Ethereum V/S Hyperledger Fabric. A Comprehensive Comparison.
These days, it is foolishness to try and introduce the concept of blockchain to people. A buzzword that has quickly become part and parcel of the lives of people even remotely interested in tech, blockchain has been already put to incredible use in all sectors imaginable. Perhaps the fintech sector has benefitted the most, but other areas like supply chain management, healthcare, education, computing and data storage are not far behind. The power of blockchain to disrupt every industry imaginable is one of a kind. Since its inception in 2008, it has been used to power many major projects, one of the most famous ones being the Bitcoin. Satoshi Nakamoto, whether it be an individual or a group of individuals, has/have really set the tone for the world to follow when it comes to blockchain adoption. Government organizations and federations are not far behind. Countries have begun to acknowledge the immense potential that blockchain has, and are gradually leaning towards incorporating blockchains wherever possible. This was not always the case, as there were doubts regarding the technology due to it being in its infancy. The concept has now matured, so to speak, and can be effectively used in all governmental and private work sectors.
Two of the most popular blockchain platforms include the Ethereum network and Hyperledger. At the most basic of levels, they differ from each other due to their blockchain implementations. Ethereum, using a public blockchain design, has certain advantages over Hyperledger, which uses a private blockchain design, and vice versa. Before diving into the comparison of Ethereum v/s Hyperledger, let us discuss a bit about the public and private blockchain implementations.
The main differences between public and private blockchains
Starting off with a public blockchain, we can gauge a lot about what they are all about from the name itself. Public blockchains are open to everybody, and do not require permissions to join the network. Anyone can download the entire blockchain on their computer, as one does when they operate an Ethereum node on their machine, store information and even deploy smart contracts on the network. As typified by Ethereum, the use cases of public blockchains go far beyond cryptocurrencies. Communities worldwide can store and exchange data safely using the public blockchain designs, as no one is restricted from joining the network.
Public blockchains usually employ incentive mechanisms to encourage users to participate and verify transactions on the blockchain. The Bitcoin network works on this proof-of-work consensus mechanism. On the flip side, however, the public blockchains do have a certain set of drawbacks that makes companies and large organizations shy away from using them. Little privacy for transactions is one major reason why enterprises would like to use something like Hyperledger for their blockchain needs. Also, the computing power required to maintain the ledger is huge. The proof-of-work problems must be solved by each node on the network in order to maintain synchronisation. In addition to this, public blockchains can be slow and inefficient simply because of the large number of entities involved in decision making.
How to solve the problems with public blockchains? Enter private ones.
The polar opposites as compared to public blockchains, private ones give full control to their owners and are more flexible. Things are obviously tighter and more secure than public networks. Permissioned networks are usually employed, with participants validated by the network starter. Hyperledger is based on the private blockchain concept since it was designed keeping enterprise needs in mind.
Adjusting rules is easier in private networks. Different permission levels, implementing updates, memberships, public exposure, and other factors can all be decided freely and quickly. Evidently, private blockchains run faster and are more efficient than their public counterparts. This does, however, require a huge amount of trust within the partners operating the blockchain. There is always the risk of one or more partners going rogue and sabotaging the entire network. Thus, private and public blockchains both have their own demons. This was all you need to know about the private and permissioned blockchains before delving into the comparison of ethereum v/s hyperledger fabric.
Hyperledger and the problems it solves
IT giants like IBM and Intel saw the blockchain, realized the massive potential on offer, and developed something that can truly be described as one for the ages. They saw the benefits on blockchain in Bitcoin, and came up with the Hyperledger, which is a Linux foundation project aimed at evolving leadership and advancing technology. With over 130 members across the world, Hyperledger is the Linux foundation’s fastest growing project. Aimed at satisfying enterprise and commercial needs, Hyperledger utilizes a private blockchain structure which provides numerous core modules and easy to use APIs that enable quick and efficient development. Confidential transactions, increased security and privacy are a few of the major features of this technology, and they play a huge part in making Hyperledger ideal for businesses and enterprises.
Consensus mechanisms here involve comprehensive processes of tracing the whole transaction from proposal to commitment. As opposed to simple proof of stake or proof of work algorithms, each node has a specific part to play here. A node may be a peer, a client or an orderer. The absence of any mining concept gives birth to another major difference between Hyperledger and Ethereum, which is the absence of a native cryptocurrency in Hyperledger. It goes without saying that smart contracts, called chaincode in Hyperledger, can be used to create cryptocurrencies if need be. Now that we’re discussing the comparison of ethereum v/s hyperledger fabric, let’s have a look at what hyperledger offers to the businesses.
Hyperledger solves all blockchain problems for businesses, as it incorporates all key elements of blockchain for enterprises-
1. Permissioned networks. Participation in the network involves validation from the network starter, thus making your business network safe and secure.
2. No cryptocurrency reliance. Computational power is saved, as there is no concept of mining involved.
3. Programmability. Chaincode enables you to automate processes across your business infrastructure.
4. Confidential transactions. Enterprises can now make transactions on the network without worrying about data leaks and security issues.
I know, you’ve been waiting for me to discuss Ethereum since we’re doing a comparison of Ethereum v/s Hyperledger fabric. Vitalik Buterin’s extension to the blockchain concept has been an intriguing one, to say the least. Ethereum, an open source blockchain network, allows for DApp development using smart contracts, or chaincode in Hyperledger. Smart contracts consist of code that executes itself when certain conditions are met on the network. Solidity is the language preferred to write smart contracts, and are basically the fuel that runs Ethereum. Officially launched in 2015, Ethereum has gained popularity as a platform to support various DApps and ICOs, and not just cryptocurrency projects like Bitcoin.
There exists a native currency on the Ethereum network, known as ether. Executing smart contracts on the network costs gas, which is a technical term for a small amount of ether. The existence of a native currency allows the Ethereum network to function on proof of work algorithms for its mining functions. Upon verifying a transaction on the network, nodes receive the incentive in the form of ether. This helps in keeping the network going by giving participants a reason to contribute to the network. Even though the proof of work mechanism is a popular one, it has one or two nagging issues. One, it consumes too much computing power, and two, the miner incentives reduce over time, which could lead to the network losing genuine participants and inviting malicious threats. Due to these issues, Ethereum is trying to switch over to a proof of stake consensus algorithm.
Proof of stake refers to a consensus mechanism where owners are required to show proof of money that they own. Calculations are not required, as in PoW, and ether can be locked up to create scarcity. This drives up ETH prices, which means that only miners that possess ether would be able to validate blocks. Malicious validators verifying false nodes result in losing their ETH.
Ethereum, also referred to as the World Computer, could be the next internet, if implemented correctly.
What’s the difference, to sum up?
Besides the public vs. private blockchain view, let us try and sum up the key differences between Ethereum and Hyperledger in a few bullet points.
The intentions of designing these networks are probably the fundamental difference between these two blockchain implementations. While Hyperledger is designed to cater to business and enterprise needs, Ethereum is more focused towards the masses. The Ethereum Virtual Machine enables deployment of smart contracts to enable decentralized applications to work on the network.
- Consensus mechanism
Hyperledger does not require proof of stake or proof or work algorithms for verifying its transactions. It allows users to choose between no consensus requirements, or an agreement protocol such as the Practical Byzantine Fault Tolerance mechanism, where two or more parties involved agree on a key in such a way that the outcome can be influenced by both. Undesired third parties, therefore, cannot interfere in the transactions.
Ethereum, on the other hand, relies on proof of work algorithms as consensus mechanisms. Due to the pitfalls discussed before, it is switching to a proof of stake algorithm for verification of transactions. If you need to understand the nitty-gritty of ethereum v/s hyperledger fabric in terms of consensus mechanisms, have a look at this guide on consensus mechanisms.
- Cryptocurrencies (or lack thereof)
Hyperledger does not rely on cryptocurrencies for its transactions. No mining means there is no requirement for a native cryptocurrency, thus making it capable to handle high transaction rates. On the other hand, Ethereum with its built in currency ether can be advantageous over Hyperledger in use cases requiring cryptocurrencies. Hyperledger does not lag behind too much in this respect, since currencies can be deployed if needed via chaincode.
This is an extension of the public vs. private battle. Ethereum, being a public network, does not allow for much privacy, since every transaction is transparent and visible to everyone on the network. Hyperledger on the other hand allows for confidential transactions due to its private nature. Businesses are afforded flexibility and security by Hyperledger, which are two essential elements of running a successful organization. There can be a lot more points when it comes to the comparison of Ethereum v/s hyperledger fabric in terms of confidentiality.
A useful case study
Let’s discuss an interesting case to further understand the comparison of ethereum v/s hyperledger fabric. In the race to build friendly blockchain-as-a-service platforms, two of the biggest tech giants of the world, IBM and Microsoft, have adopted significantly different approaches. While it may happen that both of these moguls turn out to be successful, it would be a good idea to discuss their plans when talking about Ethereum vs. Hyperledger.
Systems being developed by both companies seem similar at first sight- massive ecosystems, cloud-based on the open source code, and the likes. Microsoft has seemingly sided with the Ethereum network, which was shown by the soft launch of the company’s BaaS services at an Ethereum event in 2015. Microsoft is a founding member of the Enterprise Ethereum Alliance but is not a member of the Ethereum foundation. Therefore, any changes to the Ethereum network could be done without any input from Microsoft. The fact that Ethereum is public also makes interaction with the network all the easier. Is this a positive? Let us wait and watch.
IBM has steered clear of public blockchains. Its BaaS service is based on Hyperledger fabric, the base code of which IBM wrote a large part. This is something that might give it an upper hand in the comparison of Ethereum v/s Hyperledger fabric. As opposed to Ethereum, IBM is a member of the governing committee of Hyperledger’s codebases. Therefore, there can be no changes made to the Hyperledger code and platform without IBM’s approval. This wipes out the possibility of bugs and problems in the services due to source code updates. Also, the private nature of the blockchain means that if, for instance, a bug was to be encountered in Hyperledger, it would be quickly solved, no doubt, but there is a high chance that the outside world would never even get a sniff of what happened.
Ethereum and Hyperledger present unique possibilities for all organizations. While Hyperledger is more focused towards the business side of things, Ethereum is more for the masses. Where it all will lead us remains to be seen. As of now, let us sit back and enjoy the joys of technology on offer!
So this was our comprehensive comparison on Ethereum v/s Hyperledger. Hope it was of some help to you. If you want a high-level discussion on this topic, feel free to get in touch with us. Our blockchain developers will be more than happy to take forward this discussion about ethereum v/s hyperledger fabric with you.