DAG vs Blockchain

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Blockchain technology, created in 2008, became famous through Bitcoin and has been used in several other sectors because of the transparency and security it offers. However, this technology has some limitations in its scalability. To try to solve this problem, several solutions have been created, including DAG.

Continue reading and find out more about the technologies and what are their main differences.

Blockchain Features

Blockchain technology is a public ledger that records a cryptocurrency transaction so that that record is reliable and immutable.

One of the main characteristics of the Blockchain is the construction of the transaction blocks on top of each other, forming what this technology names: a chain of blocks, in which each block produces a unique hash that identifies the transactions.

Having a single hash per block, if an attempt is made to change the transaction information, a new hash will be generated and fraud will be identified. In addition, publishing transactions in the public ledger also prevents fraud.

What is DAG?

Directed Acyclic Graph or, to shorten DAG, is a consensus-based distributed accounting technology.

In DAG, processing a new transaction requires confirmation of at least two previous transactions before being officially registered on the network. In addition, DAG transactions are individual and connected directly to each other, eliminating block grouping and the need for miners.

The DAG, therefore, has a data structure similar to a flowchart, in which all nodes are oriented towards a common orientation and no node within the DAG can be its own “mother node”, as, as the name itself designates, it comes to an acyclic graph.

Main differences

The most notable difference between Blockchain and DAG is in its structure. The Blockchain is distributed linearly, in a blockchain, which is added to a previous blockchain for the validation of the transaction grouping. The DAG has no blocks and the transactions are individual and are linked to several others, branching out like the branches of a tree.

Consensus mechanisms also differ widely from one technology to the next. As in DAG, transactions and nodes are immediately connected to each other, transactions provide validation to each other and users themselves perform them, eliminating the need for fees. In the Blockchain, transactions are validated through proof-of-work by network miners, who earn a fee charged on the transaction as a reward.

Those factors also contribute to the DAG overcoming the Blockchain in terms of scalability and allow less energy consumption, as the DAG requires only two checks and there is no proof-of-work to validate them. In addition, this method also eliminates the need for miners and makes the transaction process free of fees or very low fees.

Another difference is the speed of transactions. Blockchain makes it possible for Bitcoin to perform 4 to 7 transactions per second. The DAG makes it possible to process thousands of transactions per second, facilitating the processing of low-value microtransactions, for example.

However, this reveals another very important difference between the two with regard to decentralization and security. Blockchain, as we know, is truly decentralized and fraud-proof due to its consensus mechanisms and the blockchain structure it owns. The DAG is more vulnerable to attacks if there is a reduction in the volume of transactions, so it has some centralized resources such as pre-selected coordinators or validators, which implies that DAGs are not truly decentralized.

It can be seen that although they work for the same purpose, registering transactions in order to avoid fraud, DAG presents notable differences in terms of speed, consensus process, and decentralization, in addition, of course, to the structural difference of both technologies. However, Blockchain is still the most widely adopted technology, not only for cryptocurrencies but also in several other areas.

Check out our comparison between Blockchain and Hashgraph.

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