The best thing about the tech world is that upgrades and newer versions will always prevail. No matter how advanced or efficient we think technology is, sooner or later a newer generation will replace it. For instance, blockchain might feel relatively new but the technology is actually ten years old and is already being challenged by a new contender in the world of distributed ledgers: Hashgraph.
What is a distributed ledger?
A distributed ledger is a consensus of shared and synchronised data across multiple sites. Distributed ledger technologies, including hashgraph and blockchain, envision a more innovative and trustworthy peer-to-peer computer model that can help harness computing power like never before.
How a distributed ledger works
A distributed ledger ensures data is consensually shared and synchronised across the entire network. Each node of the network can access shared information and own an identical copy.
The nature of distributed ledgers means that they do not rely on a centralised point of control, making the systems fairer and more secure.
Blockchain vs Hashgraph
The real potential of distributed ledger technology was realised when blockchain came into existence. To date, the spotlight on this technology is focused on bitcoin cryptocurrency which resides on the very first blockchain protocol, yet it comes with design limitations.
While many people are still trying to understand blockchain use cases beyond bitcoin, new technology is making headlines, hyped as the future of peer-to-peer networking and distributed ledgers: Hashgraph. But to understand the benefits of Hashgraph, you need to know a little about its forerunner.
Blockchain ledgers employ a chain of blocks for valid and secure distributed consensus. They are managed by and distributed across peer-to-peer networks. Data is grouped and organised into blocks. These blocks are then linked together and secured through cryptography.
The ledger is essentially a continuously updated list of records. It is impossible to delete previously entered data, hence it only allows the addition of data. Blockchain technology was massively pioneered by cryptocurrencies such as bitcoin.
However, for all its benefits, blockchain technology has severe constraints in terms of speed and costs. The fundamental bottleneck is its performance since it can only handle on average around 7 transactions per second (TPS). That’s where Hashgraph comes in.
Hashgraph is an algorithm that uses a consensus mechanism on virtual voting with the gossip protocol to achieve consensus efficiently, fairly, quickly and securely.
The gossip protocol is well-known in computer science and can be simply defined as calling a random node and sharing everything you know with that node.
It is a patent algorithm that promises to provide the benefits of a blockchain without its limitations. While blockchain technology can process only a few transactions per second, Hashgraph will initially process around 10,000 transactions per second, and beyond that who knows.