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Hedera Hashgraph sacrifices decentralization for high throughput, says developer

Hedera Hashgraph could be making fundamental tradeoffs to achieve its touted 10,000+ transactions per second. These tradeoffs make it one of the most centralized networks on the market, argues well-known crypto developer Eric Wall.

A buzzword-powered blockchain that wants to change the world

Less than a year old, the Hedera Hashgraph network has been marketed as a game-changer for blockchain. The network, which has been locked in a testing environment since December 2018, was backed by some of the largest corporations in the world after promising incredibly fast transactions and unprecedented scalability.

After 9 months of testing, the mainnet beta was opened to the public on Sept. 17, allowing anyone to open an account or build a decentralized app on the blockchain. The beta version offers users unprecedented speed—up to 10,000 transactions per second, whereas Bitcoin currently processes around 4 tps. For reference, Visa has a theoretical capacity of 65,000 tps.

To achieve high throughput, Hedera Hashgraph completely removed blocks and the process of validating transactions. All network participants are directly connected to each other and confirm the transactions in the form of messages.

And while the innovative proposition managed to attract the backing of some of the largest corporations in the world, including Boeing, IBM, and Deutsche Telekom, the network has been heavily criticized by crypto developers.

Eric Wall, a crypto writer and developer, explained that the tradeoffs Hedera Hashgraph made in order to achieve the incredible 10,000 tps throughput should scare off both investors and traders.

In a lengthy Twitter thread, Wall explained that Hashgraph, which is now valued at $6 billion, is leveraging “top-shelf tricks” such as touting corporate partnerships and focusing on buzzwords to achieve such a high valuation.

Centralized, permissioned, and slow

Wall believes that the only way hashgraph can be capable of going more than 10,000 transactions per second is by removing the ability to validate the system.

While some argued that transactions on the hashgraph could be validated at a later stage when Hedera introduces “state proofs,” Wall said that this type of validation is no guarantee that the rules and monetary policy of the network will be enacted.

However, one of the most interesting things Wall found was the fact that Hedera’s 10,000 tps number doesn’t actually apply to all transactions. He pointed out that the network could, in theory, handle more than 10,000 account to account token transfers.

To get a clear picture of the number of transactions per second the Hedera can handle, it’s best to look at the decentralized applications built on the network. Wall said that dapps that use smart contracts can handle around 10 tps, which is less than the often-congested Ethereum.

Medium post exceprt
(ource: Medium

But, it’s worth noting that the sacrifices Hedera made could be acceptable to many. The company’s partnerships with multi-billion dollar corporations must have gone through at least some due diligence, especially when it comes to safety.

Wall acknowledged this but raised an interesting question. Even if the tradeoffs were worth it, was there a need for a native Hedera cryptocurrency? He believes that the network could have had more success as a sidechain for a more liquid network, such as Bitcoin.

All of this will render HBAR, Hedera’s native coin, obsolete, he argues.

A deep-dive into Hedera showed that the young network still has a lot to show for. Its inability to deliver on the ambitious promises made last year could have been what caused the price of HBAR to drop more than 80 percent just two days after it began trading.

Hedera Hashgraph | HBAR

Updated: Sep 20 at 4:45 pm PDT
$0.05
-17.94%

Hedera Hashgraph, currently ranked #2009 by market cap, is down 17.94% over the past 24 hours. HBAR has a market cap of $0 with a 24 hour volume of $22.52M.

Chart by CryptoCompare

Hedera Hashgraph is down 17.94% over the past 24 hours.

Posted In: Altcoins, Opinion, People of Blockchain, Price Watch, Technology

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Priyeshu Garg
Author

Priyeshu Garg

Crypto Analyst @ CryptoSlate

Priyeshu is a software engineer who is passionate about machine learning and blockchain technology. He holds an engineering degree in computer science engineering and is a passionate economist. He built his first digital marketing startup when he was a teenager, and worked with multiple Fortune 500 companies along with smaller firms. When he is not solving transportation problems at his company (Ola), he can be found writing about the blockchain or roller skating with his friends.

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