Hyperledger or Ethereum Smart Contracts| Which is Better

In this comprehensive article, explore the key differences, business purposes, and other complexities of smart contracts with Ethereum and Hyperledger blockchain development for businesses.

Smart contracts carry out transactions without intermediaries between one or more parties. One of the critical challenges of any transaction in real life is trusting involved parties. Financial institutions, law firms, notaries, contractual arrangements, origin certificates, and many others generate a pyramid of paperwork during transactions. Additionally, a lot of time and money is required to establish trust between the two sides of a contract.

Smart contract for Business 

With smart contracts solutions development, doing business transactions in a trustless world gets easier. Indeed, a smart contract is a piece of code. It stipulates a condition and action to be taken within a business contract. It validates the compliance of predefined terms and further instructs the course of action. Otherwise, it denies them.

How it Works

For instance, John is selling his car to Bob. The smart contract validates that Bob has received the car ownership and ensures that John has received the money. Upon meeting the mentioned conditions, it transfers the car ownership to Bob and unlocks John's payment. If Bob has got the car ownership but is taking time to transfer money, a smart contract will revoke it to its previous owner, as stated.

Besides this, smart contracts can manage more complex transactions. Therefore, they are of great benefit to companies in virtually every industry.

What Can it Do 

When used with Ethereum or Hyperledger blockchain development, Smart contracts can simplify and augment various business processes, including payments, insurance claims, product authenticity, and more. Virtually, any business requiring its operations to operate automatically under certain conditions can do with it.

Also, read | How Smart Contracts Fuel The Blockchain Technology

Ethereum and Hyperledger-powered Smart contracts

Ethereum smart contracts and serves their purpose well for public applications like ICOs and other unregulated platforms. However, enterprise blockchain implementation needs a specific approach to access management and protection. In such cases, Hyperledger 's capabilities seem more appealing.

Let's understand the workings of smart contracts of both Ethereum and Hyperledger-based smart contracts and how they serve different business purposes.

A Comparison between Hyperledger vs. Ethereum smart contracts

"The portrayal of the Hyperledger and Ethereum networks as competitors is wrong," according to Brian Behlendorf, Executive Director of Hyperledger.

There are, however, a few key differences that characterize their use cases and applications.

Fundamental Difference

Hyperledger smart contracts mainly serve the needs of an enterprise blockchain solution. Hyperledger Fabric, a blockchain platform for smart contracts, provides efficient, permissioned business smart contracts. In Hyperledger, we call them chaincode.

Ethereum 's smart contract solutions provide a standard environment for developing a set of rules to build public smart contracts. It makes it rather easy and straightforward to write smart contracts on Ethereum.

The Hyperledger Fabric, as well as the Ethereum, are open source.

Business Purpose

It is the key difference between Ethereum and Hyperledger Fabric smart contracts. It defines several unique features in their development and use.

Indeed, Ethereum smart contracts intend to serve the needs of decentralized public applications. Thus, they are efficient for applications like ICOs and public digital payment systems.

In comparison, smart contracts generated in Hyperledger Fabric primarily focus on serving business purposes of a closed enterprise ecosystem. They are not open to the public.

Security and Access Management

Ethereum smart contracts are for public use. They do not have any inherent permission mechanism and are open to all. Therefore, we recommend it in cases where a company aims to get as many users as possible. Instances include crowdfunding via an ICO or any other public program.

Possibly, we can implement a permitted smart Ethereum contract. However, it requires special programming effort. Put it another way a company can set up a private blockchain on Ethereum that only permissioned parties can access.

In turn, the design of the Hyperledger chaincode focuses on serving permissioned enterprise solutions. It enables participation only by permission. A closed community uses a smart contract built on Hyperledger Fabric. It means new members can join only by invitation. Hyperledger Fabric also supports multi-level access schemes.

The permissions can get configured in a Hyperledger blockchain. It enables assigning different permissions to specific user groups based on their roles. Such a versatile authorization program helps you to achieve the optimal degree of protection and effectiveness in an enterprise solution.

Hyperledger provides a more efficient alternative for businesses requiring enhanced protection of their activities. It establishes an immediate security shield around the company network.

Also, read | Creating Industrial Permissioned Systems with Hyperledger Fabric

Consensus Mechanisms

At present, Ethereum uses the Proof-of-Work consensus algorithm. It consumes power and requires transaction fees. In a public system where you pay to get the transaction managed, that is rational. Ethereum, however, is employing the implementation of a more economical algorithm called the Proof-of-Stake algorithm in the next release of the Casper edition.

Enterprise blockchain solutions, being closed networks, do not have to charge per-transaction fees, and intend to be cost-effective. Hyperledger's smart contracts use the Practical Byzantine Fault Tolerance algorithm, which is cost-efficient.

Furthermore, Hyperledger may also use voting-based algorithms to reach consensus. Such consensus in Hyperledger gets achieved in the pool of another consensus based on the lottery.

Hyperledger's degree of trust is higher than that of public blockchains due to being a permissioned network. It does not require all nodes to be involved in validating a transaction. It requires only those in compliance with a policy. Therefore, the transmission speed is higher for the network.

Also, read | Understanding the Blockchain and Decentralized Consensus

Privacy 

There is no way in Ethereum to make a transaction available to a few participants, and inaccessible for others. If it gets released on the network, it is visible to everyone. It is a feature in the Ethereum blockchain that preserves reliability and accountability and benefits public networks.

Business requirements, however, also have different goals. Any company that deals with several partners may have different conditions. The terms must be kept confidential. When one of the partners gets a discount, the other partners should not be aware of it.

Hyperledger provides solutions to these confidentiality challenges. It enables flexible conditions to be established and maintained within the same network.

Programming Language

Ethereum smart contracts get written in a purpose-built programming language, Solidity, developed with a focus on standardization. Thus, it simplifies the writing and compilation of smart contracts. Also, Hyperledger Fabric employs Golang, or, for short, Go. Google has developed the language and is gradually becoming more popular now.

Also, read | Resourceful Blockchain Programming Languages 2020 | Updated List

The Use of Cryptocurrency and Tokenization

Ethereum has a cryptocurrency built into it, ETH, but Hyperledger is cryptocurrency-agnostic. It gives Ethereum an edge over Hyperledger for applications requiring a payment instrument.

Both blockchains support custom tokens, and therefore, are suitable for tokenization purposes.

Challenges 

Ethereum has more developers than those able to build an efficient smart contract with Hyperledger. The explanation is simple – Ethereum is much more common today. Also, blockchain enterprise is still in its inception phase. As a blockchain development company that works with both Ethereum and Hyperledger smart contracts, we see that big businesses are beginning to explore the opportunities of blockchain and its enterprise-level applications.

What Should You Choose

Considering what we've been talking about, companies that deal with an expansive public client base should opt for Ethereum. Use cases where the Ethereum blockchain's advantages can prove beneficial include ICOs, insurance schemes, consumer loyalty systems, cryptocurrency exchange platforms. Applications involving any payment transactions must prefer Ethereum and its cryptocurrency.

By the way, cryptocurrencies as an investment or payment instrument are going beyond their primary intent. They are now equivalent to other properties – for instance, insurance coverage (search fizzy, a flight delay insurance scheme) or reward points (see Delta Air Lines).

The specifications of enterprise business systems, on the other hand, are substantially different. Security, access management, confidentiality, and a high degree of customization and flexibility are what they require. Hyperledger smart contracts satisfy all these criteria enabling custom implementations to be created and deployed efficiently, safely, and scalably.

Conclusion

We hope to have proven with our review that Ethereum and Hyperledger are no competitors. Based on Ethereum and Hyperledger Fabric, smart contracts are designed for different purposes, and thus, target specific audiences.

Explore our blockchain development services and contact us for a free consultation about the implementation of blockchain for your enterprise. Take this chance to use this cutting-edge technology to revamp your market infrastructure.