While browsing through the internet, performing mini day trades on Binance and diving more deeper into technology behind the different cryptocurrencies, I bumped into Hashgraph through this video and boy was I blown away. The claims that the founder made in the video caused an existential crisis deep down. Not in real life but definitely in the crypto world. It occured to me as the Thanos waiting for his time to conquer the Avengers’ universe. I had to research more about it. It just seemed too good to be true. And so I did.
So what is Hashgraph?
Simply put, it is a distributed ledger technology which does not uses Blockchain as its core data structure, is asynchronous Byzantine Fault Tolerant, processes about 250,000 transactions per second, does not use resource intensive consensus algorithms like Proof of Work and gives discrete surety about the confirmation of the transaction. They use two basic algorithms - Gossip protocol and virtual voting.
Well that was a mouthful. But it does work. For a more detailed guide into the groundbreaking algorithm I would suggest reading its official whitepaper and if you want to understand it in English, do give this medium post a read. If you want to see a working product built on its Java SDK, you could check this out this devpost. They sponsored the TechCrunch 2017 Hackathon. Do notice the minimal network latency in between the devices. It literally blew my mind when I realised this was without the use of a server.
We do realise that the technology is breathtaking. I mean they won a contract for delivering the technology to the CULedger serving roughly a 104 million customers (link). So,no doubts about that in my opinion. What I personally want to discuss here are the implications of the technology.
One of the best things I found about the technology was its ability to run a light node at will. So what it means is, unlike blockchains which have a probabilistic consensus they have a confirmed consensus. A probabilistic consensus here means that one can never be certain the order of transactions included in the blockchain are indeed correct. The probability only increases as more and more blocks gets added into the single state ledger. A confirmed consensus on the other hand, after a certain number of rounds of voting, the history of the transactions achieves global truth which means a probability of one despite being a non deterministic system. Hence a light node can act as a full node by not storing the history of transactions which have been successfully verified, thereby enabling someone to run a full node on mobile phone itself.
My biggest concern around the technology is Swirlds’ decision to put an IP on the technology. On one hand we have blockchain which is promoted as open-sourced solution. Satoshi could have gone on the same path as Hashgraph but that wouldn’t have worked out the way it has. We wouldn’t have a crypto ecosystem that is ever growing like today. Moreover, he/she/they sit on a fortune of roughly around $10 Billion dollars at the current price of bitcoin. Therefore, hashgraph by venturing into the private permissioned networks such as Credit Unions took far lesser challenge with lower growth potential than what it might have been had they released a cryptocurrency themselves and competed in the open markets. Though they plan to release a public protocol in the future, but I doubt they will succeed without open-sourcing their technology altogether.
Secondly, they self-proclaim that Hashgraph can sustain about 250,000 transactions per second. They even claim that number in a highly scaled environment. But reputed people in the space like Vitalik Buterin - founder of Ethereum have raised questions on its scalability time and time again. They believe directed acyclic graphs like the hashgraph will face the same issues as them when deployed in a public environment where chances of Sybil attacks are more prominent. Moreover, they argued that even though hashgraph manages to scale itself with a larger pool of transactions, it will not be able to provide the same throughput when a larger number of nodes are drawn into the picture.
The beauty of network effect is what is keeping Bitcoin alive today. It has the first mover’s advantage and people are considering it as a digital gold despite its shortcomings. Whether Hashgraph kills the whole cryptocurrency domain remains to be seen, but what Bitcoin has taught us is that whatever the technology is, its the adoption that ultimately wins.