The Directed Acyclic Graph (DAG) is a prime example of how far Distributed Ledger Technology has come since Satoshi Nakamoto’s brilliant Bitcoin breakthrough. It’s an ambitious alternative to blockchain technology, designed to offer all the advantages while improving on its flaws. Both blockchain and DAGs are designed to offer a decentralized solution to the problems of trust and data manipulation, and both offer unprecedented levels of transparency and security in how they function.
Despite being tried, tested and functional, blockchain technology has encountered some difficult roadblocks, most notably in the areas of scalability and transaction fees. These are areas that DAG networks offer remarkable improvements in. Core innovations behind DAG Technology include the ability to conduct low-fee micro and nano transactions on a system that is made more scalable as activity increases. The more transactions sent on a DAG ledger, the faster they are confirmed.
The Mechanics of DAG Networks
As is the case with traditional networks, each network member is called a node. This is a computer that sends transactions for validation to other members. A chain of transactions is typically referred to as a ‘branch’. The main rule in a DAG network is that any new transaction must approve previous transactions. The longer the branch on which a transaction is based, the more ‘weight’ it carries. This is another way of saying the amount of work that has been invested in proving the transaction’s legitimacy. The greater the weight, the more valid the transaction is likely to be. Each new transaction is randomly selected by an algorithm to avoid a situation where members only choose to validate their own transactions. DAGs also completely cut out the need for blocks and subsequently, mining. Instead, transactions are verified by other transactions in a linear fashion.
This can be a bit difficult to wrap one’s head around, so we invite you to have a look at our DAG visualisation. Just click on the link below.