Blockchain was born out of the banking crisis and a perceived need for a completely decentralized method of transactions and wealth storage. These principles are honorable and remain intact, but they are principles that have a negative impact on the technology, crucially with regard to speed and scalability. We saw this when the Bitcoin network creaked under the strain of the 2017 bull run, with huge transaction delays and high costs. Hashgraph takes the concept of the blockchain and straps a rocket to it.
Directed Acyclic Graphs
Hashgraph uses a Directed Acyclic Graph (DAG) consensus mechanism, which is as complex as it sounds, but the basics can be explained relatively easily. The problem with a blockchain like Bitcoin is that new blocks are only created every ten minutes, which creates bottlenecks at busy times. Block sizes can be increased and creation times reduced (see Bitcoin Cash), but these have tradeoffs and there’s only so far that ‘traditional’ blockchain technology can be taken.
DAGs use graphs with connections called ‘edges’, which are essentially branches of a flow chart that all flow in the same direction. This means that transactions don’t have to wait until a new block is formed before beginning their journey. The result? Theoretically infinite, lightning-fast transactions. It’s a little like each car on the motorway having their own lane while the Bitcoin users are stuck in a traffic jam. The appeal of hundreds of thousands of transactions per second on a distributed ledger is evident.
Hashgraph is Not Decentralized
Before we get too blown away by Hashgraph’s speed, let’s look at one huge drawback – Hashgraph is not decentralized. Instead, it is a private, permissioned system, which means that it is owned and operated by a central source that governs the system and approve nodes. As we have seen with Ripple, this brings into play ideological questions about whether Hashgraph and DAGs in general can be placed in the same category as 100% decentralized blockchains like Bitcoin, Ethereum, and Litecoin etc.
Given the speeds that Hashgraph’s creators say it can achieve, we shouldn’t be surprised that it is not decentralized – nothing that fast could be, at least not at this early stage in blockchain’s life. It is for this reason alone that many feel that the likes of Hashgraph will never replace Bitcoin.
The King of 2019?
2019 looks to be the year of Hashgraph, with the mainnet currently going through testing before being released into the wild later at some point this year. It is not yet known which projects will be the first built on the protocol, but with so much being talked about Hashgraph already, whatever comes our way is sure to make a splash, regardless of which side of the decentralization debate you sit. For a more in-depth look into the workings of Hashgraph and DAGs, this video provides a good explanation.