Blockchain technology incorporates a new understanding of economic processes, and constitutes the structural rebuilding of social interaction. It is believed that Blockchain can, and will, change the world for the better.

Like any other technology in its infancy, blockchain has its problems; the most notable of which being scalability. Some experts think that scalability is a problem specifically related to blockchain protocol that cannot be solved within the system.

To this day, no single blockchain network can implement a solution that fundamentally fixes scalability problem. As a result, people try to find other ways of keeping a secure record. One of the alternatives, distributed ledger technology, is directed acyclic graph (DAG). Other scalability solutions in our article.

DAG overview

A DAG is a programming tool that represents multiple relationships between data and object. Each node in a DAG stands for an object or a piece of data, and is related to the system with directed edges.

The DAG model does not use blocks. It relies on the principle where transaction issuers are also transaction approvers. It means that when a transaction is sent to the network, two previous records are approved by nodes.

A DAG structure removes the need for miners and eliminates the conflict that can arise between miners and users. DAG improves the process of uploading and approving transactions, thereby solving subsequent problems of scalability and fees. As a result the network is fast, scalable and favorable for micropayments.

The disadvantages of the architecture are only theoretical, as the DAG technology is new and untested. The main problem that can arise due to the structure is vulnerability to attack. For this reason, DAG projects use different approaches to avoid this problem.

Read about the most popular consensus algorithms used in blockchains

There are currently 3 working projects that use DAG

IOTA

Due to the foreseeable and ongoing development of technology, almost all technical devices will be connected to the network, and IOTA offers a method for conducting transactions between these devices.

IOTA is a transaction system for the IoT (Internet of Things). The main purpose of the IOTA is the ability to implement micropayments in real time among devices, without competition or commissions.

The basis of IOTA is DAG structure Tangle

It allows participants to carry out transactions with zero commission. The innovative Tangle registry is scalable and has a simple architecture, so it can transfer the required amount of data and carry out transactions without commission.

Tangle does not use blocks and functions as a self-regulating decentralized peer-to-peer network. More information about Tangle can be found in the IOTA technical documentation.

The main advantage of IOTA is microtransactions. It solves a lot of problems and opens up new opportunities for doing business. It should also be mentioned that Tangle data is only transmitted between authorized participants, and as such the process becomes completely safe and can not be broken.

Byteball

Byteball uses DAG and benefits from its characteristics in the following ways:

• Fast transactions. Transactions in the Byteball network are confirmed almost instantly, which makes Byteball Bytes a profitable financial tool for business.
• Ease of use. The Byteball network is simple and intuitive.

Byteball allows the use of smart contracts in all transactions. It is convenient and safe. All the necessary conditions are prescribed in the contract and users do not worry that any item will be changed or misinterpreted. All contracts are checked by several nodes in a decentralized network and follow the same clear rules for their implementation.

Users are able to send cryptocurrency through emails or private chat rooms because the Byteball links the user directly to the digital store, even if a user is not yet a member of Byteball Bytes.

Byteball has two built-in cryptocurrencies:

• Bytes. With Byteball the user must pay a commission using Bytes to add data to the database. For example, the commission for adding 1 Kbyte of data will be 1000 bytes.
• Blackbytes. Blackbytes is designed specifically for anonymity.

Nano (formerly RaiBlocks)

The Nano ecosystem uses DAG with its own features: it is a unique technology called “block lattice”, where every account has an independent blockchain.

Each transaction in Nano is an independent block, and every new block replaces the older block in the chain. Every new transaction (new block) takes the current balances in the user’s account and records them as a part of the new transaction. This replaces the old balance with a new one.

DAG technology is still very young and untested. It is considered to be a plausible solution to blockchain’s problems and propagates new possibilities in the sphere of distributed ledger technology.