Clear DefinitionsDirected Acyclic Graph (DAG)
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Pronunciation
[duh-rek-tid ey-sahy-klik graf]
Analogy
If a traditional blockchain is like a single-file line of people entering a venue one at a time, a DAG is like multiple entrance doors that feed into the same venue, allowing several people to enter simultaneously. While everyone still ends up in the same place (the confirmed ledger), they don't have to wait in a single line, significantly speeding up the entry process while maintaining order and security.
Definition
A data structure consisting of vertices and directed edges where information flows in one direction without cycles, used in some blockchain systems as an alternative to linear chains of blocks. DAGs allow multiple blocks or transactions to be added simultaneously, potentially improving throughput and reducing confirmation times.
Key Points Intro
DAGs provide an alternative approach to organizing blockchain data with unique scaling properties.
Key Points
Enables parallel addition of transactions or blocks without strict linear ordering.
Potentially offers higher throughput and lower latency than traditional blockchains.
Resolves conflicts through various rules rather than enforcing a single chain.
Used in cryptocurrencies like IOTA, Hedera Hashgraph, and Nano.
Example
IOTA uses a DAG-based structure called the Tangle, where each transaction must approve two previous transactions to be added to the network. This creates a web-like structure of interconnected transactions rather than a linear chain, allowing multiple transactions to be processed in parallel rather than sequentially as in traditional blockchains.
Technical Deep Dive
DAG-based distributed ledgers implement various approaches to achieve consensus without a linear chain structure: (1) In IOTA's Tangle, transactions directly reference and validate previous transactions, with random walk algorithms and coordinator nodes (historically) determining transaction finality; (2) Hedera Hashgraph uses a gossip protocol where nodes share transaction information with random peers, building a DAG of transactions that achieves consensus through virtual voting; (3) Nano implements a block-lattice architecture where each account has its own blockchain that only the account owner can modify, with transactions requiring both a send and receive block across different account chains. DAG structures address the fundamental limitation of linear blockchains where transactions must be processed sequentially, instead allowing parallelized processing. Key technical challenges include determining transaction finality in the absence of a single chain, preventing reference manipulation that could orphan transactions, and achieving secure consensus without total ordering. Implementation approaches include voting-based systems, coordinator nodes, accumulated proof-of-work, or heuristic-based confidence scoring. These systems typically provide probabilistic finality that increases over time as more transactions reference a given transaction directly or indirectly.
Security Warning
DAG-based systems often make different security trade-offs than traditional blockchains. When evaluating DAG systems, carefully assess their approach to preventing transaction censorship, their methods for resolving conflicts between branches, and their resistance to various forms of attack including partition attacks and reference manipulation.
Caveat
While DAGs can theoretically process more transactions per second than linear blockchains, they often introduce new complexities and potential attack vectors. Many DAG-based systems have made compromises on decentralization or implemented temporary centralized components to address security challenges, working toward more decentralized approaches as the technology matures.
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