Hubs are very simplistic devices that accept a single data packet then sends it out to all the computers that are connected to it. This means that only one data packet can pass through the hub at a time and all the data must wait for its turn. The overall bandwidth of the router is then shared by all the computers and that degrades the speed. This method often leads to a collision of data where a computer tries to send a packet of data to the hub while it is broadcasting. In order to detect and correct such collisions, most hubs employ added hardware that could slow down the total speed even more; an additional effect that it has is the limit on the number of elements you can have on your network.
Switches do not broadcast the data to all the computers in the network. Whenever a computer wishes to connect to another computer, the internal circuitry of the switch creates a bridge between the two; very comparable to old telephone operators who operate switchboards. This means that multiple paths can exist in the switch at the same time, making it possible for computers to send data at full speed regardless of what other network elements are doing. Collisions do not happen on switches, this lifts the speed and element limits seen on hubs.
The reason why hubs gained early prominence was the high price of switches. But today, the prices of switches have gone down significantly that there is no longer any reason to choose a hub over a switch. Because of that, hubs have become obsolete for all usual applications except for a couple of specialized niches.
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