Blockchain related news seems to dominate the headlines nowadays, with major publications like the Wall Street Journal, CNBC, and the New York Times all publishing articles related to the nascent technology. What’s more, the sole reign of the Bitcoin and Ethereum networks may be coming to an end relatively soon. Newer companies like Hedera and their Hashgraph platform are developing proprietary distributed networks in an attempt to dethrone these blockchain kings, while mainstream companies like IBM have their own full fledged blockchain based solutions. The participation of traditional tech giants like IBM not only vindicates the validity of the emerging industry, but also demonstrates the fierce competition that rages on in this segment of the economy.
Banks and financial services companies, who are typically seen as one of blockchain’s biggest targets, are understandably worried about blockchain’s capabilities, particularly decentralization and distributed ledgers. Earlier this year, Bank of America noted in a regulatory filing that they view cryptocurrencies as a threat to their business, CNBC reported. The statement said, “Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies… negatively affect[ing] our earnings… [and] the willingness of our clients to do business with us.”
Nevertheless, other banks are more bullish on the technology. JPMorgan Chase, for example, is working on its own “enterprise-focused version of Ethereum” called Quorum, is even thinking about spinning the initiative off into its own company, according to CoinTelegraph. Yet JPMorgan’s blockchain program in particular highlights some of the problems with these initiatives — they are still centered around outdated consensus algorithms and protocols, such as Bitcoin and Ethereum. To be sure, blockchain technology has experienced tremendous growth in recent years, but there hasn’t been a catalyst to propel it where it needs to be.
One tech startup Hedera, is working on a virtual currency and decentralized platform, Hashgraph, that is actually not built on a blockchain. It utilizes a different feature called a directed acyclic graph (DAG), but is able to achieve decentralization and network distribution, like blockchain networks but with more security.
Another key aspect of the platform is its Byzantine fault tolerance. This means it isn’t susceptible to a “Byzantine failure” whereby “up to just under 1/3 of the members can be attackers, can collude, and can delete or delay messages between honest members with no bounds on the message delays.” Hedera Hashgraph is therefore much more secure than its blockchain powered counterparts, and on a practical note, is well equipped to fend off lethal DDoS attacks.
Hedera Hashgraph’s Key Platform Features
One of the major faults with the Bitcoin and Ethereum networks is their dependence on the proof-of-work (PoW) consensus algorithm. PoW blockchains are not truly byzantine because theoretically, they are still subject to a 51 percent attack. A user could purchase or take a majority of the supply and then change the network. In addition, network members never truly known when consensus has been achieved; they simply have an increased confidence in this probability that grows over time. What’s more, the proof-of-work system is prone to forks, because two blocks can be mined simultaneously, forcing a fork until the community agrees on which “brand” to follow.
Both the Bitcoin and Ethereum networks also have a huge problem with transaction speed and network efficiency. Bitcoin processes on average ten transactions per second, with Ethereum around fifteen — not much better. In contrast, the Hedera Hashgraph platform operates using a new distributed consensus that can achieve hundreds of thousands of transactions per second. This is possible through several key features.
First, “gossip” plays a huge role on the network. Each network participant “gossips” about the information it learns, allowing data to spread through each member as each member repeatedly spreads information to other members at random. This gossip protocol uses very little overhead bandwidth — in contrast to existing blockchain protocols — and prevents network bloat. The “hashgraph” data structure records who gossiped to whom in what order, creating a distributed ledger of network interactions. The gossip protocol allows the network to scale with tremendous speed and efficiency.
Second, the consensus algorithm uses “virtual voting”, whereby every member of the network has a copy of the hashgraph. This allows Party A to determine what vote Party B would have sent, if both were using a typical Byzantine protocol that involved sending votes. In this case, Party B doesn’t actually need to vote, so each member can achieve agreement on decisions without any votes actually being sent. The virtual voting systems provides a new level of honesty and transparency while also saving the bandwidth that PoW algorithms cannot.
Third, the network promotes fairness through its transactions. All members have the ability to create a signed transaction at any time, and each member receives a copy of it. The community reaches agreement based upon the order of these transactions. By implementing this level of fairness, a small group of attackers cannot maliciously influence the order of transactions chosen as the consensus.
With features like this, it’s completely possible that Hedera Hashgraph could dethrone Bitcoin and Ethereum and be crowned the next distributed network king. Or tare Hedera are just one of the many competitors coming into the surface as Tezos,EOS,Cardano and will always be a side kick for Bitcoin and Ethereum? Time will tell, but we have seen it before and if it will happen, it will definitely won’t be the last time.