DAG vs Blockchain: Is Blockchain Circling the Drain?

Over the span of a few years, blockchain made headlines for being the technological discovery to disrupt businesses and governments, enhance the qualities of our daily lives and save the future of humanity. However, what if blockchain is not all that it is cut out to be? What if the possibilities we were promised lies within the bosom of another creation?

Blockchain start-ups from all across the globe promised the highest levels of security, scalability, and speed. But when it came to the actual application of said technology, to making transactions in real-time, the technology fell flat and failed to meet the promises made.

Outrage and complaints spread through the Internet like wildfire, from chatrooms to messaging boards. Here’s the problem: With each transaction taking place, blockchain adds one more block to its “chain” of transactions. Every block increases with data since it bears the history of the blocks before it. So the more users onboard the network, the more transactions ensue, the more likely it is that the current system will crumble.

Bitcoin and Ethereum use blocks to process transactions and, back in the day, the maximum size of these blocks was limited. This mechanism was designed to make the blockchain more secure but, with each transaction comes data, and with a maximum size of 1MB per block (for instance), there’s only so many payments that can be processed at once. Bitcoin can handle about 3 to 4 transactions per second and Ethereum can handle 15 transactions per second.

Can blockchain solve this scaling problem?

Most people in the crypto world agree that frameworks and scalability need to be addressed if the technology has a chance of overtaking fiat financing institutions and other industries. To tackle this scaling problem, a number of solutions have been suggested, including a radical change to the protocol in a process called hard fork and the database partitioning technique called sharding.

Coming up with solutions takes time and a lot of effort. In part, this is because any proposal has to have the support of miners, developers, businesses and other stakeholders before it can be enforced — a process which can take months and, even then, end in disagreement.

It’s a Bird . . . It’s a Plane. . . It’s DAG

Few people outside of the tech industry have heard of DAG (Directed Acyclic Graph) but it has been described as the solution to blockchain’s scaling problem. DAG is often applied to problems related to the following:

• Data processing
• Scheduling
• Finding the best route in navigation
• Data compression

DAG is a directed graph data structure that uses a topological ordering. The sequence can only go from earlier to later. DAG is composed of a network with a number of different nodes confirming transactions. Each new transaction submitted needs to be confirmed by a minimum of two earlier transactions before it is effectively documented onto the network. With more transactions being submitted, confirmed and entered, a distributed web of doubly-confirmed transactions is created.

Without the need for miners, only two “parent transactions” are needed to confirm the validity of a subsequent transaction, making human intervention unnecessary and processes quicker. In addition to speed, without miners, transaction fees are kept to a minimum and this provides benefits, e.g., allowing the structure to process microtransactions.

Is this the end of blockchain?

One project in China called IOT Chain (ITC) is already taking a shot at DAG and can handle more than 10,000 transactions per second. With the industry turning to DAG to scale, the technology will play a critical role in whether or not projects will be successful in the market.

DAG vs Blockchain: Is Blockchain Circling the Drain? was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.