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Hyperledger Fabric – What Is It and How Does It Work?

The cryptocurrency world continues to see new developer ideas enter the market. Today, we will simplify a technical aspect: the Hyperledger Fabric technology.

Any reader interested in learning about the most complex aspects of the topic can refer to the official documentation. This article will analyze the main elements of this system, also highlighting important criticisms in the sector.

Understanding Hyperledger Fabric

Let’s start, first of all, by understanding the origin of the instrument name:

  • Hyperledger is an open-source distributed ledger system. A group of developers from the Linux Foundation launched this product in December 2015.
  • Fabric is a decentralized ledger technology-based (DLT) platform owned by IBM.

Hyperledger Fabric combines the know-how of Linux Foundations and IBM to create a modular blockchain framework. A developer can use this tool to build blockchain-based solutions and products.

There are tons of blockchain projects that are trying to leverage Hyperledger. To date, the Linux Foundation estimates around 30,000 projects on this system.

The demand for private blockchain systems

One of the main limitations of traditional blockchains is that of a transaction’s confidentiality. As a result, there are areas where an organization may consider it dangerous to disclose information about its transactions to the public.

Let’s think, for example, of the defense industry. Sensitive information in the wrong hands could cause enormous damage to national governments. The transparency of blockchain technology can become a limitation for many businesses.  

In this context, it is clear that not everyone should manage to access a private blockchain. For example, companies may need to know and verify a counterparty’s identity. At the same time, an external operator does not need to see this information.

Hyperledger Fabric is, essentially, the market’s answer to this need.

A quick technical overview

We do not intend to explain how Hyperledger Fabric works highly complexly. Instead, to simplify, we can divide the framework into three pillars:

  • Chaincode: an open-source set of smart contracts which businesses can adapt to their needs.
  • Transaction ordering: several nodes in the system serve the unique purpose of ordering transactions.
  • Transaction validation & commitment: a system enables the validation of individual transactions and their storage in the ledger. The infrastructure needs fewer trust levels, making Hyperledger Fabric a relatively efficient tool.

Furthermore, each player can have one of the three following roles in Hyperledger Fabric:

  • Endorser: the entity that receives the transaction proposal.
  • Committer: the entity that validates the endorsement operations of the transaction.
  • Consenter: the entity that takes charge of the internal consensus mechanism in the system.

The most important thing to understand is what the Hyperledger Fabric information flow is all about. As we can guess, only the confirming instructions circulate among the different entities of the system.

This structure does not envisage the need to circulate other data relating to individual transactions. The direct consequence of this mechanism is the potential high scalability of the entire ecosystem.

Existing criticism

There is a lot of criticism of this new system in the blockchain sector. However, history teaches us that criticism can lead to significant technological improvements. For this reason, we believe it is essential to mention two of the main arguments against Hyperledger Fabric.

A non-blockchain technology?

Several people active in the crypto sector accuse Hyperledger Fabric of using non-blockchain technology. A team of researchers in Paris published a paper in 2019 on this topic.

The researchers’ engineering approach appears to demonstrate critical flaws in Hyperledger Fabric. According to the team, the main issue is the slowness of information propagation between users.

Fighting monopolization

We believe it is essential to clarify that Hyperledger Fabric is not the only technology in this market niche. For example, a 2020 study showed that Corda currently enjoys more incredible popularity among developers.

Competition in the sector should create a better product for the end-user. Hyperledger Fabric is interestingly failing to take the entire market. There seem to be many developers who agree with the researchers we mentioned earlier.

Is it possible to create a token on Hyperledger Fabric?

Yes, one of the main applications of Hyperledger Fabric is the issuance of new tokens. As one may guess, creating a token is a highly-technical process. Once again, we will attempt to simplify the matter as follows:

  • Issuing: developers must locate an empty (or, as they call it, “unspent”) space in the system. At this point, they will be able to issue the new token.
  • Listing: once developers issue a token, the whole community operating on Hyperledger Fabric must know of it. This operation involves listing the coin internally, making other developers aware of its existence.
  • Transferring: users can spend tokens by moving them to a recipient. This operation removes the coin amount from the system.
  • Redemption: this phase stores the information on the whole operation in the ledger. This step enables users to issue only unspent tokens, a fairness protection level in the system.

Final thoughts

This article has shed some light on the subject of Hyperledger Fabric. In many contexts, the transparency of blockchain is a strength of this new technology. However, there are sectors where excessive transparency can create non-trivial complications.

Hyperledger Fabric is one of the many answers the market has given to this demand. However, as mentioned in the text, some alternatives are even more popular among developers.

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High competition can create a more excellent innovative drive. Companies entering this sector will have to face increasingly competent competitors. End-users will have an increasingly wide range of products at their disposal, with simplified access conditions.

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