Ethereum Liability Problem Solved by Hashgraph
- Ethereum allows for unauthorized network forking
- Forking creates ambiguity around which chain is the “legitimate” one
Unlike Ethereum, Hashgraph is not open source, which might seem like a con of using Hashgraph. However, as large multinationals begin to use this technology to run their transactions or execute their contracts, they will focus on one key metric to judge cryptocurrencies: security. Being open source, Ethereum brings about significant security concerns due to forking.
Forking
In order to understand one of the main security flaws in Ethereum, one must understand what forking is. In broad terms, forking is taking a copy of some source and developing on it. In Ethereum, this means copying a network, building new blocks on it, and running with a different set of rules. If these rules still work on previous versions, then the change is considered a soft fork. If the changes do not work on previous versions, however, it is called a hard fork. Once a new chain has enough blocks on it, it becomes a different chain and creates a fork. Such forking occurred in Ethereum as the network was upgraded to remove hacker transactions. Some who disagreed with such measures kept running the old network (Ethereum Classic), creating a fork.
Security Flaw
Since the network is open source, there does not need to be consent from the initial parties for the forking to happen. Anyone with the means to copy and produce a new chain can fork a network. After a fork, it is difficult to determine which network is legitimate. This is due to the ambiguity of the validation system. Currently, this validation only comes from assessing which chain is longer or which has more computing power. When looking at smart contracts deployed by larger corporations, this ambiguity could expose companies to severe liabilities.
Suppose an ill-intentioned group decided to fork a network containing smart contracts for a large public company. Also imagine that the chain built by this group is longer than the one continued by the public company. Those originally making transactions on the sole network would now be faced with choosing which chain to transact on. Which chain would be the legitimate one? Merely choosing the one with more computing power or more blocks would not necessarily be the correct decision. A third party could have more resources than the original network runner, causing the legitimate network to look like the unofficial one. This flaw creates the opportunity for ill-intentioned parties to “take over” networks by forking them and bringing about this ambiguity. For large public companies that must answer to shareholders, and regulatory government agencies, this is a massive liability.
Solution: Hashgraph
Hashgraph is not open source; it is open review. While any party could copy a network and run it locally, they could not use it for commercial purposes due to the legal protections that Hashgraph has. Since the networks on Hashgraph cannot be duplicated for commercial purposes, the original network runners are safe from unauthorized forking. The ill-intentioned party cannot profit from their forking of the network. This allows those running networks to be able to rely on those networks, because they would not have to worry about their network being forcefully forked.
Why is it important for a large company to be able to rely on the network or for its legitimacy to be maintained? The reason is that these companies plan out their cash flows years in advance in order to structure their financing and make operational decisions. Any change to the flow of their money, for example not having access to the transactions in a smart contract due to an ambiguity, could prevent the company from investing in their business or run operations. Additionally, credit analyst would lower the credit rating of these companies given the exposure to risky investments or, in the case of smart contracts, risky cash flow logistics. Such an event would prevent these companies from accessing loans and financing their business. As cryptocurrencies gradually become adopted by large companies, their procedures need to adapt to company’s needs. Regardless of the benefits Ethereum and other similar cryptocurrencies might have, companies will pick the safer, more secure option that will appease their shareholders: Hashgraph.
Read more:
https://lightrains.com/blogs/what-is-meant-by-forking-blockchain
https://www.fxstreet.com/cryptocurrencies/resources/what-are-cryptocurrency-forks
