DAG technology in crypto
You have heard more than once what a problem scaling is for blockchain technology. It is for this reason that even Bitcoin has long been an extremely low-bandwidth network. Currently, there are many initiatives circulating around the crypto space to improve networks. Some experts suggest increasing block size, while others want to reduce processing time on the network. There is much debate about which variable should be changed, and given the complexity of the task, it is impossible to say when the problem will be solved.
However, some projects offer a more radical approach to solving problems: they have created entirely new networks that do not use the blockchain data structure at all. Instead, they seek to implement something called a directed acyclic graph (DAG).
What is a DAG (Directed acyclic graph)?
The idea of a cryptocurrency on DAG (directed acyclic graph) was first introduced in 2015 by Sergio Demian Lerner in his article in which he outlined his concept of a digital currency called a DAG coin. DAG technology is an alternative system that allows cryptocurrencies to function similarly to those that use blockchain technology without the need for blocks and miners.
Directional acyclic graphs are a general category in graph theory, computer science and mathematics that essentially constitute a topological order in which nodes (e.g. nodes, tasks or events) are connected to edges (directional arrows, dependency relations or transactions) in an asynchronous way (nodes cannot return and flow goes in one direction).
DAGs are applied in modeling many kinds of information where collections of events must be represented in the way they affect each other (probabilistic structures in Bayesian networks, historical data records, distributed version control systems, etc.)
This deviates from the blockchain technology paradigm in that the blockchain structure works by combining flat sequences of lists and grouping them into blocks. With blockchain, each block refers to and includes the previous block, which leads to bottlenecks when too many transactions start coming in too often.
This makes it difficult to reach consensus on allowable blocks (the notorious scalability problem). In a structured DAG environment, there is no theoretical constraint on transaction throughput because transactions are directly linked rather than grouped and serialized on a single line.
General properties of DAG
The technical design of DAG allows for a wider range of algorithms that can be applied, and hence greater flexibility. There are several DAG-based projects, all of which are very different and worthy of attention, and all of which have built their code base from scratch. Nevertheless any project based on DAG will have some of the same features.
- Acyclicity: time flows in one direction. New transactions refer to old transactions, but not vice versa. In a database availability group, each node depends on previous nodes referencing it. This allows transactions to run locally or even autonomously and be processed, validated or terminated at a later stage.
- Delay: The execution speed and acknowledgement time are not limited by the size of the block, but are limited by the bandwidth between the communicating nodes. Theoretically, there is no limit to how much the system can scale.
- Less waste: fixed delivery, no mining involved. Each transaction issuer is simultaneously a validator. This allows for free micro- and nano-transactions, limiting the impact on the environment.
- Zero-value transactions: e.g., messages or transactions with no value, requiring or not requiring digital signatures and placed in a UDP packet.
- Database pruning: allows you to keep the database slim, and different nodes can save only the story that is interesting or relevant to them.
DAG technology is already used in a number of cryptocurrencies as developers actively seek alternatives to the current blockchain architecture.
DAG technology is still very young and untested, and developers still have a lot to do. Nevertheless, some ambitious cryptocurrency projects are already using it. But technology development is a process of identifying and fixing problems, and it is this approach that has created large ecosystems like Bitcoin and Etherium. Experts predict the same path for DAG.