

With rising concerns around climate change and the need to reduce carbon footprint, businesses are turning to technologies and processes that are cost-efficient and environment-friendly. Hashgraph will help you achieve this goal by offering reduced environmental impact than Blockhain which can be extremely resource intensive.

For instance, between 2020-21, blockchain consumed 173.42 TWh of electricity just for mining purposes. Hashgraph on the other hand makes it a more eco-friendly option through its consensus algorithm.

On the other hand, you can go for Blockchain if you need a DLT that offers:

Open Source Community

If customization is at the top of your priority list, blockchain is the DLT for you. It has a large, growing open-source community. This means that there are many opportunities for blockchain developers to customize the blockchain solutions accordingly. For instance, platforms like OpenChain and Corda are open-source blockchain projects that enable businesses to enhance their business operations based on specific operational requirements.

Mining For Data Verification

Blockchain will be the right fit for you if your project relies on cryptocurrency mining as the main pillar to succeed. Blockchain networks rely on mining as a method of transaction verification to secure and maintain data integrity. Hashgraph eliminates the need for mining in the transaction verification process, allowing you to focus on what your project requires and intends to accomplish.