Hedera Hashgraph Vs Blockchain Vs Lightning Networks

Distributed ledger technologies are constantly evolving, offering businesses new ways to streamline operations, enhance security, and create unprecedented value. While blockchain technology is the most well-known DLT, innovations like the Lightning Network and Hedera Hashgraph are rising in popularity. Understanding the aspects of hashgraph vs blockchain, as well as their broader context within the DLT landscape, is key to choosing the best fit for your needs.

In this blog, we’ll compare the pros and cons, core mechanics, and real-world uses of blockchain, the Lightning Network, and Hedera Hashgraph. It will help you make informed decisions about the optimal DLT solution for your business.

What are Blockchain, Lightning Network, and Hedera Hashgraph?

At their core, DLTs are decentralized databases shared across networks of computers. This decentralization offers unique benefits, but it’s crucial to grasp how these specific technologies differ:

Blockchain

Blockchain technology functions as an innovative digital ledger. Unlike traditional ledgers held by central authorities, a blockchain is distributed across a vast network of computers. Each of these computers maintains an identical copy of the ledger, allowing for transparency and reducing the risk of manipulation. 

Transactions occurring within this network are grouped into blocks, which are then cryptographically linked together in an unbreakable chain. This chain provides a tamper-proof historical record of all activity on the Blockchain. The decentralized nature of blockchain technology terminates the need for intermediaries, promoting trust, security, and direct peer-to-peer interaction.

Lightning Network

The Lightning Network operates as a secondary layer built upon the Bitcoin blockchain. It aims to address the limitations in Bitcoin’s scalability and transaction fees. The Lightning Network allows users to open direct payment channels with one another. Within these channels, transactions are conducted off the main Blockchain, minimizing network congestion. 

Only the final balances from each channel are recorded on the Blockchain. This approach drastically improves Bitcoin’s transaction speed, enabling thousands of transactions per second while substantially reducing associated fees. The Lightning Network unlocks the potential for micropayments, making Bitcoin a viable solution for small, everyday transactions.

Hedera Hashgraph

Hedera Hashgraph presents itself as a distinct alternative to conventional blockchain architecture. Instead of a linear chain of blocks, it employs a structure called a directed acyclic graph (DAG). In a DAG, transactions are not bundled but rather woven together along with timestamps for each event.  

Hedera Hashgraph reaches consensus through a unique process known as “virtual voting,” ensuring that all nodes within the network agree on the order of transactions. This approach eliminates the possibility of manipulation and guarantees fairness and security within the system. Hedera’s design allows for blazingly fast transaction processing, handling thousands of transactions per second along with maintaining predictable, low-cost fees.

Technology	Concept	Key Advantages
Blockchain	Decentralized secure ledger	Decentralization, immutability, transparency
Lightning Network	Layer 2 solution on Bitcoin	Scalability, low fees, micropayments
Hedera Hashgraph	Blockchain alternative	Speed, low fees, fairness

Exploring Pros and Cons

No technology is perfect, and each DLT comes with specific tradeoffs. Let’s unveil the advantages and potential drawbacks of each:

Blockchain

Pros

Decentralized Trust Model

Blockchain eliminates the need for central authorities, allowing transactions to happen directly between parties. This reduces the potential for manipulation and minimizes the trust that needs to be placed in any single entity.

Resilience Against Tampering

The combination of distributed record-keeping and cryptographic security makes blockchains remarkably resistant to unauthorized changes. This creates a high level of confidence in the integrity of data stored on the Blockchain.

Transparent and Verifiable History

Each transaction on a blockchain is part of a permanent, unchangeable record. This makes it a powerful tool for applications where tracing events, proving ownership, or ensuring that processes have been followed is crucial.

Cons

Potential for Bottlenecks

Some blockchain designs may face congestion when a large number of transactions occur at once. This can result in slower processing times and higher costs for users.

Energy Demands 

Consensus mechanisms like Proof-of-Work, used in certain blockchains, can be very computationally demanding, leading to high energy usage.

Technical Hurdles

Understanding the principles behind Blockchain and implementing effective solutions can be complex. This may sometimes make it a challenging technology to adopt or integrate into existing systems.

Lightning Network

Pros

High-Speed Transactions 

The Lightning Network removes Bitcoin transactions from the main Blockchain, allowing for nearly instantaneous confirmations. This makes it ideal for situations where speed is essential, like point-of-sale purchases.

Negligible Fees

By operating off-chain, the Lightning Network dramatically reduces the fees associated with sending Bitcoin. This makes it a cost-effective solution for frequent transactions.

Tiny Payments Made Possible

The Lightning Network’s ability to handle fractions of a Bitcoin opens up new possibilities. Use cases like paying for content by the second, streaming micropayments, or machine-to-machine transactions become viable.

Cons

Channel Funding

To use the Lightning Network, users must set up payment channels and lock up a portion of their Bitcoin within those channels. This temporarily reduces their directly spendable balance.

Technical Knowledge

Setting up and managing Lightning Network nodes can be complex for those without technical expertise. This could act as a barrier to entry for some users.

Current Capacity Limits 

While advancements are being made, individual payment channels on the Lightning Network have limitations on how much Bitcoin they can transfer at a given time.

Hedera Hashgraph

Pros

Exceptional Throughput

The Hashgraph consensus model allows Hedera to process a remarkably high number of transactions per second, surpassing the capabilities of many traditional blockchain systems.

Affordable Transactions

Hedera Hashgraph keeps transaction costs consistently low and predictable, promoting its use for a wide range of applications.

Inherently Fair System

The design of Hedera’s consensus mechanism prevents any single party from controlling the order of transactions. This provides a strong guarantee of fairness for everyone participating in the network.

Cons

Governance Structure

The governing council model used by Hedera Hashgraph can raise questions about the platform’s level of decentralization over the long term.

Still Emerging

While rapidly gaining traction, Hashgraph is a newer technology than established blockchains, and its mainstream adoption is still developing.

Specialized Knowledge

Understanding the underlying principles of Hashgraph and effectively developing solutions on the platform may require a deeper level of technical understanding.

Technology	Pros	Cons
Blockchain	Trustless System, Enhanced Security, Audit Trail	Scalability Challenges, Energy Consumption, Complexity
Lightning Network	Rapid Transactions, Minuscule Fees, Micropayment Potential	Requires Open Channels, Network Complexity, Limited Capacity (Currently)
Hedera Hashgraph	Lightning-Fast Speed, Cost-Effective, Guaranteed Fairness	Centralized Governance, Nascent Technology, Technical Expertise

Core Characteristics: Hedera Hashgraph Vs Blockchain Vs Lightning Networks

Selecting the ideal DLT involves a careful analysis of your project’s requirements and understanding the strengths and limitations of Blockchain, Lightning Network, and Hedera Hashgraph. Here’s a more in-depth breakdown:

Speed

Transaction speeds can differ drastically between blockchain implementations. Bitcoin is well-known for its slow confirmation times, while platforms like NEO and Hyperledger are built with speed in mind.

By moving transactions off the main Blockchain, Lightning Network provides near-instant confirmation times. This makes it a compelling choice for businesses needing rapid, real-time payment processing.

Hedera Hashgraph’s unique consensus mechanism enables exceptionally fast transaction processing. It can control hundreds of thousands of transactions every second, making it perfect for applications requiring high throughput.

Fairness

In Blockchain, depending on the consensus mechanism, miners may have the ability to manipulate transaction order, introducing a potential risk for unfair behavior.

As a layer built on top of a blockchain, the Lightning Network mirrors the fairness characteristics of the underlying Blockchain.

Hedera Hashgraph system ensures that transactions are timestamped and cannot be reordered after consensus is achieved. This creates a level playing field where all participants are treated equally.

Security

Blockchains, due to their distributed design and cryptography, are generally considered secure. However, the level of security can differ depending on the respective Blockchain and its consensus mechanism.

Lightning Network heavily relies on the security of its underlying Blockchain. It’s important to understand potential vulnerabilities in payment channel management as well.

Hedera Hashgraph employs Asynchronous Byzantine Fault Tolerance (ABFT), which provides a very high degree of security. Once records are confirmed, they become extremely difficult to alter.

Scalability

Some blockchains may face challenges when processing a large volume of transactions, potentially leading to congestion and increased fees. Others are intentionally designed with scalability in mind.

The Lightning Network specifically addresses the scalability limitations of certain blockchains. It excels at facilitating fast, low-cost micropayments.

The architecture of Hedera Hashgraph prioritizes scalability. It’s capable of handling a very high transaction volume while maintaining consistent performance and predictable fees.

Community Strength

Major blockchains like Bitcoin and Ethereum have huge, well-established communities. This translates to robust developer support and a wide range of resources.

The Lightning Network has a rapidly growing community with increasing interest from developers focused on enhancing Bitcoin’s capabilities.

While smaller than some established blockchains, Hedera Hashgraph’s community is expanding quickly. Its distinct features are attracting significant developer interest.

Consensus

Blockchains use different mechanisms to reach consensus, such as Proof-of-Work (PoW) or Proof-of-Stake (PoS). These variations impact speed, security, and energy consumption.

Lightning Network relies on localized two-party consensus within payment channels, enabling it to operate alongside the existing blockchain infrastructure.

Hedera Hashgraph Uses a combination of a ‘gossip about gossip’ protocol for sharing information and ‘virtual voting’ to determine if transactions are valid. This approach prioritizes fairness and efficiency.

Stage of Development

Blockchain technology, as a whole, is fairly mature. However, various projects are at different stages of development and adoption.

Lightning Network’s development is currently in beta, with ongoing development to improve its stability, usability, and features.

Hedera Hashgraph is a relatively new technology. While it demonstrates significant potential, wider adoption, and a more extensive developer ecosystem are still evolving.

Characteristic	Blockchain (General)	Lightning Network	Hedera Hashgraph
Speed	Varies; Bitcoin (slow), others faster	Instantaneous	Extremely fast (500k+ TPS)
Fairness	Risk of miner manipulation	Scales fairness of underlying blockchain	Timestamps prevent manipulation
Security	Generally secure, dependent on implementation	Relies on underlying blockchain security	Highly secure (ABFT)
Scalability	Varies, some face bottlenecks	Micropayments specialist	Designed for high throughput
Community Strength	Large, established communities	Growing	Smaller but rapidly expanding
Consensus	PoW, PoS, etc.	Two-party, based on payment channel	Gossip protocol & virtual voting
Stage	Mature, proven	Beta, actively developed	Early, high-potential

Choosing the Right Distributed Ledger Technology 

Let’s take a deeper look into the key considerations when selecting a DLT, adding in some extra considerations:

Focus on Your Needs

Evaluate your project’s specific requirements. Does it prioritize speed and low cost (Lightning Network/Hedera Hashgraph)? Is decentralization paramount (Blockchain)?

Know Your Non-Negotiables

Clearly define the core functionalities your project absolutely cannot compromise on. This immediately narrows your technology choices.

Prioritize Metrics

Don’t settle for vague descriptions. Quantify your needs – acceptable transaction speeds, latency limits, and the expected volume of data. These hard numbers act as a filter when comparing DLT capabilities.

Compliance 

If you operate in a regulated industry, don’t waste time on DLTs with known incompatibilities. Thoroughly research industry-specific regulations and how they interact with potential technology choices.

Consider Tradeoffs

There are often tradeoffs when choosing a DLT. Speed and scalability may come at the expense of decentralization and vice versa.

Understand the True Cost of Tradeoffs

Saying ‘decentralization is slower’ is vague. Be specific: Is a 5-second delay acceptable to increase security? Is a small governance council a suitable compromise for lightning-fast transactions?

Don’t Romanticize Decentralization

Pure decentralization is a powerful ideal, but it’s not always practical. For enterprise use cases, a degree of control might be necessary for performance, regulatory compliance, or ease of integration with existing systems.

Sustainability Matters

Some DLTs have hefty environmental footprints. If sustainability is part of your project’s ethos or brand image, factor this into your technology decision from the start.

Future-Proofing

Think about the long-term vision for your project. Is a well-established ecosystem like Blockchain more relevant, or are you comfortable pioneering with a newer technology like Hedera Hashgraph?

Bet on Talent

A large developer community provides reassurance. If you need to hire or work with external contributors, consider the availability of experienced developers for your chosen DLT.

Analyze Roadmaps Critically

Don’t be swayed solely by promises. A DLT’s development roadmap should realistically address your project’s future needs and align with your growth timeline.

Design for Adaptability

Mitigate risk by building your solution in a way that allows you to migrate to a different DLT in the future. Modular architecture and clean separation of concerns make this transition less painful.

Remember, there’s no “one size fits all” solution. Be bold in determining your needs and confidently select the DLT that propels your project to success.

Real-life Use Cases 

Let’s dive into specific use cases where one technology shines over the others:

Blockchain 

Supply Chain Provenance

Tracking the journey of goods from origin to end-user. The Blockchain’s immutable ledger creates a trustless, verifiable history that aids in combating counterfeiting and ensures ethical sourcing.

• Walmart partnered with IBM to build a blockchain-based system for tracking food products across their supply chain. This enhances their ability to quickly pinpoint contamination sources and reduce recall times, improving food safety.
• De Beers Uses the Tracr platform (backed by Blockchain) to create digital certificates for diam.

Digital Identity Management

Decentralizing identity verification and authorization processes. Blockchain-based identity solutions enable individuals and organizations to own their data and reduce reliance on centralized providers.

• Civic Offers a decentralized identity verification solution, allowing users to control their personal data and streamline online identity checks.
• ShoCard provides blockchain-based digital identity solutions that are used for secure logins, age verification, and streamlined KYC processes for businesses.

Financial Services

Streamlining cross-border payments, securities trading, and other financial processes. Blockchain can introduce efficiency gains and reduce reliance on intermediaries.

• Ripple Facilitates cross-border payments for banks and financial institutions using XRP cryptocurrency and the RippleNet blockchain-based network.
• JPMorgan Chase Created the JPM Coin, a blockchain-powered stablecoin aimed at streamlining internal payments and settlements.
• Visa Launched B2B Connect, a payment network leveraging distributed ledger technology for faster, more transparent business-to-business transactions.

Lightning Network 

Micro-Subscriptions

Enabling seamless and flexible payment models for content access or service usage. Lightning Network allows consumers to make extremely small payments without facing high fees.

• Satoshi’s Place is a collaborative digital canvas where users can buy individual pixels for tiny fractions of Bitcoin using the Lightning Network.
• Breez is a mobile payments app offering Lightning-powered micropayments for podcasts, online content, or topping up balances in other apps and services.
• Fold App Integrates Lightning Network into a rewards app, allowing users to earn small amounts of Bitcoin on everyday purchases.

In-Game Economies

Facilitating the frictionless exchange of in-game items, currency, and rewards within gaming environments. Lightning Network enables near-instant transactions at negligible cost, enhancing player experience.

• Lightnite is an online multiplayer game where players earn and spend real Bitcoin through instant Lightning Network transactions.
• Zebedee is a platform for integrating Lightning Network payments into various games, enabling gamers to earn cryptocurrency while playing.

Machine-to-Machine Payments

Enabling automated microtransactions between connected devices. It is ideal for use cases with frequent, small-value payments where speed and efficiency are paramount.

This area is still developing. Potential examples include smart energy grids where appliances automatically purchase electricity based on real-time consumption and negotiated prices.

Hedera Hashgraph

High-Frequency Financial Trading

Supporting platforms where speed and transaction finality are critical. Hedera Hashgraph can handle a massive volume of trades without introducing bottlenecks or compromising fairness.

• Uppsala Security built a Threat Reputation Database on Hedera, processing a huge volume of security data related to crypto assets and aiding in fraud detection for exchanges and wallets.

Digital Advertising & Auctions

Ensuring transparent and auditable processes for ad impressions, delivery, and bidding. Hedera’s consensus mechanisms contribute to fraud prevention and create a trustworthy foundation for transactions.

• AdsDax is an advertising platform built on Hedera Hashgraph that focuses on addressing transparency issues and ad fraud with verifiable data on impressions and engagement.

Multi-Party Loyalty Programs

Handling large-scale programs with multiple stakeholders (businesses, customers). Hedera can efficiently manage reward point issuance and redemption even with complex rules.

• Swirlds (the company behind Hedera) created its loyalty program, PowerPoints, demonstrating the potential for managing complex reward and point redemption schemes.

Conclusion 

Choosing the optimal DLT for your business isn’t a one-size-fits-all decision. Blockchain, the Lightning Network, and Hedera Hashgraph each bring unique advantages and tradeoffs to the table. The key lies in carefully analyzing your specific requirements. 

Remember, the DLT landscape is constantly evolving, so staying informed about advancements is vital. It’s also worth noting that hybrid solutions, combining different DLTs, can sometimes be the most powerful approach.

Want to add Distributed Ledger Technology to your business?

If you’re ready to explore how DLTs can transform your operations, Idea Usher is your one-stop shop. We can help you analyze your needs and design the most effective DLT strategy.

Don’t get left behind! Let Idea Usher help you gain a competitive edge with DLT. Contact us today to start supercharging your business with the right technology.

FAQs

Is hashgraph a blockchain?

No, Hedera Hashgraph is not a traditional blockchain. While both are distributed ledger technologies (DLTs), they differ in their structure and how they reach consensus. Blockchains use a linear chain of data blocks, while Hashgraph employs a “gossip about gossip” protocol to achieve agreement on transaction order.

How many transactions can Lightning Network handle?

The theoretical limits of the Lightning Network for transaction throughput are extremely high. However, practical capacity is constrained by a few factors: the amount of Bitcoin locked in network channels, the average size of transactions, and network connectivity. Realistic estimates suggest thousands of transactions per second are achievable.

Is Lightning Network more private?

Yes, Lightning Network transactions offer increased privacy compared to on-chain Bitcoin transactions. Since most Lightning transactions occur off the main Blockchain, they aren’t publicly broadcast, and only the opening and closing of payment channels get recorded on the Bitcoin ledger.

How is Hedera different from Blockchain?

Hedera Hashgraph offers a distinct alternative to traditional blockchain technology. Instead of storing data in a linear chain of blocks, it uses a directed acyclic graph (DAG). This difference in architecture, along with a council-based governance model, sets Hedera apart from the decentralized nature of many blockchains. Ultimately, these design choices are focused on maximizing transaction speed and maintaining low, predictable fees.