Distributed Ledger Technology (DLT) is one of today's leading innovations. Among many types of DLTs, the debate around DAG vs. Blockchain is one of the most widespread. While many are familiar with blockchain, Directed Acyclic Graphs (DAGs) remain less understood.
This article explores what DAGs are, their benefits, use cases, and key differences from blockchain. Let’s dive in!
DAG vs Blockchain: Key Differences
DLTs have revolutionized various industries. However, many mistakenly consider blockchain as the only type of DLT. In reality, DAGs are another innovative branch of distributed ledger technologies. Both record transactions in a digital ledger, support decentralization, and enable token economies. Yet, they differ significantly in structure and functionality.
What Is DAG Technology?
A Directed Acyclic Graph (DAG) is a unique data structure where transactions are linked unidirectionally, forming a layered network without blocks. Key features:
- No mining (unlike Proof-of-Work blockchains).
- Transactions validate previous transactions (no miners/validators).
- Scalable and energy-efficient.
Advantages of DAGs
- Speed: Higher transactions per second (TPS) due to no block delays.
- Scalability: Seamlessly handles increased transaction volume.
- Cost-Efficiency: Lower fees (no miner incentives).
- Energy Efficiency: No energy-intensive mining.
Disadvantages of DAGs
- Centralization Risks: Some DAGs rely on third-party bootstrapping.
- Limited Large-Scale Testing: Real-world adoption still emerging.
How Does DAG Differ from Blockchain?
| Feature | Blockchain | DAG |
|-----------------------|-------------------------------------|--------------------------------------|
| Consensus | Mining/PoS | Transaction references |
| TPS | Lower (e.g., Bitcoin: 4–7 TPS) | Higher (scalable) |
| Data Structure | Blocks in a chain | Layered transactions |
| Use Cases | Large payments, DeFi | IoT, microtransactions |
Popular DAG Networks
Blockchain vs DAG: Use Case Comparison
| Application | Blockchain | DAG | Reason |
|----------------------|------------|------|--------------------------------------|
| IoT | ❌ | ✅ | DAGs handle micro-payments efficiently. |
| Microtransactions | ❌ | ✅ | Low fees and high TPS. |
| Large Payments | ✅ | ❌ | Blockchain offers higher security. |
| P2P Energy Trade | ❌ | ✅ | Scalability for small-value trades. |
FAQs
Q: Is DAG replacing blockchain?
A: No—both serve different niches. DAG excels in microtransactions; blockchain suits high-security needs.
Q: Are DAGs fully decentralized?
A: Not always. Some DAGs start semi-centralized to bootstrap the network.
Q: Which is faster, DAG or blockchain?
A: DAGs typically process transactions faster due to their structure.
Q: Can DAGs support smart contracts?
A: Emerging DAG projects (e.g., IOTA) are integrating smart contract functionality.
👉 Discover how DLT is transforming industries
Both DAGs and blockchains are reshaping digital transactions. While DAGs solve scalability and cost issues, blockchains remain robust for high-value applications. Developers should choose based on project requirements.
Want to implement DLT? 👉 Connect with experts to explore solutions.