Directed Acyclic Graph (DAG) is an alternative way of organizing transactions that allows for parallel transaction processing and increased network performance.
Directed Acyclic Graph is a data structure consisting of vertices and edges.
The structure of the DAG consists of vertices and edges. A vertex is a circle or single point representing a given event or activity. They all point in the same direction, away from the first vertex.
Edges connect one vertex with another in the graph, represented by a line with an arrow at its end. The order in which they are connected indicates the order in which transactions are processed. Moreover, each edge is both a receiver and a sender.
DAG permits numerous paths between any two vertices, making it helpful in picturing complex connections between entities.
A primary characteristic of the DAG is its parallel structure, meaning each transaction can be verified independently. The parallelism of processing is provided by vertices, which can have several edges (outgoing and incoming).
New transactions are usually implemented on top of older ones, and mining is not required since no blocks exist. The absence of miners also indicates that DAG is more energy efficient.
A Directed Acyclic Graph (DAG) finds use in multiple fields of computer science and blockchain technology.
In cryptocurrencies, DAG is an alternative form of the traditional blockchain that addresses the limited scalability of the conventional blockchain based on mining. DAG's structure is so efficient and scalable that it can process thousands of transactions per second.
However, combining DAG with PoW, PoS, or other consensus mechanisms can build more efficient and scalable blockchain systems. For example, Hedera Hashgraph combines DAG with a consensus to create a consensus hashgraph that can process thousands of transactions per second while minimizing transaction costs.
One of the fundamental challenges that DAG faces is the security problem in so-called double-spending attacks. DAG can only prevent double-spending attacks if nodes have access to all transactions.
DAG is an interesting alternative to traditional blockchain because it allows transactions to be processed in parallel, improving network performance and scalability. The advantages of DAG are scalability and lack of block mining problems. However, it has a less developed infrastructure and lower popularity compared to traditional blockchains.
