A directed acyclic graph is a type of data structure that has edges and vertices. In blockchain technology, the transactions are recorded in blocks and form a chain of blocks whereas transaction in DAG includes a number of vertices. Transactions on DAG have also nodes and nodes have fixed paths for routing.
Table of Contents
Working of DAG?
DAG has a tree-like structure where interconnected nodes serve as its branches, each node has more than one parent, and the model allows multiple transactions to be carried out and validated at the same time.so it prevents the wait time for transactions to be recorded and added to its chain.
In DAG there is no mining process just like normal blockchain where each vertex represents the transaction. Transactions are built on top of one another in a form structure. It uses proof of work for validation of transactions whenever participants solve the computation challenge. Like another blockchain, double-spending transactions do not happen here because nodes trace the route of the transaction and confirm the previous transaction in order to prevent double transactions.
Properties of DAG
Scalability
DAG has high speed and scalability in terms of transaction; it can process a high number of transactions per second making it more scalable than other blockchain networks. It can process 11000 transactions per second, with 6 nodes. Unlike other blockchains when members are added it will degrade the quality and speed but in the case of DAG, it is reversed as more participants will join the network will improve the performance as these structures are not affected by the block timer.
High transaction speed
The major benefit of DAG is its faster transaction speed. It allows anyone to send the transaction to those who are participating in a network that receives immediate approval. It helps in applications where transactions are faster and multiple at the same time such as the banking sector.
Transaction fees
As DAG does not have a mining process to validate the transaction, it does not have a high gas fee like an EVM blockchain like Ethereum which has the highest transaction fee. DAG requires a minimal fee for the execution of transactions.
Flexibility
DAG is a structure that is likely to be adopted by blockchain as per the requirement and use case. So it can be integrated with different consensus mechanisms and it can be used in various applications.
Performance improvement
Unlike the other blockchains that is available in the market such as Bitcoin and Ethereum, polygon, and Binance, likely called as evm blockchain sometimes becomes slow due to the traffic and huge network congestion. DAG has its reverse performance as the number of transactions increases it also improves the performance.
Popular projects that use DAG
The most prominent protocols using the DAG structure are Constellation Network, NCOG Earth, Hedera hashgraph,and Fantom.
Constellation network uses DAG architecture, the native DAG coin, and the Hypergraph transfer protocol (HGTP) to manage and verify the exchange and transaction through the network. It also provides the Hypercube development suite, a tool for the development of efficient apps.
The Hypergraph Transfer Protocol (HGTP) is a scalable and feeless distributed ledger system built on Directed Acyclic Graph (DAG) technology, enabling decentralized applications and seamless integration with existing IT systems. The architecture has three key layers:
1. Global L0 Network: The foundational layer responsible for organizing and validating data, supporting cross-chain interactions and execution through validator nodes.
2. Metagraph Networks: Independent subnetworks that validate their own data and handle off-chain triggers, processing separate state updates like traditional blockchains.
3. DAG L1 Network: Focuses on validating DAG currency transactions and groups transactions into blocks, relying on the Global L0 for final validation.
The network addresses the blockchain trilemma (security, decentralization, scalability) through horizontal expansion. It uses a unique Peer-to-Peer reputation mechanism called Proof of Reputable Observation (PRO), where validators stake DAG coins and are rewarded based on their contributions and reliability, with a top performance score of 1.0.
NCOG EARTH
In NCOG Earth Chain, this system is complemented by the Forest protocol, which uses a stake-based model to ensure fairness in validating transactions, further enhancing sustainability by eliminating the need for energy-intensive proof-of-work mechanisms. This combination results in an eco-friendly blockchain that reduces energy consumption while maintaining security and speed. NCOG Earth Chain’s use of DAG technology is particularly relevant for decentralized finance (DeFi) applications.
Hedera Hashgraph & Hashgraph Consensus
Hedera Hashgraph is an open-source public distributed ledger that utilizes DAG through the Hashgraph consensus mechanism. This ensures fast, fair, and secure transactions. The platform provides developers with a toolkit to build decentralized applications (dApps), including support for Solidity-based smart contracts, consensus, and tokenization.
Key features of Hashgraph
Hashgraph Consensus: Asynchronous Byzantine Fault Tolerant (ABFT), providing strong security, speed, and energy efficiency. Unlike traditional blockchain, it ensures definitive agreement on transactions without probabilistic uncertainty.
Validation Process: Every user in the system participates in validating transactions, rather than relying on specific validators.
A real-life analogy compares this to students passing notes, where each person adds and shares information until all participants know every detail from previous notes, illustrating how Hashgraph builds a unified and fully informed ledger.
Conclusion
DAG brings a promising enhancement in the evolution of decentralized frameworks and also provides an efficient solution for managing complex tasks. DAG has demonstrated projects worth thousands of transactions per second in an efficient way. Blockchain technology in the current scenario holds a strong position in the market. DAG is still in the process of growing its audience.