What is DAG (Directed Acyclic Graph)? Commentary on Differences with Blockchains

Have you ever heard of the acronym DAG? DAG is expected to be the next-generation blockchain, and is an algorithm embedded in multiple cryptocurrencies. It is also used in the high-profile IOTA with expectations of functional performance.
In this article, we will explain the features of DAG, the comparison with blockchain, and examples of installed projects.


DAG, standing for Directed Acyclic Graph, is an algorithm with a non-technological name, but is a directed (with connection direction) and acyclic (without connection circling) graph. By applying DAG to cryptocurrency, it is possible to connect multiple blocks instead of single blocks to realize a high-speed and low-cost approval method.

Cryptocurrency features with DAG

Fees are free in principle

A key feature of DAG technology is that trading parties can perform approval work. In traditional blockchains, there is an entity that approves transactions, such as miners and stakeholders, to connect the chains separately from the parties involved in transactions. As a result, the approval process can take time and it was necessary to design a reward and pay fees. However, in the case of DAG, the person who performs the transaction can complete the transaction by performing his own approval, and the approval work can be performed only by using a certain CPU. In principle, it has achieved realized transaction speeds and eliminated transaction commissions.

Fixing the block size issues

By accepting each transaction as one block in DAG, you will be able to open many transactions. In the case of the blockchain adopted by Bitcoin, multiple transactions are combined into one block, and approval work is performed to link it with past transaction records like a chain. In the case of Bitcoin, the capacity of each block is set as 1 MB, so if a transaction volume exceeding 1 MB occurs, transactions are delayed and fees increase. In fact, the price of Bitcoin soared in 2017, and the volume of transactions soared, requiring hours for trade confirmation with fees exceeding 3,000 yen!
By accepting each transaction as one block in DAG as shown in the figure below, it is possible to eliminate the concept of block size like on a blockchain, and connect even a large number of transactions at high speeds and on an infinite scale.

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I explained the characteristics of DAG in the above, but I will briefly introduce the blockchain differences in a table. The highest profile of each:

  DAG (IOTA) Blockchain(Bitcoin)

The problem is theoretically solved because only certain information is recorded in the block by adopting a method in which the trader approves a certain block.

There is an upper limit to the block size because all the information is recorded in one block.

Approval speed

Allows approval in a few seconds as the parties perform the approval process.

You need 10 minutes approval time at the fastest.

There is a certain anxiety factor because there is only about two years of history.

Has high security ability because it has endured over 9 years from various attacks.

Transaction Fees

Basic fees are not required because the parties use the CPU for approval.

It is necessary to pay the fees to miners who perform approval work.

As the table above shows, DAG solves the problems that blockchains have in many ways, but the shallowness of its history has an element of security concern. In fact, IOTA has a history of frailty pointed out by American research institute MIT, and it is also true that there is a high possibility that new problems will occur in the future.

Example of projects using DAG

IOTA

IOTA is a well-known currency that currently ranks 14th in total market capitalization on coinmarketcap, and was developed for the purpose of being able to use cryptocurrency with IoT devices. In order to use cryptocurrency on IoT devices, you need a fast and inexpensive payment method. By utilizing DAG, it is developed to be able to make an instant transaction free of charge for small amounts of data and payments for everyday use.

ByteBall

ByteBall is currently ranked 128th in market capitalization on coinmarketcap and is a cryptocurrency developed to solve the blockchain’s scalability problems.
Because it aims to be used around the world, Airdrops have earned a high reputation for its user-friendly design that distributes 98% of issued coins to users via Airdrop. It is developed assuming that it can be used for various functions such as P2P transactions, insurance, and betting while also using DAG instead of a blockchain.

Summary

How is that, there are many cryptocurrencies that use blockchains, but there are only a few cryptocurrencies that have adopted DAG. There are concerns with the security, but it is true that in many ways it has better functionality than blockchains. Expectations will increase as to what kind of change will be followed with cryptocurrencies that implement DAG.