What Is DAG (Directed Acyclic Graph)?
Also known as: Directed Acyclic Graph, BlockDAG
In short
A DAG (directed acyclic graph) is a data structure in which nodes are connected by one-way links and no path leads back to its starting point; some cryptocurrency networks use it instead of, or alongside, a linear blockchain.
In a classic blockchain, each block links only to the previous block, and transactions proceed in a single sequence. In DAG-based systems, on the other hand, a transaction or block can reference more than one previous item at the same time. This lets the network add new transactions in parallel rather than waiting for them in turn, which in theory means higher throughput and lower fees.
Different projects use DAGs in different ways. In IOTA's Tangle structure, each new transaction confirms several earlier transactions. Hedera's Hashgraph algorithm records the spread of information between nodes as a DAG. Kaspa combines a BlockDAG structure, in which blocks are produced in parallel and ordered together, with Proof of Work.
Although DAG structures offer a scalability advantage, the definitive ordering of transactions and security require more complex consensus rules. For example, IOTA for a long time needed a centralized coordinator node to protect the network, and this has been criticized from a decentralization standpoint.
Last updated: · This content is for information purposes only and is not investment advice.