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Crypto Terms:  Letter D
Jun 19, 2023 |
updated Apr 02, 2024

What is Directed Acyclic Graph (DAG)?

Directed Acyclic Graph (DAG) Meaning:
Directed Acyclic Graph (DAG) - a directed graph with no directed cycles, vertices, and edges.
2 minutes

Let's find out Directed Acyclic Graph (DAG) meaning, definition in crypto, what is Directed Acyclic Graph (DAG), and all other detailed facts.

A directed acyclic graph is utilized as a consensus tool and for data modeling. Besides, different from blockchain, there are no blocks. Instead, all of the transactions are documented as vertices on top of each other.

Transactions are transmitted to the DAG by nodes in the same way that they are sent to a blockchain. In order to submit a transaction, a node must complete a Proof-of-Work assignment.

DAGs have a lot of benefits. One of which is high transaction speed because processing is not managed by block creation. In addition, there are no miners so there are no transaction fees. This greatly benefits the environment as well.

It does, however, have certain disadvantages. One difference between them and blockchains is that they are not totally decentralized. Furthermore, the use of DAGs in cryptocurrency contexts remains in its development.

These two main disadvantages showcase that DAGs are currently utilized as a way to get a network started, and not as a structure that creates a balanced and permanent network.

Each new transaction in a DAG must link past transactions in order to be allowed onto the network, analogous to how blocks on a blockchain include connections to earlier blocks. 

A transaction is verified when it is addressed by another transaction. To be verified, that transaction must be referenced by another transaction, and this goes on continuously.

Miners on the Ethereum and Bitcoin networks may only create one block at a time. As a result, future transactions can only be permitted once the prior one has been completed. The DAG approach removes these blocks and immediately adds transactions to the blockchain.

Additionally, an algorithm determines the tip on which a new transaction will be created. Those that contain more confirmations are more likely to be chosen.