Directed Acyclic Graph (DAG)

Thanks to a large amount of popularity that the blockchain technology has received almost right away, as well as many potential uses that it provides, its development was extremely rapid. Similarly to the development of the Web itself, the blockchain technology is entering its third stage. But what does that really mean, and what is Blockchain 3.0?

One of the important things to understand is that the Internet was not always as it is today. This is something that younger generations tend to forget since the current internet has been the one that we were using for a long time now.

When the internet first appeared, it was a simple flow of information that could only go one way. Reading the online content, and maybe sending an email from time to time was pretty much the only thing that the users could do. After a while, however, the internet managed to develop into Web 2.0. The social networks appeared, online marketplaces were soon to follow, and the real interaction was finally possible.

Soon enough, Web 3.0 will come, and the preparations for it are slowly leading us to it. Everything everywhere will be connected, which is one of the main purposes of the IoT devices. The blockchain technology is following a similar path.

The Development Of Blockchain

The first blockchain, of Blockchain 1.0, is basically Bitcoin. Its creator, Satoshi Nakamoto, referred to it as ‘chain of blocks‘, since that is basically what it was. However, the term was replaced by a better-sounding name – blockchain.

After a while, Ethereum appeared and brought a significant amount of innovation. That included smart contracts, self-governing apps, the community, and more. Eventually, it became accepted as Blockchain 2.0.

And so we come to Blockchain 3.0. This is basically a title to be given to the next big blockchain that will become a game-changer in the entire industry, and many are anxious to see which one of them will get it. One of the biggest candidates so far is DAG, also known as Directed Acyclic Graph.

What Is Directed Acyclic Graph (DAG)?

The short answer to the question regarding what DAG actually is, is that it's a directed graph data structure that has a topological ordering. Its sequence can go in only one direction, which makes it similar to Bitcoin transactions, or smart contracts. As for what it does, it basically compresses and processes data. This is something that makes it fundamental when it comes to resolving issues regarding scalability.

Bitcoin is the first blockchain ever, and as such, is bound to be flawed. This is why developers are constantly looking to improve it and to create new systems that do not suffer from such flaws. DAG comes as one such solution that values scalability and flexibility.

One of its goals is to provide a stable system that would secure an extended storage time and to do that, it will simply allow multiple blocks to form on the network at the same time. This can be done through the use of side-chains, and each chain would have its own transactions. The most important part is that all of the transactions will be possible at the same time, which is not something that was possible before.

Despite the fact that Ethereum is seen as a new and improved blockchain, especially when compared to Bitcoin, they still share one important issue, which is the matter of scaling. A problem that appears is a type of a bottleneck, and it comes due to a long period of time that is needed for a confirmation of the transaction to arrive. Even a period of 15-20 seconds is now seen as not fast enough. Just compare it to the previous 10 minutes length, and it is obvious just how much is this technology lacking in this day and age.

A lot of players have started accepting DAG system, and they confirm that DAG's confirmation time is almost instant.

The Importance Of DAG

One of the greatest advantages of DAG is that it speeds things up. It adds more chains, which allows for more apps to be built, and it allows for faster transactions with much lower fees. This is especially important for microtransactions since they no longer have to suffer large fees imposed by Bitcoin and Ethereum.

According to IoT Chain (ITC), DAG system allows for handling over 10,000 transactions each second. IOTA, on the other hand, can only handle 500-800. Even VISA, which is known for its speed of transactions can only handle around 1,700 per second. When we compare it to Bitcoin's 7 transactions per second, it is obvious why DAG is superior.

Another great use for DAG revolves around handling data. One database network that is DAG-based, Cybervein, plans to interconnect all existing data out there. This will include information from individuals, as well as that of various institutions, and it will also include all data that internet users create each day through various devices.

This is something that no other blockchain could ever hope to achieve since the size of the data itself is too much for them to bare. And the constant processing that will happen by various parties, and all at the same time would not be possible outside of DAG. DAG provides near-unlimited storage, and it is much faster and tighter than any other blockchain out there.

There is only one flaw that it has, and that is a bigger vulnerability when it comes to hacking attacks. This is a very important flaw, and it will have to be taken care of before DAG can take its place as Blockchain 3.0. Otherwise, we will have to wait for Blockchain 4.0 to deliver the ultimate version of this technology.

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