The year 2021 has been very favorable for the cryptocurrency market so far. Many coins have updated their all-time highs set during the previous bull market in 2017-2018. As you may have noticed, the higher the demand for cryptocurrencies, the more expensive the transactions are. As of the beginning of April 2021, the Bitcoin network’s average commission is $17, Ethereum’s — $20.
Indeed, such numbers make small transactions unprofitable. However, there are other projects on the market that strive to ensure fast and cheap operation. This article will talk about two projects that solve this problem: Hedera Hashgraph and Cardano.
How does Hedera Hashgraph work?
The interaction of the platform architecture’s components is carried out through the Gossip protocol. After each transaction, one decentralized component shares all the data it knows with two other elements. If one of the two components notices the missing data when viewing information, it updates its history.
The two components that received the information will do the same, exchanging information with two other random components simultaneously. The process will repeat as long as the transaction is distributed throughout the data structure. This protocol’s advantage is the use of exponential data transmission instead of gradual or parallel completion. It means that consensus can be reached extremely quickly and at a low cost.
Hedera Hashgraph Gossip
To understand how this works, let’s look at an example with five participants: A, B, C, D, and E. Each user forms a transaction that results in an “event”. Each participant then calls a different random participant and shares their transaction history with it. For example, D calls B and shares the history of D’s transactions with B. Then B chooses another random communication node, say, C, and shares the records, which now include participant D’s history.
Such calls repeatedly occur until each participant shares information about their transaction with other nodes. Simultaneously, E can share with A, and so on. Each call leads to an event, and each event contains the hashes of all previous blocks. Everything is highly transparent, but at the same time, really chaotic. The chart of such events looks like a tree.
In 2021, the network received two new nodes; they were Standard Bank and EFTPOS. As a matter of fact, the project network is becoming more and more decentralized.
Now let’s compare Hedera Hashgraph (HBAR) vs. Cardano (ADA). It’s time to find out more about the second project.
How does Cardano work?
The Cardano project bases on advanced blockchain technology. Here one can create smart contracts just like in Ethereum. The network has a decentralized management format.
The main difference between Cardano and other projects is the multi-level blockchain:
- Settlement level. This part of the registry is already functioning successfully. It is responsible for transferring ADA coins between users.
- Computational level. It is still under development. It is responsible for the performance of smart contracts and the security of the chain.
How are transactions confirmed?
Before understanding how Cardano works, let’s first find out how a classic blockchain like Bitcoin works. As you know, the leading cryptocurrency miners use their computing power to solve complex mathematical equations. This type of confirmation is called Proof-of-Work. Gradually, these equations’ complexity increases, which means that more computing power and electricity are needed to solve them.
The Cardano Blockchain uses a different principle of transaction confirmation — Proof-of-Stake. Instead of miners, there are validators. Validators put a certain amount of ADA they own on a block. It is called “placing a bet”. For each transaction carried out, the validator receives a reward from the network in the form of coins. The amount of the reward is directly proportional to the amount of the bet.
It is important to note that this type of blockchain operation is much more efficient both from an environmental and economic point of view. The Cardano team created the Ouroboros protocol to make the validator choice as fair as possible. It guarantees equal rights to all network participants.
When will the second level of the Cardano blockchain start working?
At the end of March, the project developers shared their plans for the long-awaited hard fork Alonzo. After that, the project’s blockchain will start working in full, and users will finally create and execute smart contracts.
The team claims this will happen in August this year. If you look closely at the project roadmap, you can see that the test net could be launched as early as April. A code commit should occur after two months of testing, which will cause the activation of the update.
The Hedera Hashgraph and Cardano teams have a similar goal; they both want to make payments simple, cheap, fast, and secure. The former use their own patented technology, which is not publicly available. The second one decided to take the blockchain as a basis and make it multilevel and more efficient. Both of these projects have great potential, but only time will tell which of them will occupy this niche.