Blockchain, the underlying technology of cryptocurrencies like Bitcoin, could be on its way out.
Even as individuals and companies are trying to wrap their heads around, and take advantage of, cryptocurrencies such as bitcoin and ethereum and the underlying technology called blockchain, a new kid on the block named hashgraph is challenging the dominance of blockchain—a distributed ledger technology (DLT) that has been around for almost a decade.
The spotlight on the distributed ledger space to-date is primarily focused on the blockchain. Yet, blockchains come with limitations by design. 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.
Consensus mechanisms using proof of work (POW) are by their nature slow, so the community can come to the 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.
“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.”
Experts perceive hashgraph as a promising technology and one that has fewer limitations when compared to the blockchain. This new consensus algorithm also has a peer-to-peer architecture, but it rectifies the genetic flaws of its older sibling blockchain, such as latency, energy wastage, expense, and proof-of-work.
However, the biggest threat to blockchain could come not from regulators looking to gain back control, but from hashgraph, a data structure based on Swirlds algorithm.
US-based start-up Hedera Hashgraph insists that unlike blockchain, hashgraph can provide the speed required for multiplayer gaming, stock market transactions, micro payments, food and in-app purchases.