June 18, 2024

Hashgraph: An Alternative Distributed Ledger Technology

Introduction to Hashgraph and Its Consensus Mechanism

Hashgraph is an alternative distributed ledger technology that was created by Leemon Baird and designed to improve upon some of the limitations of blockchain. Unlike blockchain, which uses a proof-of-work consensus algorithm, hashgraph uses an aBFT (Asynchronous Byzantine Fault Tolerance) consensus protocol without the need for miners. This allows hashgraph transactions to settle faster and use less computational power than blockchains.

The hashgraph consensus algorithm works by having each node take turns transmitting “gossip” about transactions to other nodes in the network in a way that allows them to mathematically reconstruct an ordering of events. This gossip ensures all nodes agree on the same transaction history without the need for mining. Let’s take a deeper look at how hashgraph consensus works.

How the Hashgraph Consensus Algorithm Works

In hashgraph, each transaction is signed by the participating nodes and shared as “gossip” in the network. When one node receives a transaction, it cryptographically signs the information and passes it along to other nodes at random. Each of those nodes adds their own signature to what they received and passes it along further.

This web of signatures spreads exponentially throughout the network in a way that allows all nodes to independently calculate an agreed-upon total order of all transactions ever issued on the network. Nodes can mathematically verify the authenticity and order of transactions even if some nodes in the network are acting maliciously or shares incorrect information.

The output of this consensus process is known as the Hashgraph  Рan acyclic graph data structure that records the order and helps nodes agree on the state of network. Because nodes are gossiping independently and deterministically passing on information, no single node can interfere with or change the consensus process.

Transactions are Considered Final Immediately

Unlike blockchains, which require block confirmations as more blocks are added, transactions on hashgraph are considered final and settled from the very first confirmation. There is no possibility of a transaction being rewritten or reversed as new blocks are added.

This allows for faster transaction finality times and improved user experiences compared to waiting for multiple confirmations on a blockchain. It also eliminates the risk of double spends or 51% attacks impacting confirmed transactions.

Hashgraph Is More Scalable Than Blockchains

Early testing has demonstrated hashgraph’s ability to scale to thousands of transactions per second while maintaining strong security guarantees – orders of magnitude faster than any existing blockchain. This scalability is achieved through its consensus algorithm which spreads transactions exponentially throughout the network without bottlenecks.

The network performance does not deteriorate as the throughput increases unlike blockchain networks which suffer from lower transaction rates as the number of nodes increases. Hashgraph remains highly scalable even as the size of the network grows, making it potentially suitable for high-volume use cases.

Applications of Hashgraph Beyond Currency

While blockchain’s flagship application has been digital currency, hashgraph was designed from the ground up to work for a much broader range of applications. Some potential use cases where its advantages in speed, scalability and low computational overheads could be useful include:

Supply chain management – Tracking items throughout the supply chain in real-time with instant settlement of transactions.

Digital identity – Providing a decentralized identity layer allowing users to prove attributes and interact across different applications.

Asset registries РRecording the ownership and provenance of digital and physical assets without central authorities. Online voting РEnabling secure and verifiable voting applications without the need to trust intermediaries.

Internet of things – Allowing IoT devices to transact micropayments or securely share data without heavy resource demands.

Digital notarization – Providing timestamping services to timestamp documents, software updates, and more instantly.

The Future of Distributed Ledgers
While blockchain has captured mainstream attention with its flagship application in cryptocurrency, there remains room for innovation in distributed ledger technologies. Hashgraph presents an alternative consensus mechanism that seeks to improve on some limitations of blockchains like scalability and transaction speeds.

Only continued development and real-world deployments will determine if hashgraph is able to deliver on its promises at scale. Both hashgraph and blockchain are still early-stage technologies, but ongoing research could potentially combine useful properties from both approaches. The future remains bright for continued advancement towards decentralized systems serving a broader spectrum of use cases.

1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it