What Is Hashgraph, and Why Does Hedera Believe It Can Beat Blockchain?

Hedera does not use a blockchain. Instead, it runs on a data structure called a hashgraph, which processes transactions using a gossip protocol and virtual voting rather than a chain of blocks. The result, Hedera claims, is a network that is faster, cheaper, and more energy-efficient than most public blockchains available today.

How a Blockchain Actually Works

A blockchain groups transactions into blocks. Each block links to the one before it, forming a chain. Miners or validators compete or take turns to add the next block. Only one block gets added at a time, and the rest of the network must agree on it before moving forward.

This process works, but it has limits. Adding blocks sequentially creates a bottleneck. If two valid blocks are created at the same time, one gets discarded. That discarded work is called an orphaned block, and it represents wasted effort and wasted time.

So What Is a Hashgraph?

A hashgraph is a directed acyclic graph, or DAG. Instead of grouping transactions into blocks and adding them in a single line, every node on the network constantly shares information with other nodes in small packets called "gossip." Each gossip message contains recent transactions plus a record of who told what to whom and when.

This creates a web of interconnected event records rather than a single chain. Nothing gets discarded. Every valid transaction is woven into the structure.

Hedera's hashgraph was invented by Dr. Leemon Baird, co-founder and Chief Scientist of Hedera, and is patented technology. That patent is a point of debate in the open-source crypto community, which we will return to.

How Does Hedera Reach Consensus?

This is where the technical design gets interesting. Hedera uses a process called virtual voting.

In most blockchains, validators send actual votes across the network to agree on the next state. That takes bandwidth and time. In Hedera's system, each node can mathematically calculate how every other node would vote, based on the gossip history it already holds. No vote messages need to travel across the network. The consensus is calculated locally using the shared event graph.

Key properties Hedera claims from this design:

• Finality in under 3 seconds, with the current network average around 2 to 3 seconds
• Throughput of up to 10,000 transactions per second on the public network
• Energy consumption low enough that Hedera has been carbon-negative since mid-2021, with carbon offsets purchased quarterly and verified by third-party provider Terrapass

For context, Bitcoin processes roughly 7 transactions per second and Ethereum handles around 15 to 30 on its base layer without additional scaling solutions.

Is Hedera Actually Decentralized?

This is a fair and frequently asked question, and the honest answer is: not in the same way Bitcoin is.

Hedera is governed by the Hedera Council, a group of up to 39 term-limited organizations, with 31 members currently active across 11 industries worldwide. Members include Google, IBM, Boeing, Deutsche Telekom, LG Electronics, Accenture, FedEx, McLaren Racing, and Standard Bank, among others. Council members run the consensus nodes, approve network upgrades, and oversee treasury decisions.

Hedera argues this model delivers predictable governance and regulatory clarity that open validator sets cannot. Critics argue it is closer to a permissioned enterprise network than a truly decentralized public ledger.

Both positions have merit. The answer depends on what you value more: censorship resistance or operational reliability.

What Does Hedera Use the Hashgraph For?

Hedera's public network supports several practical use cases today.

Its native token is HBAR, used to pay transaction fees and as a staking mechanism for network security. Transaction fees on Hedera are fixed in USD terms and converted to HBAR at execution, making costs predictable for developers.

Hedera Token Service

Hedera Token Service, or HTS, allows developers to mint fungible and non-fungible tokens natively at the protocol layer without smart contracts. This makes token creation faster and cheaper than deploying an ERC-20 contract on Ethereum.

Hedera Smart Contract Service

Hedera runs an EVM-compatible smart contract layer, meaning Solidity developers can deploy existing Ethereum code on Hedera with minimal changes. This compatibility has helped attract developers without requiring them to learn a new language.

Real-World Deployments

The Coupon Bureau runs a national digital coupon infrastructure on Hedera, processing billions of token redemptions. Standard Bank, now a full Hedera Council member, has used the network for cross-border payment infrastructure. Lloyds Banking Group, Aberdeen Investments, and Archax recently executed the UK's first foreign exchange trades using tokenized real-world assets as collateral on the Hedera network.

The Patent Question

Unlike Ethereum, Solana, or Bitcoin, the hashgraph algorithm is patented and owned by Swirlds, the company co-founded by Dr. Leemon Baird and Mance Harmon. Hedera licenses this technology exclusively.

This means no one can fork Hedera's core consensus algorithm and launch a competing network without licensing agreements, unlike every major blockchain in existence. For enterprise clients, this provides legal certainty. For the open-source community, it is a structural objection that has not gone away.

Conclusion

Hedera's hashgraph solves real bottlenecks in traditional blockchain design. It delivers confirmed finality in under 3 seconds, handles high transaction volumes, and keeps fees predictable. 

The Hedera Council model and the patented algorithm set it apart from decentralized public blockchains, and those differences are real tradeoffs, not just technical footnotes. Whether that makes it better than a blockchain depends entirely on what the user or developer actually needs from a distributed network.

Resources

1. Hedera Whitepaper – Hashgraph Consensus Algorithms: Fair Byzantine Fault Tolerance
2. Hedera Official Site – How Hedera Works: Gossip Protocol, Virtual Voting, and the Hashgraph
3. Hedera Council – Hedera Council: Members, Structure, and Term Limits
4. Hedera Sustainability Page – Hedera Carbon Negative Operations and Terrapass Quarterly Offset Verification
5. The Coupon Bureau – National Digital Promotions Infrastructure Built on Hedera
6. Hedera Technical Blog: Latency – Hedera Technical Insights: Transaction Latency and Finality Under 3 Seconds
7. Hedera Blog: A New Era For Hedera – Hedera Council Rebrand, New Leadership, and 2025 Governance Reforms