Cryptocurrencies will be nothing if not for their shared database, peer-to-peer architecture and distributed ledger that underpin each one of them.
And this decentralization is not limited to blockchain alone. New technologies are vying to have a slice of the craze distributed ledger is drawing. Hashgraph, invented by Leemon Baird, is one such tech rivaling the hegemony of blockchain in the decentralized finance space.
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What is hashgraph technology?
In theory, hash is a function that facilitates the mapping of data by according to it a fixed size. If a set of data comprises of an arbitrary number of characters, the hash value changes it to a fixed number. In order to reach the original data, the hash table with a clear structure must be referred to.
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Hashgraph vs. blockchain
The first point of difference is that in hashgraph, the miners cannot manipulate the order of transactions. This can be done in blockchain where miner/s can delay the process of entering any transaction into the block. This essentially means that hashgraph maintains the chronology in which transactions are entered into the network and subsequently processed by peers.
Further, in the blockchain consensus, two separate blocks concerning a single transaction cannot exist. In the event of two miners creating separate blocks, one of these has to be rejected. In contrast to this, the hashgraph network has the ability to preserve both the contesting events. These events form the basis of the consensus mechanism in hashgraph.
Lastly, the Byzantine issue is said to be better managed in hashgraph. Byzantine is a technical term in the consensus framework of distributed ledger and means that no member has enough power to stop reaching of consensus within the network. In blockchain, the computing power of any single member may allow anyone node to create a roadblock. Hashgraph claims to abide by the Byzantine agreement at all times.
Hashgraph cryptocurrency
For now, only Hedera uses the hashgraph network. Hedera, which allows creation of smart contracts and minting of tokens, has a native HBAR token.
Hedera’s distributed ledger claims support for mining of both fungible and non-fungible tokens (NFT). The latter have largely existed on the Ethereum’s blockchain. Hedera is inviting developers to build new decentralized applications (DApps) on its network, most of which are currently built on blockchain.
Hedera’s HBAR is a multi-billion dollar market cap cryptocurrency. The year 2021 saw an appreciation in the price of HBAR token. But price volatility, which is a common issue in blockchain-based cryptos, is a subject of concern in HBAR as well.
Blockchain cryptocurrencies
As of now, digital currencies using blockchain dominate the cryptocurrency world.
The biggest is Bitcoin, a crypto that became legal tender in El Salvador in 2021. Bitcoin’s market cap is multi-fold as compared with HBAR. The popularity of Bitcoin resulted in approval for Bitcoin ETFs in North America. One of these, the ProShares Bitcoin Future ETF gained the coveted approval of the SEC.
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Blockchain-based altcoins
HBAR is competing with altcoins, which are an alternative for Bitcoin. These altcoins use blockchain in their own unique ways, including decentralizing torrent file sharing (BitTorrent) and infusing peer-to-peer architecture in travel bookings (Dtravel).
Hashgraph’s biggest competitor is Ethereum. Ethereum – unlike Bitcoin, which is emerging as a fiat currency challenger – is a blockchain network that allows the creation of new tokens and the building of DApps. Multiple altcoins use ERC-20 services, and most NFTs are recorded on the ERC-721 standard.
Two new segments of crypto assets dominated the news in 2021. One of these is meme currencies. Dogecoin and Shiba Inu gained on the back of some favorable tweets by billionaire CEO Elon Musk. This has also highlighted the issue of investors thronging to cryptocurrencies without caring much for their utility in the long-term.
The second is metaverse. Blockchain games have drawn enough interest and backing. These games allow users to own NFTs, which paves the way for the play-to-earn model. Axie Infinity, Decentraland, and The Sandbox are some of the projects with their in-house tokens.
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Hashgraph and other blockchains
Though blockchain technology works similarly, multiple networks are competing to make it faster and more scalable. Hashgraph claims more transactions per second, and blockchain networks like Solana and Cardano are working toward the same goal. Solana’s native token SOL was one major crypto that gained immense value in 2021.
This essentially means that hashgraph’s network has to not only trump Ethereum’s blockchain but newer versions like Solana.
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Hashgraph limitations
That hashgraph only permits trusted members of the network makes it a little less open as compared with blockchain.
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Viewpoint
Decentralized ledger technology has yet to mature into a definitive network. Multiple blockchains like
Ethereum, Solana and Cardano are competing with each other. Hashgraph is a relatively newer entrant, and it is promising to have better speed than blockchain.
Both blockchain and hashgraph aim to remove centralization and concentration of power. As of now, much of the investment in crypto assets is driven by the popularity of any particular project. In the long term, the underlying tech of these projects may come under scrutiny. It is then when the hashgraph vs. blockchain debate might heat up further.
