What is Directed Acyclic Graph (DAG) in Blockchain and Crypto

We will study “what is Directed Acyclic Graph (DAG) in blockchain and crypto”. Also, high transactions, blockchain and cryptocurrency.

Let’s give a brief introduction of the topic “what is Directed Acyclic Graph (DAG)”. It is a means we use to reform and design data. Generally, in the crypto, people use it as a vital tool.

Understanding Directed Acyclic Graph (DAG)

From the name, you would have an idea of what it is about. It possesses certain features that define it. To clarify, it contains vertices and edges. Like we know, in the case of blockchain, transactions are stored in blocks. But, in directed acyclic graphs, the store transactions as vertices. It stores it one above the other. A node is very vital here, it is a tool for submitting transactions. However, it must finish a task before it can submit a task. One can regard this task as a Proof-of-task.

In directed acyclic graph, there are criterias to enable a transaction be part of a network. It must remark on the pioneer transactions to qualify. Also, this act leads to confirmation of transactions. So, this process must continue to ensure efficiency.

For the development of a fresh transaction, a tip must be the base. The higher the tip’s confirmation, the higher the picking chances. However, an algorithm is the main factor.

More Info On DAG

As we proceed further, we shall discuss some of the advantages of directed acyclic graphs. But, these are a few of them: high transaction speed, no transaction fees, improvement in environmental conditions. This last advantage is as a result of no miners.

Certainly, whatever has an advantage must have a disadvantage. The prominent one is, its lack of full decentralization. In addition, it is still new to the crypto world. This limits DAGs, as it kick starts a network, rather than being the base to establish the network.

Now let’s see how the topic “What is Directed Acyclic Graph (DAG) in Blockchain and Crypto” relates to graph theory and computer science. How does this subjects define DAG ? It is a directed graph devoid of directed cycles. Arcs and vertices make up its component. It follows a particular progression, not to create a complete loop. Consequently, we can regard a DAG as a directed graph, when the vertices are in a line form. In conclusion, there are certain areas where directed acyclic graphs can apply. It can apply in evolution, citation of networks or scheduling.

Side Note On Directed Acyclic Graph (DAG) ?

The name “Directed Acyclic Graph” is simply from its resemblance with a graph. Its improvement in data storage and transaction processing, is highly positive to cryptocurrency. As a result, some see it as a perfect replacement for blockchain. Also, the see it as a tool to resolve cryptocurrency decentralization. Once this model grows, it can improve the usability of networks.

Working Principles Of DAG in Blockchain

Its pros contribute to its working principles. The most evident, is its proper and effective data storage. However, its set-up or form is like a tree, having the nodes as the branches. The branches, which merge with each other, can have multiple parent host. This permits more transactions to be confirmed at the same time.

What does a vertex stand for? It stands for a transaction. Therefore, it is a key feature in directed acyclic graph. How does Proof-of-Work tasks function? This is when a node presents a transaction, for the confirmation of earlier transactions. The main aim of this is to prevent spam.

This topic “What is Directed Acyclic Graph (DAG) in Blockchain and Crypto” will reveal a lot to us. Meanwhile, DAG and blockchain share a few differences. Unlike blockchains, DAG can reference many transactions simultaneously.

On the other hand, Directed Acyclic Graph (DAG) possess another feature known as Double-spend protection. It functions with nodes, to perform its task. As a result, it confirms the prior transactions before following a route back to DAG’s initial transaction. With this method, one can determine the sufficiency of a sender’s balance. One ought to be careful when building on paths, to avoid risking the transaction.

A couple of algorithms help to result conflicts arising from many paths. This algorithm must support the heavier tips.

Uses Of Directed Acyclic Graphs

The two shortcomings facing blockchain technology in DAG model are decentralization and scalability. Nevertheless, DAG is on the path of making security and usability effective and efficient.

How is this achievable ?

  • When miners work on either the Bitcoin blockchain or Ethereum platform, they don’t produce blocks at the same time. This gives room for efficient processing of transactions. Once a transaction is done, the replace the block with another one, directly to the blockchain. This is how the process continues.

However, DAG doesn’t need mining. Removal of block after a complete transaction makes it possible. This affects DAG positively, as it doesn’t need much power to aid the network. Below as some DAG advantages:

  • High transaction speed.
  • No mining.
  • No transaction fees.
  • Low energy consumption.
  • Improvement in environmental conditions.

Uses Of Directed Acyclic Graph By Cryptocurrency.

In the early time of cryptocurrency, it cannot function without blockchain technology. But, in recent times, cryptocurrency can function with Directed Acyclic Graph.

One of its limitation is that, it is still new to the system. But, it is still exhibiting wonderful qualities, now imagine when it becomes scalable. We will study some of the platforms that apply the use of DAG. The few we will study are:


It is also known as ByteBall. This is a cryptocurrency that functions under the DAG structure. But, users have a fee to pay when the use it.

There are certain features that bring about this situation. It operates with a system that confirms and reviews a transaction. In addition, it utilizes an algorithm which is generally selected by the developers. There are sincere testifier who function as validators. Lastly, the safeguard the transactions and contracts.


This is the second platform under our study. It stands for Internet of Things Applications. IOTA makes use of a network that is without blocks. It operates in a unique way. A user ought to verify two transactions before confirming one transaction. However, users eventually become miners. This particular network also, uses a collection of nodes. It is actually for more efficient validation process.

Users play a role of collective effort to decentralize and develop the network. In terms of transactions fees, it has a very low transaction fee.


This is a cryptocurrency, with blockchains that stand alone. Nodes merge them together which gives it the name “block-lattice technology”. However, DAG and blockchain, function in it.

With every user handling its own wallet, nobody can alter the wallet. For a transaction to be successful, both parties must carry out a specific on their blockchains. After that, the transaction is complete. There are no transaction fees. But, the rate of processing transaction is high.

Function Of DAG in Blockchain

Most people view DAG to replace blockchain in the nearest future. However, it seeks to solve basic blockchain issues.

DAGs use ledger to store transactions. Similarly, blockchain uses it too. Both also share the same objective. On the other hand, the medium for storing transactions, differentiates them.

Comparison Between DAG & Blockchain

Like we said earlier, both share the same goal and objective. They record their transactions on a shared ledger. But, they record it through separate ways.

Comparison in terms of Pros and Cons:

Pros of DAG

  • Performs both micro and macro transactions.
  • No need for mining.
  • Probability of fee reduction.
  • Low rate of energy consumption

Cons of DAG

  • Open to threats and attacks.  
  • Low decentralization level.  

Pros of blockchain

  • High usability rate majorly by Bitcoin and Ethereum.
  • Tight security.
  • Cost-effective for high-value transactions

Cons of blockchain

  • High storage demand.
  • Increased level of network bandwidth demand.
  • Power consumption rate is much.
  • High transaction fees

Both of this projects are good. It now depends on personal interest and goal.

Meaning of Directed Acyclic Graph (DAG) in Cryptocurrency?

A cryptocurrency and a blockchain work simultaneously. Blockchain serves as the building block of most cryptocurrencies, if not all. The beauty of it is, users have the freedom to communicate. Also, they share values with decentralized apps.

When we talk about blockchain, we talk about blocks. To create the chain, one must perform a task. One must attach a fresh block to the prior block with a link. This is known as a ‘hash’. A unique block contains transactions, that users share out. However, there might be a delay during a broadcast. Also, in including transactions in a block. Some factors affect this situation. The are; block size and uncompleted transactions.

As many appreciate blockchain technology, some do not. They view it at a stage where its efficiency will reduce. Also, they perceive a low acceptance of the blockchain technology. This is if its stability problem continues.

There is a possibility of cryptocurrency payments networks, depending on DAGs.

Additional Information

Vertices in directed acyclic graphs are the spheres. While, the edges are the lines connecting them. Their structure is linear and directional, acyclic in nature. This means that the spheres don’t meet at each end.

In the scientific or medical field, one can use DAG. One may use it to note the interaction between variables. For example, some factors can serve as a guide to how the impact on a patient. Factors like nutrition, sleep cycles, etc. But this isn’t our focus. Our focus is on DAG. Also, how it can be an instrument to establish a collective decision. This is regarding the cryptocurrency network.

Working principle of DAG in Crypto?

Unlike the blockchain, vertices in DAG stand for a transaction. These transactions are put on top of each other. Meanwhile, there must be a Proof-of-Work for a node to submit a transaction. This action helps to reduce spam. Lastly, there is no need for mining or miners here.

Alice must build on a transaction. But there is no certainty of which transaction it will be. This confirmation will proceed, if Alice references the transaction.

A large or heavy transactions are more likely to get acceptance from users. It helps to boost the system. This is a limitation to user’s quest to build on older transactions.

A feature known as double-spend protection prevents the double usage of the same fund. The node finds out this attempt and prohibit blocks without similar transactions. However, production of block could be expensive. That is why the encourage miners to play fair and safe.

Alternative to Double-spending.

On the other hand, there is an alternative way to prevent double-spending. It requires tracing back to the very first transaction. This is after the confirmation of the prior transactions. This is done without miners and to know the sufficiency of the senders fund. This tracing back may have various ways. But the only verify one.

When users develop on a path that isn’t legit, it may be detrimental to the transaction. It may be the prior transactions that isn’t legit. This also risks the transaction.

Sometimes, there could be branches coexisting. This can make one deposit funds on them. When this happens, a selection algorithm intervenes. It uplift tips with bigger weight. Also, it neglects the smaller ones.

A transaction can reverse at any time in blockchain. However, one can reverse transactions in a Bitcoin or Ethereum block. It builds ones confidence. It happens when one add more blocks to an existing one. Especially, the block containing its transaction. Users shouldn’t just spend their funds. Most importantly, they should wait for six confirmations first.

Confirmation In IOTA’S Tangle

Let’s talk about confirmation confidence in IOTA’S Tangle. Everything is in details. The run the selection algorithm multiple times. Meanwhile, you can also determine the approval duration of your transaction. This is in the unique tips.

Some think of this as a bad user experience. But, is that the case?. For instance, one can send 5 MagicDAGTokens to another user. The sender wouldn’t bother to select the appropriate tips. Subsequently, the sender’s wallet will perform the following:

  • Pick the tips with the highest confirmations.
  • Trace the way back through prior transactions. This is to determine the sufficiency of the tip’s balance.
  • Addition of their transactions to the DAG. Confirmation of transactions also occur.

The sender inputs the receiver’s address and enters send. In conclusion, this is an outlet of transaction procedures. .

Advantages And Disadvantages Of Directed Acyclic Graphs In Crypto

Advantages of DAGs in Crypto


At any time, one can share and process its transaction. One can do this without hindrance. One can present any number of transactions. The only requirement is to confirm the holders ones.

Lack of miners and mining

PoW consensus algorithm doesn’t apply here. Their carbon footprint is a part of cryptocurrencies. It majorly rely on mining for blockchain network security.

No transaction fees

No mining or miner removes payment for transactions dispersal. However, little fees could be paid to nodes.

Lack of scalability issues

Directed Acyclic Graphs has the ability to carry out more transactions. Unlike a basic blockchain network, this has the capacity to increase DAG’s value. Also, in Internet Of Things (IOT), machines can engage each other in interactions.

Disadvantages of DAGs in Crypto

No complete decentralization

In DAGs, most of the protocols possess traits of centralization. It can just be a brief period to activate the network. Meanwhile, some still worry if DAG can function with an intermediary. Anything aside this can make the network vulnerable to threats

Not scalable  

The DAG cryptocurrencies are still new to the system. It will take a while for them to fully develop and gain recognition. One can only wait till they are scalable to gain well from it.

So far, I believe you are understanding all about the topic. “What is Directed Acyclic Graph (DAG) in Blockchain and Crypto” is interesting.

Difference Between DAG And DLT

On the blockchain, blocks are very instrumental. This is so because, the add it on the blockchain. Also, there is need to let each block know of any occurrence of transaction. On the other hand, directed acyclic graph doesn’t make use of this blocks. Its transaction addition in the network is unique.

In DAG, there is a linkage of individuals. The tree-like form of this linkage encourages end-to-end transactions. However, this transactions doesn’t go through all the nodes. At the end, transaction obtain verification in the network.  

DAG provides fast transactions and great scalability. Also, it provides low transaction cost and less energy consumption. While, DLT has a slower transaction speed. It also has high cost of transaction and is time consuming. DAG-based protocols can work on a TPS rate as much as possible. This is contrary to the Bitcoin and Ethereum. Their TPS varies at 7 and 30, respectively.

Most importantly, there is no waste of computing power in DAG structure. The retain the blocks are transactions are complete.

Blockchain may receive criticism from different people. But, its high level of competency remains exceptional. It provides high level of security to high transactions. On the other hand, DAG network becomes vulnerable to attacks. This happens on a reduction of transaction volume.


I believe you now know what is Directed Acyclic Graph (DAG) in Blockchain and Crypto.

It is definitely instrumental in both blockchain and cryptocurrencies. With time, it will be scalable. People will then appreciate it more. DAGs possess such great potentials as they are still new. Now imagine when they develop fully.

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