Ethereum vs. Hyperledger: How Do They Differ?

Introduction

There are currently more than one thousand unique blockchain projects in the world. Therefore, it can be a real challenge for novice cryptocurrency investors to pick and choose the best option. Ethereum is the second largest blockchain by market cap and popularity in the world. However, several new blockchains are arriving in the cryptocurrency sector with more upgrades and features. Hyperledger is another promising blockchain project that has gained traction among investors recently.

What is Ethereum?

Cryptocurrency understands that blockchains are digital ledger that allows users to perform online transactions without the presence of a centralized supervisor. Following the introduction of the beacon blockchain project Bitcoin, a group of developers combined their heads to create a new blockchain project called Ethereum. Ethereum made its debut in 2015, during a launch event called Frontier and mined its first block.

Ethereum blockchain expanded the traditional blockchain purpose and created a program that was able to not only issue cryptocurrencies but also host dApps. dApps are decentralized applications that can be used for performing different programming functions automatically using smart contracts. As per stateofthedapps.com, there are around 2,970 dApps on the Ethereum network today.

Key Features of Ethereum

 Ethereum blockchain was first created by a Canadian programmer called Vitalik Buterin in 2014. Since the inception of the Ethereum network, many other programmers joined the blockchain to complete and enhance it such as Gavin Wood, Charles Hoskinson, Joseph Lubin, Anthony Di Lorio, and Amir Chetrit among others. At its peak, the Ethereum market cap was valued at $163.40 billion. Here are some of the key features of the Ethereum blockchain:

Smart Contracts

Smart contracts are the core technology of the Ethereum network. A smart contract is a type of automation code that programmers create to carry out a function when a predetermined set of conditions are met. It means that the Ethereum network can have applications and projects that run decentralized such as transactions without the intervention of a supervisor.

Ethereum Coins

The Ethereum network has a main coin issue that is called Ether or ETH. ETH is the core currency issuance of Ethereum 2.0 while ETC is a native coin to Ethereum Classic. Ethereum can host other cryptocurrency projects that can also issue more cryptocurrencies. It is worth noting that the main digital currency of a blockchain network is called a coin while the secondary cryptocurrencies hosted on the same blockchains are known as tokens.

Hard Fork

Many cryptocurrency investors have heard about two Ethereum coins namely ETH, and ETC. It is worth noting that there are two Ethereum blockchains. The beacon Ethereum blockchain was hacked in 2016 and the developers decided to add a new update to the blockchain to reclaim the stolen currencies. However, some community members did not agree to the update and it resulted in a hard fork that created Ethereum 2.0 and Ethereum Classic. 

Ethereum Virtual Machine

Ethereum Virtual Machine is mimicry of the Turin Virtual Machine that allows computer programs to process any information based on binary data strings. EVM is seen as the underlying code that defines the architecture, smart contracts, software, and stakeholder interaction on the network.

Decentralized Autonomous Organization (DAO)

DAO or Decentralized Autonomous Organizations are a type of smart contract program. DAOs allow the community members on the Ethereum blockchain to vote for a particular decision on a democratic basis. DAOs are also automated and they are designed to carry out the functions of allowing the participants to cast their votes regarding a situation and perform the election process without any additional intervention.

Decentralized Applications (dApps)

Decentralized applications or dApps are blockchain-based applications that can perform various online functions that can keep operating independently and autonomously. DApps are automated versions of any traditional application that runs on smartphones, tablets, or any other operating system. However, programmers on Ethereum need to write the DApps code with programming language solidity that is compatible with the blockchain.

Advantages of Ethereum Blockchain

Permissioned Ecosystem

Ethereum network is a permission network which means that anyone hailing from any part of the world can participate in the blockchain. A permissioned blockchain is a type of digital ledger that does not require any external approval or verification for participation. Bitcoin is the first ever permissioned and open-sourced network. For Ethereum, the permissioned status means that any programmer can also join the network and create a unique decentralized application or trade its tokens.

Data Privacy

Ethereum can offer data protection and transaction privacy to commercial enterprises with private layers. It means that programmers can create decentralized applications or second-layer solutions on the Ethereum network that are wholly private and reserved for the use of nominated parties or institutions.

Scalability

There are some issues with the baseline scalability of the Ethereum network. However, projects like Consortium allow the Ethereum users to experience extended scalability options for the stakeholders that are even better than the underlying blockchain network using innovations like the Proof of Authority model.

Tokenization

Ethereum network cannot only host decentralized applications but also grants the programmers the power to tokenize their projects. Tokenization utility is beyond just issuing a unique cryptocurrency for a dApp, it is used for fractional sales of real estate, product line expansion, and creating innovative incentive models.

Interoperability

Interoperability is the quality of a computer program communicating and exchanging data with other parallel programs. Ethereum networks allow the programmers to create parachain projects that will allow the investors to send cryptocurrencies and other blockchain products across other networks without having to use a third-party intermediary.

Limitations of Ethereum Blockchain

Programming Language

Ethereum blockchain is compatible with the Turing standard, which means that it can process any information based on ones and zeros within its programming parameters. The core Ethereum code is written in a programming language similar to C++. Other programming languages compatible with the blockchain are Java, Python, and Solidity. However, Solidity is a complicated programming language and Solidity programmers are quite rare.

Financial Risks

Ether price histogram indicates a meandering pattern that indicates a considerable probability of investment risks. Cryptocurrencies are intrinsically very volatile in terms of their book value. Therefore, cryptocurrencies like Ethereum present a challenging investment option for new investors and it takes time to gain trading experience.

Scalability Issues

The baseline Ethereum blockchain is not as immutable as Bitcoin but it still faces issues with scalability. The main reason for the traffic overload on the Ethereum blockchain is the presence of more than 2 thousand decentralized applications on the network. On account of its limited scalability, the Ethereum network also faces issues like massive transaction fees, technical blond spots, hacks, and malfunctions.

What is Hyperledger?

Hyperledger is a decentralized project that allows users to create privatized blockchains for commercial usage. The Bitcoin network introduced blockchain as a way for investors to use decentralized cryptocurrencies, and Ethereum allowed programmers to deploy decentralized applications. 

In the same vein, Hyperledger which is created by the Linux Foundation is a project that allows users to create private blockchains. Hyperledger is an open-sourced project and it contains several frameworks such as Fabric, Sawtooth, Iroha, Indy, and Burrow. Hyperledger is dedicated to creating enterprise solutions and deploying blockchain projects for industrial purposes.

Key features of Hyperledger

Consensus Layer

The Consensus layer on Hyperledger is used for creating unique orders and verification of all the terms and conditions necessary to perform legitimate transactions present on each block.

Smart Contract

The smart contract layers on Hyperledger allow the stakeholders to process transaction queries and approve only the ones that met all the requirements.

Communication

The communication layer on Hyperledger is a messaging protocol that allows the transaction conductors to exchange messages for peer-to-peer connections.

Identity Management

Identity management services on Hyperledger are required to confirm the stakeholder ownership statuses and ensure verified transactions on the network.

APIs

APIs or application programming interfaces on Hyperlegder allow the network users to exchange information, transactions, messages, and cryptocurrencies with other blockchains and external applications.

Advantages of Hyperledger

Modular Architect

Hyperledger has a modular architect which means that it allows the programmers to create plug-in protocols. For commercial enterprises, it is possible to create permissioned blockchains using Hyperledger and at the same time add their existing plug-in components such as identity management systems due to the modular architecture.

Permissioned Blockchain

Hyperledger is a network that allows commercial enterprises to create permissioned blockchain networks. It means that these permissioned blockchains only allow verified and selected individuals to participate and view the transaction data. The Fabric framework on Hyperlegder is also a permissioned network and only those parties who have been approved to use can join. Hyperledger also can grant different levels of entry to different users based on their authorization level.

Performance and Scalability

Hyperledger does not use the PoW consensus model which means that it does not require mining. Typically, PoW blockchains take more time for processing transactions and conduct verifications.

The scalability of Hyperlegder is considerably higher than traditional blockchains. Furthermore, the transaction speeds are also fast since they occur on a set of permissioned networks with a nominal amount of users.

Data Partitioning

Private enterprises are always worried about keeping their internal transaction history private. However, even blockchain encryption is not enough to completely warrant financial data protection for an international organization. In a decade quantum computers will be available publically that will allow users to perform billions of computing functions in a nano-second. However, Hyperledger Fabric has introduced data portioning channels that can tackle the issue effectively.

Querying Capability

Hyperledger allows the users to create querying protocols using LevelDB technology. It is a key-value database that is stored in the form of JSON. JSON database eliminates the need for constantly editing applications to make the querying process faster and smoother.

Limitations of Hyperledger

Transparency

Since Hyperledger is a permissioned blockchain it means that it lacks transparency which is one important quality present in all public blockchains. Additionally, all B2B and B2C blockchains on Hyperlegder allot a varied level of entrance approval that does not offer complete disclosure for all its participants.

Cryptocurrencies

Hyperledger does not have a cryptocurrency or token issue. It means that there are no incentives for the users who are validating its nodes or performing transactions. On the other hand, some users claim that it is impossible to have anonymous transactions on the network and the need for expensive and time-consuming mining is also absent.

Consensus Model

Hyperledger has received a considerable amount of criticism for its lack of a PoW consensus model. Lack of PoW can jeopardize its data security protocol which is replaced by an Identity management system on Hyperledger. Furthermore, the absence of PoW also removes immutability from Hyperledger. At the same time, the corporations using the network need to employ a specialized tamper-evident mechanism to check hashes for data manipulation.

Main Differences between Hyperledger and Ethereum

Programming Languages

Hyperledger is a private or permissioned blockchain network that uses Golang for creating chain codes. On the other hand, the Ethereum network is a blockchain where the smart contracts are written using Solidity. There are more Golang developers than Solidity programmers on account of their difficulty level.

Purpose

The underlying purpose of the Ethereum blockchain is that the users can run smart contracts that are based on EVMs and create decentralized applications. On the other hand, Hyperledger uses a modular architecture that allows the users to create pluggable applications that work for creating permissioned blockchains for enterprise purposes.

Tokens

Ethereum Classic blockchain has a core coin issue called ETC while Ethereum 2.0 native coin is known as ETH. At the same time, the Ethereum network allows its developers to tokenize any and every type of decentralized application on the network. On the other hand, Hyperledger does not have any type of cryptocurrencies or token issuing protocols that do not allow the developers to incentivize the use of the blockchain in any capacity.

Confidentiality

All the transactions performed on the Ethereum network are transparent because the network is a public blockchain or permission-less network.  Ethereum network does allow the developers to create second-layer decentralized applications that are private or permissioned. On the other hand, Hyperledger is a dedicated permissioned network and blockchain generator that is dedicated to providing commercial enterprises with complete data privacy using protocols like Data Partitioning Channels.

Transaction Costs

Since Hyperledger blockchain is permissioned, it means that only authorized users are permitted to traverse through the network. Therefore, there are no transaction fees on the blockchain that are present to reward the miners. On the other hand, the Ethereum network uses the PoW consensus model and it requires transaction fees from transaction conductors as commission for miners.

Consensus Mechanism

Hyperledger allows the developers to use no-op (consensus-free transactions) or PBFT (Practical Byzantine Fault Tolerance) for node validation. PBFT is a validation method where two or more transaction participants can create a financial agreement for a unanimously agreed outcome. Meanwhile, the Ethereum network uses the PoW consensus model that requires miners to validate transactions on each blockchain using computational power.

Both Ethereum and Hyperledger have unique pros and cons to offer. When it comes to choosing between both blockchain projects, it is best to keep the requirements of the users first. For enterprise users, Hyperlegder is the ideal choice. Financial and other organizations must keep their data and transaction history private from the public for a prolonged duration. Therefore, if a commercial user tries to perform sensitive transactions on the Ethereum network they will have to suffer.

On the other hand, a retail cryptocurrency investor cannot show any type of interest in the Hyperledger blockchain. Hyperlegder blockchain does not allow users to issue tokens or cryptocurrencies and they do not allow permission to perform transactions or public participation since they are reserved for enterprise usage.  Hyperledgers do not require miners, cryptocurrency traders, or any other unauthorized users. Developers can only use Hyperledger for creating permissioned and private blockchains that are used by private organizations.

Conclusion

Hyperledger is a unique blockchain that was introduced in 2016 as a permissioned network that does not have any mining or cryptocurrencies. On the other hand, Ethereum was conceptualized in 2014 and it is permission-less blockchain that everyone can use to make public and transparent transactions. Ethereum is also used for creating and hosting decentralized applications that can be tokenized. Both blockchains have different merits and are advantageous in their own right.


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