What is Directed Acyclic Graph (DAG)

The scalability problem in blockchain has been continuously resolved through the latest innovations. Directed Acyclic Graph (DAG is one alternative solution. Read more here.

Understanding Directed Acyclic Graph (DAG) Structure 

Directed Acyclic Graph (DAG) is an innovative alternative to blockchain, offering a potential solution for scalability and efficiency in cryptocurrency technology . 

In contrast to blockchains which are composed of blocks , DAGs are composed of interconnected nodes and edges, forming a dynamic network structure.

Transactions are represented as overlapping nodes, allowing for more flexible data flow.

DAG Consensus Mechanism

Even though the Directed Acyclic Graph (DAG) does not have blocks, transaction validation is still performed. Each new transaction must reference a previous transaction to be accepted into the network.

The DAG algorithm determines which end is ideal for establishing a new transaction, with a preference for the end that has more confirmations.

Advantages of Directed Acyclic Graph (DAG)

• High Transaction Speed: DAGs enable parallel processing of transactions without block creation limitations, resulting in much higher scalability than blockchain.
• No Transaction Fees: DAG does not require miners to validate transactions, so there are no transaction fees that users need to pay.
• Environmentally Friendly: DAG does not require large energy consumption like the Proof-of-Work process on blockchain, making it a more environmentally friendly solution.

Disadvantages of Directed Acyclic Graph (DAG)

• Decentralization: DAGs are generally less decentralized than blockchains, with control more centralized across a few nodes.
• Early Phase: The application of DAGs in cryptocurrencies is still in its infancy, with many projects still in the development stage and unproven in the long term.

Conclusion

Directed Acyclic Graph (DAG) offers great potential to overcome some of the limitations of blockchain, such as scalability and transaction costs.

Although still in the early stages of development, DAG shows potential to revolutionize blockchain technology and pave the way for wider cryptocurrency applications.

Also read:

What is Hybrid PoW/PoS? What are the advantages?

What is the Blockchain Consensus Algorithm?

What is a Blockchain Consortium?

What is a Benchmark Index?

DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.