Directed Acyclic Graph Technology: The Alternative to the Blockchain

When most of us think about what powers cryptocurrency, we think of blockchain technology. Although blockchain technology is the industry standard, there are other cryptocurrency powering technologies which perform equally well, if not better than the blockchain. In this piece, we will be looking at directed acyclic graph technology and some of the crypto projects that have successfully utilized it.

What is a Directed Acyclic Graph

Directed acyclic graphs technology or DAGs are used for a variety of tech applications. To understand exactly what a DAG is, we will break it down piece-by-piece, starting with graphs. Graphs are a concept that we are all familiar with. Where they become interesting is when we apply acyclic formatting. While cyclic means a repeating pattern, acyclic refers to a pattern that will not repeat itself. Finally, when we direct the graph, we have a fundamental system which can be used for data storage in a similar fashion to blockchain.

What’s the Difference Between DAG and Blockchain

A blockchain is a database that is distributed and shared across the nodes of a computer network in data blocks. These data blocks have a set storage capacity. When the storage capacity of a block is filled, the block is closed, and connected to the previously filled and closed block. At this point, a new block is opened, and the process repeats itself.

DAG powered cryptocurrencies partially lend themselves to blockchain technology. Rather than a public ledger being recorded, each individual wallet keeps track of its own private record of interactions with other wallet addresses. As an example, if wallet “A” interacts with wallet “B” and wallet “B” interacts with wallet “C”, and we know that there is a set number of total tokens distributed amongst the three wallets, the DAG formula can use this information to ensure that the network is free of foul play. In traditional blockchain, every transaction would be recorded on each device, which is effective, but also energy consuming in comparison to DAG.

In DAG, even if wallet “A” and wallet “C” never interact with each other, wallet “A” can still guarantee the network is secured, based on its interaction with wallet “B”. This is achieved by comparing the total of wallet “A” and wallet “B”s transaction history, relative to the total token supply. This is how all parties are able to extrapolate this data quickly and efficiently without having to look at a shared ledger of each and every transaction. Another huge benefit to this system is that it completely eliminates the blockchain trilemma of scalability, security and decentralization which is causing Ethereum and Bitcoin to have ever increasing transaction fees.

Nano (NANO)

Nano is the first cryptocurrency which has successfully implemented DAG. Transactions are completely free and instantaneous on the Nano network, because of the lack of miners and validators, making it an excellent cryptocurrency for sending and receiving funds. It is one of the few financial tools that can send funds all the way to the other side of the world in a matter of milliseconds, for free, without the need for layer 2 protocols.

Conclusion

DAG is one of the most innovative solutions for modern cryptocurrency and will likely play an even more important role in crypto as time goes on!

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