Here’s a quick and simple comparison between the new blockchain contender – DAG technology – and the standard blockchain technology
The blockchain industry has grown to considerable heights since Bitcoin’s inception in 2009. Blockchain is the core technology that has enabled cryptocurrencies to work as intended. With Bitcoin leading the cryptocurrency scene, other cryptocurrencies like Ethereum, Litecoin, and Ripple have come into the market—all of which realizing the dream of financial decentralization, immutability, and transparency, among many other groundbreaking things.
However, as new discoveries were made from the existing blockchain, it became more apparent that the blockchain technology could do with a little bit more improvement, mainly on the following:
– Transaction times
– Transaction fees
– Centralization of hash power to mining pools
– Threat of double spending
In an effort to offer a solution to where the existing blockchain technology falls short, a few alternative ledger system technologies emerged, one of which is the Directed Acyclic Graph (DAG). Here we’ll focus on what DAG technology is, how it works, and how it differs from the pioneering blockchain system.
What is DAG technology?
DAG technology is an alternative ledger system based on an established data structure known in computer science with the same name: Directed Acyclic Graph. The structure uses a topological ordering, which means that the sequence of transactions only go from earlier to later.
The applications of DAG in the cryptocurrency scene was first introduced in 2015 by Sergio Demian Lerner, in which he proposed a new cryptocurrency called DagCoin that runs on the proposed DAG technology. Some examples of applications using DAG technology are IOTA and ByteBall.
The main value proposition of DAG technology that makes it different from the existing blockchain technology is that it requires no mining and has no fixed blocks; that is why it is termed as a blockchain-free system.
How does DAG technology work?
Put simply, when a new transaction is introduced in the DAG network, for it to be validated, it needs to be linked with two other existing and relatively recent transactions. The two existing transactions are chosen using a complex algorithm using the DAG data structure.
Each transaction also carries its own Proof of Work (PoW) and are linked to one another, which means that after a transaction is placed, the process of mining is skipped. Instead of adding blocks sequentially forming a chain, transactions are paired, validated, and recorded directly into the DAG network, making the whole process significantly faster.
However, in spite of the bright promise that the DAG technology offers, it also has its own set of limitations. With mining taken out of the equation, validating users in the network are not incentivized, as opposed to the standard blockchain practice of explicitly incentivizing miners with cryptocurrency.
Another looming threat to DAG technology is that it is vulnerable to being overwhelmed by too many inputted transactions introduced into its system at the same moment. Theoretically, DAG technology is designed to scale infinitely; meaning, as the hash power increases, the speed of the network increases as well. A decrease in hash power, however, would make the network susceptible to such attacks.
How does blockchain technology work?
When a new transaction is prompted in the standard blockchain technology, it is broadcasted across a vast peer-to-peer network where each node has to validate the transaction. For the transaction to be validated, it has to go through a process called mining where a Proof of Work is required.
The crux of the matter here is that there might be more than one miner who can find a valid hash at the same time. Because of the competitiveness of the mining process, this leads to time delays in validating a single transaction, which in the case of Bitcoin can often take an average of 10 minutes and upto one hour to be confirmed.
Main differences between DAG technology vs. blockchain technology
Blockchain and DAG technology both work on the same principle of processing digital transactions. However, DAG offers features that delineates it significantly from the common blockchain. Here are some of the main differences between DAG technology and blockchain technology:
The blockchain industry, being still at its infancy stage, is constantly and rapidly evolving. There is no perfect solution yet, and this how new technologies like DAG came to be: the continuing quest to improve the current system. Keep in mind that DAG has its own set of limitations too, just as blockchain does. With the increasing rate of how fast new blockchain-based technologies are discovered, who knows just how much blockchain technology will evolve in the coming years.
– Article written by Tinny
Tags: blockchain technology, byteball, centralization, cryptocurrency, dag technology, directed acyclic graph, double spending, hash power, iota, mining pool, proof of work, transaction fees, transaction times