Many isolated components of blockchains have been around for decades such as smart contracts and encryption. Blockchain is a clever design that is composed of various technologies that were created throughout the ages by various computer scientists, mathematicians, and logicians.
This article is going to discuss in detail about DLTs and DAGs and how they are associated with blockchains.
What is Distributed Ledger Technology (DLT)?
When it comes to blockchain most people have heard and read that it is a type of distributed ledger or DLT. A DLT is a consensus that is copied, shared, and synchronized form of digitized data which is spread across many sites or nodes.
It is a reverse form of a centralized database that stores all data in one location. Therefore, DLTs do not depend on a central administrator and are free from the threat of a single point-of-failure.
What is Directed Acyclic Graph?
Blockchains have recently gained popularity on account of the cryptocurrency market. However, blockchains represent only one type of DLT. Another lesser-known type of DLT is a DAG or directed Acyclic Graph.
DAGs are also used as a basis for cryptocurrency hosting and governance networks. Blockchains are linear data structures while DAGs are more complicated hybrid data structures. While both blockchains and DAGs are types of DLTs, they still have some important distinctions.
Difference Between Blockchain and DAG
Here are some key differences between Blockchains and DAGs that are going to help you understand the fundamentals of blockchain technology with more clarity:
The two most popular consensus models that blockchains use are PoW and PoS. PoS are considered faster and more cost-effective in comparison to PoW. However, blockchains often create one new block at a given time since they are linear. In comparison, DAGs can reach a consensus faster in comparison to blockchains.
DAGs have a topological arrangement of their vertices or nodes. It means that the nodes run after other dependencies are completed but some DAGs can also generate nodes in a simultaneous fashion which leads to faster processing speed and smaller fees.
Regardless of their consensus model, blockchains are designed to create and add one new block at a given time. This design hinders their transaction speed. Meanwhile, DAGs can process nodes faster and thus it has a faster throughput.
At a given time, multiple nodes can simultaneously run on the DAG allowing them to process a greater amount of data than a block size in a smaller duration than blockchains.
DAGs are cheaper in comparison to blockchains and thus they are considered more suitable for commercial adoption and managing high transaction volume.
Blockchains are more decentralized in comparison to DAGs. The number of nodes for a DAG is often more conservative in comparison to blockchains. Secured blockchains like Ethereum and Bitcoin can have thousands of nodes while DAGs usually depend on a few verified node operators.
DAGs inherently have more scalability since they can process more transactions per second and have lower energy requirements. There is no mining associated with DAGs or sudden increase in the total node operators.
Blockchains are more popular in comparison to DAGs but they are gaining more popularity in the form of projects such as XRP, Algorand, IOTA, and Hedera etc.
Some consensus models of Blockchains such as PoW can consume a sizeable amount of energy namely Bitcoin which requires 250-950 kWh per transaction. However, DAGs can be completely carbon negative requiring as little as 605K times lesser energy as blockchains.
DAGs are slowly but surely raising to mainstream popularity. More developers are considering adopting this database structure over blockchain on account of options such as user-friendliness, better speed, low fees, and faster throughput. All the while, DAGs can also support smart contracts.
Blockchains are considered the most innovative and disruptive invention of the 21st century. Many experts believe that DLTs can transform the financial and economic structure of the world in the next decade.
It is ideal to learn about fundamental concepts of DLTs such as blockchains and DAGs to keep up with the changing times.