The spotlight on the distributed ledger space to-date is primarily focused on blockchain . Yet, blockchains come with limitations by design. Consensus mechanisms using proof of work (POW) are by their nature slow, so the community can come to agreement and throw away the blocks they don’t agree on. This design also includes inherent inefficiencies such as electricity consumption discarded on stale blocks.
Distributed ledger technologies envision a new, better peer-to-peer compute model that could help us harness compute power like never before. As we move away from the client-server compute model, we move closer to realizing a new trust layer for the internet. This transition is still limited by challenging problems yet to be solved around efficiency, scalability, and interoperability.
The hashgraph algorithm, invented by Leemon Baird, the co-founder and CTO of Swirlds, is a consensus mechanism based on a virtual voting algorithm combined with the gossip protocol to achieve consensus quickly, fairly, efficiently, and securely. Today, the founders of Swirlds, a permission-based ledger that uses the hashgraph consensus mechanism, launched the Hedera Hashgraph Platform, a separate venture dedicated to developing a public ledger based on the hashgraph.
“Hashgraph is an alternative to blockchain — a first generation tech with severe constraints in terms of speed, fairness, cost, and security,” explained Mance Harmon, Co-founder of Swirlds and Hedera. A fundamental bottleneck has been the performance — how many applications are there that can run on a database that can just do 5 transactions per seconds.”
Hashgraph aims to provide the benefits of blockchain as a distributed ledger technology without the limitations. While many ledgers use the gossip protocol, Baird combined the gossip protocol in the form of “gossip about gossip” with a voting algorithm to reach consensus quickly and securely without proof of work. The gossip protocol shares new information that other nodes don’t know, and the gossip about gossip includes where that new information originated.
When the new messages include the hash of previous messages into one, then you have the entire history of who talked to who in the network and in what order.
Baird attests, “So I can guess how you would vote, but you don’t need to vote, so you reach consensus for free. It’s the fastest way known to humanity to send information.”
Last year, hashgraph released speed tests of hundreds of thousand transactions a second on Swirld’s permission-based ledger. While impressive, it couldn’t be fairly compared with public ledgers, because the number and identity of nodes in a permission-based network are known. Today, Hedera Hashgraph shared their public ledger test results.
Large companies across sectors like financial services and supply chain management are increasingly testing blockchain proof of concepts, yet their adoption is constrained by limitations such as transaction speed.
“We can process hundreds of thousands of transactions per second on Hashgraph Hedera, compared to proof of work blockchains like Bitcoin or Ethereum’s blockchain that can do 5-7 transactions per second,” Harmon said…
Read Full: Hashgraph wants to give you the benefits of blockchain without the limitations