What is Hedera and how is it different from existing blockchain technologies?
Hedera is a new platform that could present an alternative to conventional blockchain technology. Currently, every blockchain uses a ‘consensus mechanism’ to validate its transactions. Older blockchains like Bitcoin and Ethereum use the Proof-of-Work (PoW) mechanism. Here, each node (or miner) dedicates computing power at their disposal to solve complex mathematical equations to access and authenticate transactional data.
Newer blockchains, however, use the more energy-efficient Proof-of-Stake (PoS) mechanism. Ethereum is also in the process of upgrading to PoS now. In PoS, miners pledge the blockchain’s native cryptocurrency to the network to qualify as transaction approvers. The likelihood of becoming a miner grows as the amount of cryptocurrency devoted to the blockchain grows. For example, a person dedicating 10 Hedera to the blockchain is more likely to become a miner than a person dedicating only seven.
Hedera (HBAR) is the native cryptocurrency of the Hedera Hashgraph system – a uniquely structured technology that is expected to be faster, more efficient, and more secure than blockchain technology.
How is the Hedera Hashgraph different from other blockchain technologies?
The Gossip Protocol
Hedera uses its revolutionary ‘Gossip’ protocol. Here, each node on the network communicates with every other node on the network to record and authenticate transactions. This leads to an explosive rate of communication. The network of individual transaction data, each connected to all other data, creates a Directed Acyclic Graph (DAG), which is the backbone of the Hashgraph Consensus Mechanism.
The Hashgraph consensus mechanism creates a graph that maps the communication of each node with every other node.
The communication history keeps growing continuously, and this information is saved on every node in the network in the form of a graph. Each time a node receives some communication, the sender and the time of receipt are recorded. This massive graph of communication history is then stored on the computers spread across the network - the ‘gossip about the gossip’.
When this graph is accessed, it is enough to reveal the transaction history, the identities of the involved parties, and the exact moment of the transaction. The two hashes are records of when one node sent out the communication and when it received its last message – a record of the transaction authentication itself on all computers in the network.
A certain number of communications is captured in 1 ’round’. In each round, a ‘famous witness’ corroborates the transaction history recorded in that round. The famous witness is the node that receives the communication before the other nodes communicating in that round. The chosen nodes then communicate with each other or ‘gossip’ to verify the data collected.
Unlike the PoW consensus mechanism, wherein one miner is selected per block to initiate the creation of a block, the Hashgraph consensus mechanism is a network of nodes mutually agreeing to add collectively verified data to the block. Once this verification process is done, the data is added to the decentralized ledger with 100 percent ‘finality,’ which means that the data can neither be tampered with nor modified nor reversed.
Public Distributed Ledger:
Moreover, unlike blockchains that store data in the form of blocks and link the data sets together, the Hedera network stores data on all connected systems on its network – a distributed ledger. But why?
Blockchain rules maintain that if two blocks are created simultaneously, one of the two will be discarded from the ledger. The decision regarding which block to add will be made by the nodes on the system. This is done to prevent the ‘forking of the blockchain, i.e., one chain splitting into two chains, and every time forking happens, it will grow infinitely like a tree.
Blockchains can also become defunct if new blocks form faster than they can be discarded. This is because the branches of the tree are forming before they can be trimmed. This is also why some blockchains use the PoW consensus mechanism to artificially stunt growth.
Hedera Hashgraph, on the other hand, discards nothing and uses everything. All the transaction data is added to the ledger after consensus and the nodes can communicate with each other to retrieve it. It is, therefore, ‘un-forkable.’
Fully Decentralised Governance:
The Hedera Hashgraph has a governance system that is completely set apart in its ways. There is a Governing Council comprising 39 industry leaders spread across geographies and 11 different sectors. All decisions regarding crucial software upgrades, pricing on the network, wealth management, etc., are made by the Governing Council.
Members of the Governing Council do not receive any profits from the network’s revenue and have a fixed term of 3 years on the council. The maximum tenure allowed is 2 consecutive terms, with the exception of Swirlds, the creator of hashgraph, who has a permanent seat and equal vote on the Governing Council.
What do these capabilities mean for end-users?
Hedera Hashgraph addresses 5 critical issues associated with other technologies – performance, security, governance, stability, and regulatory compliance (KYC required and AML compliance is checked).
The Hedera network processes over 10,000 transactions per second (TPS) as opposed to 5 TPS and 13 TPS on the Bitcoin and Ethereum blockchains, respectively. This speed is the result of the ‘gossiping’ instead of actually mining on the network. This means the nodes are just purely comparing notes on the network instead of executing complex mathematical calculations.
The transaction fee on the Hedera network is just $0.00001 as it consumes only a fraction of the energy consumed by other blockchains. Currently, only 18.09 billion Hedera tokens are in circulation, with the limit hard-capped at 50 billion HBAR.
https://www.cnbctv18.com/technology/what-is-hedera-and-how-is-it-different-from-existing-blockchain-technologies-12393172.htm
