Directed Acyclic Graph (DAG)

What is a Directed Acyclic Graph (DAG)?

A Directed Acyclic Graph (DAG) is a data structure and consensus mechanism used in some blockchain and distributed ledger technologies. Unlike traditional blockchain structures, which link blocks sequentially, DAGs allow for a more complex network of transactions that can be processed in parallel.

Key Aspects

1. Non-linear Structure: Transactions can reference multiple previous transactions.

2. Parallelization: Allows for simultaneous processing of transactions.

3. Scalability: Often offers higher transaction throughput than traditional blockchains.

4. No Blocks: Transactions are added directly to the network without being grouped into blocks.

5. Consensus Mechanism: Uses various methods to achieve agreement on the state of the network.

How DAGs Work

1. Transaction Creation: New transactions are created and reference previous transactions.

2. Validation: Each new transaction must validate two or more previous transactions.

3. Confirmation: As more transactions reference a given transaction, it becomes more confirmed.

4. Conflict Resolution: Various methods are used to resolve conflicting transactions.

5. Network Growth: The graph expands as new transactions are added.

DAGs vs. Traditional Blockchains

1. Structure: DAGs have a more complex, web-like structure compared to linear blockchains.

2. Scalability: Generally offer higher transaction throughput.

3. Confirmation Time: Often provide faster transaction finality.

4. Mining: Many DAG-based systems don't require mining.

5. Fees: Can often operate with lower or no transaction fees.

Similar Terms

• Blockchain: The more traditional linear structure used in many cryptocurrencies.

• Consensus Mechanism: The method by which agreement is reached on the state of the network.

• Distributed Ledger Technology: The broader category of technologies that includes both DAGs and blockchains.