If 2017 was the year blockchain and Bitcoin became household names, then 2018 could usher in a cryptocurrency revolution that changes everything. After its short run at the top, the blockchain is already set to be dethroned, supposedly, by a raft of faster, smarter, more efficient usurpers. New distributed consensus platforms, like Hashgraph and Tangle, will replace the blockchain over the coming year with a more advanced data architecture, leaving blockchain in the dust.
Or at least that’s the story from a growing chorus of enamored crypto-commentators. Utterly convinced that the age of blockchain is already over and a new day is dawning, they busily push the idea that emerging technologies are unquestionably superior to blockchain in nearly every way.
But this claim is a half-truth at best, and an outright fiction at worst. The evidence is simply not there, and to draw an analogy, such predictions are about as valid as claims that DogeCoin will come to dominate the cryptocurrency market in 2018.
The notion that untested, unproven technologies will completely replace the blockchain, or the idea that they are “blockchain-killers,” is not supported by any reasonable argument. The belief that they will is based more on speculation than substance, as they are claims of faith, not fact. This means some of the more misleading talking points should be scrutinized carefully.
Breaking Down The Blockchain Basics
Before getting any further into the details, it is worth reviewing what all the excitement around the distributed ledger technology is about in the first place. Boiled down to its most basic functions: distributed or shared ledger platforms, like blockchain, break down flows of data into a decentralized, public network for sending, verifying and viewing transactions, all anonymously.
The promise of the technology lies in the creation of a new type of encrypted information architecture that promises the secure preservation and exchange of data without central control. But it remains a promise, at this point. The most transformative impacts of the blockchain have not yet even begun to be felt, to say nothing of even newer platforms.
So those are the fundamentals. With this in mind, what will Hashgraph supposedly do that the original blockchain system cannot?
Don’t Believe The Hashgraph Hype
The hype has been extraordinary. However, the case typically rests on three principles: speed, fairness and security.
Hashgraph is faster, the argument goes, because it needs less time to generate and verify consensus. Because of its more sophisticated protocols for information sharing — i.e., gossip and virtual voting — Hashgraph will be able to handle more data and more transactions in a shorter amount of time. It will be fairer, broadly speaking, because of a special algorithm that allows timestamps to preserve the correct order for all current transactions and prevent meddling in the process of consensus. And it will be more secure because it is “asynchronous,” meaning it can achieve consensus even in the midst of malicious actors or firewalls that could disrupt other platforms.
There you have it in a nutshell. So what is wrong with this picture?
All That Glitters Is Not ‘Bit’ Gold
First, the faster speed of Hashgraph comes from methods that will reduce its security. The asynchronous, “Byzantine” system it is based upon will likely create more exploitable vulnerabilities since it drives toward a consensus solution despite the possible presence of disruptive actors.
The problems go much deeper than this, though. In contrast to the open, public, non-permissioned blockchain, the so-called “permissioned,” or private consensus model, relies on prior-identified, “trusted” nodes. Only such permissioned nodes can authenticate the transactions. This is already to shortchange the promise of distributed consensus networks, since it places trust, and thus the integrity of the system, in these special nodes. It effectively smuggles hierarchy in through the back door, so to speak. This means that the system can no longer be said to be truly self-authenticating, as in blockchain. Furthermore, at this stage it is not at all clear that it will even be possible to transfer the platform’s private system for securely transmitting messages to an open, democratic, distributed public ledger.
Next, the question of equity. Consensus time-stamping sounds great on paper as a means to preserve order and transactional fairness. But as one recent detailed overview of the Hashgraph platform noted, because its gossip protocols open up new, potentially manipulable channels of communication, the very protocols that direct the consensus can lead to corrupted or unfair outcomes for honest transactions.
Lastly, security. Besides the concerns I’ve already touched upon above, the gossip protocol opens up new opportunities for malicious actors to manipulate the consensus process. “Gossip” essentially creates a new threat vector, as it is another line of communication that could potentially be exploited by hackers or other dishonest participants. And again, the very reliance on a “permissioned” system architecture raises more problems than it solves, since it opens up questions about the responsibility and trustworthiness of the permissioned actors, as well as thorny questions about how one comes to acquire that permission in the first place.
Oh What A Tangle-d Web We Weave
Hashgraph isn’t the only gospel in town. Talk around Tangle being the newer — and thereby better — platform on the block has been swirling among early adopters. This enthusiasm is yet another example of how an obsessive fixation with the newest thing is clouding critical judgment in the crypto community.
Founded in 2016 and associated with its cryptocurrency, Iota, Tangle is built from a Directed Acyclic Graph (DAG), an architecture that does away with “blocks” of transactions in favor of a blockless distributed ledger. Like Hashgraph, Iota is emerging with a blitz of speculation. It will be faster, more scalable, flexible and secure — basically better than blockchain in every possible way.
But at its core, the problem is the same as in the case of Hashgraph: extravagant promises in support of a largely untested, unproven system.
One of the biggest selling points for the Tangle/Iota is the so-called “free” transactions model. Transactions would allegedly be free because, unlike Bitcoin, there would be no fees charged for verifying them; since consensus is produced intrinsically, by the transacting parties themselves, fees are unnecessary. But this is really just a bait-and-switch.
Like blockchain, verification and security on the Tangle is powered by the same proof-of-work process to authenticate transactions. The only difference is that the clients submitting the transaction must perform the proof-of-work operation themselves, rather than leaving it to miners. This is a very hardware- and energy-intensive operation at scale — hence the growth in processing power needed to balance the volume of Bitcoin transactions, as the currency has grown exponentially. If any business is interested in utilizing the Tangle architecture, then it will be saddled with rising operating costs that will inevitably come with its use at greater volumes. So the “fee-less” feature of Tangle is misleading; it would be more accurate to say it simply displaces transaction costs from miners to clients.
Blockchain Still Beats The Competition
The claims bubbling up around Hashgraph and Tangle reflect more the fervor and fanaticism of the evangelist, rather than a reasoned case proven by experience.
So much, then, for the hype. But will the blockchain remain the premiere distributed ledger technology going forward? I would argue so.
It is the oldest and most well-established technology for encrypted transactions. The worldwide community that has grown up around the blockchain has plenty of ideas for how to improve it.
It is open-source and open to the public, a huge, invaluable advantage in preserving transparency and accountability. Its unique adaptability allows for continuous upgrades and improvements from a worldwide network of contributors, instead of only privately-vetted managers.
And emerging technologies, such as quantum computing, will further open up the potentials of blockchain technology, allowing it to overcome current challenges of scale and mining techniques.
All in all, blockchain remains the most versatile, safe, and democratically-empowering distributed ledger we have. Like Mark Twain, the reports of its death have been greatly exaggerated, and we would do well to turn a critical ear the next time we hear someone preaching the gospel about Hashgraph, Tangle, or whatever the next big thing may be.