Cryptocurrency is one of the most popular tech trends currently being researched in the market. With the inception of cryptocurrency, came the Digital ledger technology, to keep track of these alt currency transactions and with DLT came blockchain.
What began as a digital ledger for tracking cryptocurrency exchanges and keeping a record of these transactions fast evolved into a technology that can truly transform data analysis and storage, with practical implementations ranging from healthcare to finance and more?
Insight into Blockchain
Blockchain is a digital ledger technology that helps in keeping track of cryptocurrency transactions. Information of transaction along with a time stamp is stored in the form of blocks, each block linked to the previous.
One of the most noteworthy attributes of blockchain is that it is decentralized. There is not one single entity or server that dominates the blockchain.
In the current scenario, blockchain technology is utilized in industries such as healthcare and agriculture for tasks such as supply change management, manufacturing, production management, etc.
Each coin has two sides. With the decentralization of blockchain being leveraged for creating effective solutions for trade and commerce, the consensus algorithm of blockchain is also being criticized for its lack of predictability and the possibility of a security breach.
What exactly is a Consensus Algorithm?
As mentioned above, there is no single entity that manages the transactions in the blockchain. It is a group of blocks, each linked to the other with multiple users engaged in the process. Hence in order for a transaction to be complete, each user has to come upon a common decision.
This paves way for the Byzantine Generals ‘problem to occur, leading to ambiguity and possible breaches. The Byzantine problem is a metaphor from the Byzantine era where the Byzantine general was required to coordinate four different groups for invading a city. Each group had to attack the city from a particular side at the same time as agreed upon. If at all any of the generals leading the individual groups deviate from the plan, it could lead to the invasion failing altogether.
Such is the case with the consensus algorithm in the blockchain. Even though the Proof of Work algorithm is in place and the entire chain is highly modified in case of any deviation from the agreed upon decision, it still leaves plenty of scope for breach of security, many a time compromising on sensitive data.
This limitation of blockchain has led to the development of a technology that some call the extension while others label as an alternative to blockchain; the hashgraph technology.
What is Hashgraph?
Hashgraph was created by Leemon Baird, CTO of Swirlds back in 2016. It is a digital ledger technology that promises the features of blockchain such as decentralization, transparency and security by breaking the Byzantine Fault Time. It is a voting algorithm that makes consensus easy by combining the virtual voting mechanism along with the gossip protocol.
Understanding the Hashgraph Mechanism
As mentioned above, hashgraph is the combination of a virtual voting algorithm and the gossip protocol. The gossip protocol is used to transform information through each node of the DLT. As soon as a transaction is made, every node along with the data is informed of the details of the transaction using the gossip protocol.
The task is then completed using the voting algorithm. The consensus is arrived at using the voting algorithm which decides which node will vote in order for the transaction to be complete. This decision is made based on the information transported through the gossip protocol.
So, each transaction creates an ‘event,’ the information about which is transferred from one member through the other. Each event is linked to the next with the help of ‘hashgraphs.’ Now the events which reach mutual consensus are recorded. This is done through virtual voting. So for e.g., let’s assume there are six members i.e. A, B, C, X and Y. Each transaction creates an ‘event.’ This is mapped through the gossip protocol. Now these events are compared and the events that gain the consensus of all members are recorded.
This eliminates the Byzantine problem as the possibility of ambiguity is eliminated as information is gossiped through the nodes. The consensus reached is thus predictable. The success of hashgraph technology has then lead to the Hedera Hashgraph Development project.
Public vs. Private Hashgraph
Most hashgraph projects are private and permissioned. Therefore, only the members that have been previously granted permission can access the ledger. This makes the transactions quicker and more secure.
However, in order to make the hashgraph algorithm more accessible to the public, Swirlds along with some of the world’s most leading tech entrepreneurs have introduced the Hedera Hashgraph project which is still in its initial development stage.
The Hedera Hashgraph Project
The Hedera Hashgraph is one of the largest public Hashgraph projects lead by some of the world’s largest tech entrepreneurs.
It is said to be a new way to distribute consensus. Said to be an alternative to a public blockchain, the Hedera Hashgraph can process a much larger amount of data than blockchain. It can process up to a million signatures within seconds. The mechanism of hedera hashgraph is said to be quite similar to the delegated proof of stake mechanism which also uses ‘voting’ to gain consensus.
It is a platform to build solutions related to cryptocurrency, smart contracts and other financial solutions based on this new consensus algorithm. Hence a lot of companies are now actively looking to get involved in hedera hashgraph development and build custom solutions of their own.
Compared to private and permissioned hashgraph, the hedera hashgraph may slow down the speed of transactions relatively however the scalability, security and the accuracy of these transactions are still believed to be much higher than blockchain.
The advantages of hashgraph technology are manifold. The possibility of processing millions of transactions within seconds with much more speed, accuracy and transparency while still remaining decentralized is what makes hashgraph quite appealing to the newer generation.
The advantages of hashgraph while maintaining decentralization has and will definitely attract a lot of attention from entrepreneurs operating in a vast range of industries, especially Fintech. What the consequences of advanced hedera hashgraph development will be and its overall effect on blockchain and cryptocurrency is a matter of time.