Blockchains are one form of distributed ledger technology. Not all distributed ledgers employ a chain of blocks to provide a secure and valid distributed consensus.
A blockchain is distributed across and managed by peer-to-peer networks. Since it is a distributed ledger, it can exist without a centralized authority or server managing it, and its data quality can be maintained by database replication and computational trust.
However, the structure of the blockchain makes it distinct from other kinds of distributed ledgers. Data on a blockchain is grouped together and organized in blocks. The blocks are then linked to one another and secured using cryptography.
A blockchain is essentially a continuously growing list of records. Its append-only structure only allows addition of data to the database: altering or deleting previously entered data on earlier blocks is impossible. Blockchain technology is therefore well-suited for recording events, managing records, processing transactions, tracing assets, and voting.
Cryptocurrencies, such as Bitcoin, pioneered blockchain technology. Bitcoin’s big rally in late 2017, and the ensuing media frenzy, brought cryptocurrencies into the mainstream public imagination. Governments, businesses, economists and enthusiasts are now considering ways to apply blockchain technology to other uses.
Hashgraphs are also a form of distributed ledger technology.
A hashgraph is a patented algorithm that promises the benefits of the blockchain (decentralization, distribution, and security through the use of hashing) without the drawback of low transaction speed. It was created by Leemon Baird and is the intellectual property of the Swirlds Corporation, which Baird founded.
While Bitcoin allows for approximately 5 transactions per second and Ethereum allows for approximately 15 transactions per second, a hashgraph can process thousands of transactions per second.
The hashgraph algorithm operates through two techniques: Gossip about Gossip, and Virtual Voting.
To understand Gossip about Gossip, imagine five members: A, B, C, D, and E. Each member starts with a transaction, which results in an ‘event’. Then, each member calls another randomly selected member and the two share their transaction history. For example, D calls B and shares D’s transaction history with B. This type of call happens repeatedly, with each member randomly calling another member and sharing its transaction history. So, B now randomly selects another member (let’s say C), and shares its transaction history, which includes D’s transaction history. Simultaneously, E may have called A, and so on. Each call results in an event, and each event holds the hashes of all previous blocks.So, once a member learns about a new piece of information, this information quickly spreads until everyone knows of it.
Virtual voting aims to reach a consensus on the order of transactions. Here’s how it works: first, the events are divided into rounds. The hashgraph algorithm has a definite mathematical answer for when a round is created. Here, for the sake of simplicity, imagine that a round has approximately ten events. Now, each member votes to determine which event should qualify as a ‘famous witness’. To understand how this happens, imagine that each of the members with an event in the next round looks backwards to each event in the current round to see if it can trace its lineage back to the current round’s event. If it can trace its lineage back to an event, it votes yes for that event, and if not, it votes no. The current round event with the most votes is crowned the famous witness for the current round, and provides the definitive order of transactions.
Private and Public
Both hashgraphs and blockchains can exist in public form or in permissioned private forms for enterprise use. Anyone can participate in the public open versions of these technologies. While several public blockchains such as Ethereum exist, the only public version of a hashgraph is called Hedera Hashgraph.
Open Source vs. Patented
Blockchain technology is mostly open source and has a huge community that builds and contributes to various blockchain efforts, from cryptocurrencies to utility tokens. Additionally, blockchain enthusiasts have generally doubted the trustworthiness of traditional institutions, and played up the decentralized nature of blockchains as their defining quality.
On the other hand, hashgraphs are based on a patented algorithm that is owned by Swirlds, and therefore any new hashgraph initiative will rely on Swirlds.
Blockchains and hashgraphs are two implementations of distributed ledger technology. Blockchains employ a single chain of blocks to provide a validated, secure, and distributed consensus. This technology underlies Bitcoin and cryptocurrencies, but also a range of use cases including payments, supply chain, and identity management. Meanwhile, the hashgraph is a patented algorithm that uses the Gossip about Gossip and Virtual Voting techniques across several, parallel lines to achieve fast and secure ledgers. Blockchains are more mainstream and more likely to be public. The Hadera Hasgraph is the only public implementation of the hashgraph algorithm.
Soon, we will begin to see more novel implementations of distributed ledger technology, beyond the blockchain and the hashgraph.