- April 1, 2023
Cryptocurrency has gained popularity as a possible alternative to fiat currency. And decentralized ledger technology which underlies crypto could change multiple industries. Blockchain is perhaps the most ubiquitous of these technologies.
But tech doesn’t stand still. It constantly evolves. But other distributed ledger technologies seek to replace blockchain. Hashgraph is one example of a distributed ledger seeking to oust blockchain from its position as king of crypto hill. But what exactly is hashgraph? And is it actually superior to blockchain?
Decentralized Ledger Technology
In order to understand both hashgraph and blockchain, one must understand decentralized ledger technology. Decentralized ledgers allow transactions and records to be updated, accessed, and validated across systems without a central authority.
An example of a centralized system is a traditional bank. Most institutions store their records in one centralized location. From there, they can validate and access records. But some would argue that not only is a centralized system inefficient, it’s also unsafe.
Because the nature of a centralized system is, well, centralized, it may be easier for bad actors to manipulate and/or destroy data and records.
Decentralized systems remove the need for a central authority to control the ledger. This removes the possibility of hacks because all of the separate entities (nodes) that comprise the decentralized system would need to be hacked at the same time.
Think of it this way. The secret recipe for Coca-Cola is on a piece of paper in a vault somewhere in the US. That’s a centralized system. If someone – say a certain former New York City mayor – found that recipe and burned the paper on which it’s written, there’d be no more delicious soda.
But, if Coca-Cola were to distribute multiple pieces of paper in vaults across the country it would be much harder for Michael Bloomberg to do that.
Blockchain is the most well-known decentralized ledger system. Its name comes from the way information appears on a ledger. Blocks of information build a chain. This ledger – or blockchain – can be accessed by individuals globally.
Every time there is a transaction, a new block is added. The crucial aspect to remember is that none of the past blocks, or transactions, can be changed. This creates a permanent record that can’t be manipulated. This is why blockchain is used in so many cryptocurrencies. The transaction record is immutable and no central authority can ever change or deny ownership.
It’s also why blockchain is pervading industries across various sectors.
From travel to healthcare, retail to agriculture, blockchain is changing the way companies and individuals store records and information. And NFTs are just one of the many applications of blockchain that has taken over the public consciousness.
Another important feature of blockchain is that all of the blocks on the chain are time stamped. This means that the records are historical. One can look back and prove ownership of things like prescriptions for medication or see the history of an airplane part.
Along with timestamps, blockchain features something called smart contracts. These digital contracts stored on the blockchain are executed automatically when certain conditions are met. This is where the efficiency of a decentralized blockchain comes from. Smart contracts allow for the near-instantaneous execution of transactions. No paperwork required.
What is Hashgraph?
Invented by Leemon Baird and his business partner Mance Harmon, Hedera Hashgraph is a decentralized ledger system. They built the system in order to support new and existing applications that run at web scale. However, Hedera Hashgraph has a couple technical aspects that differentiate it from blockchain.
Hashgraph uses something called proof-of-stake in order to build out the next block, or in this case hash, of the ledger. Blockchain uses something called proof-of-work, which selects a single “miner” to choose the next block on the chain. In hashgraph, instead of a single miner, the community of nodes that make up the ledger come to an agreement as a collective on which transactions to add.
With blockchain, only one block can be next on the chain. When two blocks form at the same time, one is chosen. The other thrown out. Think of it as a tree constantly being pruned. Comparatively, every transaction and container of transactions are incorporated into the hashgraph ledger. This means it is more efficient than blockchain. All the branches of the tree continue on.
Also, the chain of the blockchain fails if new blocks arrive too fast. Miners slow the process down. No such problem exists with hashgraph. No miners needed. This means hashgraph can take on more tps (transactions per second) than blockchain. In fact, hashgraph can process roughly 10,000 tps to blockchain’s 5.
The Difference Is Green
Hashgraph is more efficient than blockchain. But it’s also greener. You may have heard that NFTs and crypto are “bad for the environment.” That is true to some extent. But not all coins and NFTs are equal. And that’s because not all decentralized ledger systems are.
This is where miners come into play. Miners, which blockchain needs to run, use massive amounts of computational power to mine coins. Massive amounts of computational power require massive amounts of energy, which, in turn, leads to a massive environmental impact.
With hashgraph, there’s no need for miners. So the environmental impact is less. A lot less. In fact, Hedera Hashgraph uses less energy than a Visa swipe. And miners aren’t the only reason for hashgraph being greener than blockchain. The efficiency of hashgraph, the amount of tps, and the lack of waste in computational power make it a far superior technology.
So, when creating coins and NFTs, the choice is clear. Not only is hashgraph superior to blockchain in terms of efficiency. It’s also greener.
The NFT of it All
Understanding the underlying technology is not necessary for collecting and enjoying NFTs. But it is certainly helpful to understand that some technologies are more or less harmful to the environment than others.
Third Act NFTs are built on Hedera Hashgraph. Taking advantage of this more efficient technology allows for the energy consumption of Third Act’s NFTs to be negligible. In fact, Third Act takes up a fraction of the energy as Ethereum and Bitcoin-based NFTs. And even less energy than Visa swipes.
With more education about the differences between different distributed ledger technologies, hopefully, more people will demand that their NFTs go green.