What is Hashgraph?
Hashgraph is a consensus algorithm invented by Leemon Baird, a former US Air Force Lt Col (ret), with a Ph.D. in Computer Science from Carnegie Mellon University. Today he is the co-founder and CTO of Swirlds Inc. together with Mance Hermon CEO of Swirlds Inc. Swirlds Inc. is a software platform designed to build fully distributed applications that harness the power of the cloud without servers and builds software for distributed consensuses, based on the Hashgraph consensus algorithm.
Hashgraph provides a new platform for distributed consensus via distributed ledgers called “Gossip Protocol & Virtual Voting,” which allows the system to transfer information in each and every moment among its members (all members “gossip” on one other).
The Gossip Protocol (Gossip about Gossip) basically means, attaching small additional amounts of information to this “gossip” process, which delivers information throughout the system. The system is composed of two hashes, which contain the last two members talked to. Through the use of this information, a Hashgraph can be built, and can continuously update itself when more information gossips on each node.
How is Hashgraph different? And what is so special about it?
Safety – Due to the “Gossip Protocol”, all members (Nodes) are talking to each other and know exactly who did what, when, how much, etc. In such a system, disinformation is practically impossible to spread, by virtue of the fact that in a system where all members communicate with each other continuously, every member has full access to all shared knowledge, which allows, ultimately for full transparency.
Speed – Hundreds of thousands of transactions per second, the comparison between the speed of transaction between Blockchain vs. Hashgraph is mind-blowing.
Demetri Konfinas, a distributed expert compared Blockchain vs. Hashgraph as the following:
Blockchain being a snail crawling at his natural pace vs. Hashgraph being a fighter jet flying twice the speed of sound (2468 km/h, approximately 50,000 times faster).
Low energy consumption – In terms of consumption and costs of Hashgraph, Baird says this: the processor on the average iPhone is capable of running Hashgraph, making it arguably the fastest, safest, and cheapest distributed ledger to date.
According to Hemant Saxena, some of the attributes commonly used to refer or describe Blockchain are distributed, transparent, consensus-based, transactional and flexible. Hashgraph bears all these features. Additionally, it’s a data structure and consensus algorithm that is much faster, fairer, and more secure than Blockchain. It’s often described as the future of distributed ledger technology. Hashgraph uses two special techniques to achieve faster, fairer and more secure consensuses called “Gossip Protocol & Virtual Voting,”.
In order to go even deeper into how truly effective this distributed ledger is, let’s take a short look at the existing distributed ledgers already out there.
What are distributed ledgers? And which purposes do they serve?
A distributed ledger is a process that allows a group of computers who don’t know one another at all, and are in the middle of reaching an agreement (in this case, the order of transactions) to be able to work towards creating a secure and trustworthy way to manage transactions among the community of users. The aim of the distributed ledger is to build trust in the final result. A few examples would be: ensuring the validity of the members of the system, making sure that the contract or payments are in order, and that all members are playing by the rules, and identifying those who might try to take a different approach. Thanks to the Gossip Protocol, these members will be recognized and consequentially unable to take down or control the system.
A short explanation about some of the well known distributed ledgers out there:
- Voting Algorithms
Are based on 30-year-old Algorithms, in which members send votes to each other based on a “Yes” or “No” questions (which constitutes a problem regarding time frames and complicated contents based only on that system) and in the end all members are left with is a “Yes” \ “No” answer.
Very reliable and secure system, yet not fast nor effective.
- Blockchain (Proof of Work)
Proof of Work (what many people would refer today as Blockchain) is basically a system which has a chain of blocks. Each block has a number of transactions in it, which can be between wallets, smart contracts, or running share data. The idea of Blockchain is that the user based community will agree that a certain block would be first, and another block would come next, and another block would be third, and so on and so forth. There is, however a setback in this system. In order for the community to stay in control of the system and to avoid two blocks being placed at the same time, we have to slow down the system (on purpose) so that the entire system as a whole can be balanced and checked. Therefore, every member that would like to add a block has to solve a math problem below the block if he wants to add his block. Thus the community could slow the pace of the entire system as a whole. Once the process gets more complicated, only those who have far more advanced and expensive computers called “Mining Rigs,” can participate in this process. To conclude, members have to invest an awful lot of money for these supercomputers, and the electricity expenses involved in building a system that is slow on purpose. The system has proven to be very reliable and safe, yet very expensive and slow.
- Leader Base System
This distributed ledger basically means that we have one ruler, dictating the pace and direction of the entire system by telling it’s members to send him their transactions. He will then arbitrarily decide the order and priority of those transactions according to his calculations or preference. Members are then able to sign the order (if they agree.) Once all members reach a consensus, we would have a healthy system.
There are two problems for this distributed ledger:
1) This system has a leader, which dictates the order of the transactions for the rest of the members in the system and thus can manipulate the orders in his favor, if he so chooses. This disregards the fundamental idea of a decentralized monetary system.
2) The leader can be exposed to DDoS (Distributed Denial of Server) attacks. Which, if targeting the leader, and the leader after and the leader after, can slowly but surely cause the entire system to collapse.
- Proof of Stake (some may refer it as Economy Based System)
This specific distributed ledger boils down to this: it is an economy based system in which, all members are talking to each other randomly, and each member gets to vote on which transaction or any other decision should be next. However, each member has to gamble some money on his vote and if his votes turn out to be in line with the majority, he will get his money back, plus a small profit. If he votes with the minority, he lost the money that was placed on that vote. The idea behind this is that members should let the “Free Market” decide what is good for the system as a whole (similar to Adam Smith’s theory of the “Invisible Hand.”) Thus, when too many transactions occur that requires many decisions to be made, members would naturally prefer to slow the system down in order to make the right choice and visa versa.
- Virtual Voting (used in Hashgraph)
This distributed ledger basically means running a voting system with no votes. Rather than voting on the correct order of transactions, each node is already aware of what every single other node knows. Which means 100% certainty. Each node (member) can predict how other nodes (members) would have voted if such a vote were to take place. This eliminates the need to have an actual vote, which allows time and computational resources for the entire system to be saved, unlike the first four of the up mentioned distributed ledgers:
1) Voting Algorithms.
2) Blockchain (Proof of Work).
3) Leader Base System
4) Economy Based System (Proof of Stake)
Hashgraph is shown to be a fully asynchronous Byzantine, which means it makes no attributions as to how quickly messages are transferred across the internet. This capability is what makes it so resilient against DDoS (Distributed Denial of Server) attacks, botnets & various firewalls.
To conclude, it is undeniable that in times where we all wonder if Blockchain, or any other distributed ledger could be a revolutionary technology and a potential substitute for our current diminishing Fiat monetary system, Hashgraph brings a breeze of fresh air. It is an exciting possibility for a future global decentralized monetary system, where potential application use cases such as micropayments, live collaboration apps, distributed capital markets, distributed MMO’s, auctions, and more could be possible.
We will provide you with some more interesting content regarding the evolution of this new technology in future newsletters, please feel free to share or send us your take on it. We hope you enjoyed this information, and if you would like to read or watch interviews with Leemon Baird explaining Hashgraph here’s some food for thought:
https://www.youtube.com/watch?v=SF362xxcfdk (Hidden secrets of money 8, Minutes 42, 56)