introduction
In 2008, Bitcoin revolutionized the world of finance with the advent of blockchain technology. Decentralization, anonymity, and transparency helped Bitcoin and later blockchain gain traction among investors. Blockchain is a data structure, so it relies on connections of blocks that contain important information about transactions. Every block contained information about the previous block in the form of a cryptographic hash. For many years, this technology had no competitors, but that changed with the introduction of directed acyclic graphs.
What is a directed acyclic graph (DAG)?
A directed acyclic graph (DAG) is a blockchain-like data structure, but instead of operating on a single sequential chain, it is a network of many linked transactions. This concept first appeared in 2016 when the crypto project IOTA applied the concept to transactions. In this project, we called the transaction structure a tangle rather than a blockchain ledger. The term arose from the fact that it is like a web, consisting of nodes that contain transactions.
If we try to represent a blockchain graphically, we see many blocks arranged in a line, each block only connected to the previous block. On the other hand, the representation of a DAG structure shows dots, many of which are connected to multiple dots in such a way that the loop only moves forward and never returns to its original location. Every point (or sphere) is a vertex and every line is an edge. You can understand the model nomenclature from the following diagram. Edges are directed because they point in one direction, and acyclic because they never return to their original vertex.
How the structure works
At every stage of understanding DAGs, you also need information about blockchain technology. Because it is blockchain technology that DAG claims to improve or replace. Blockchain works based on blocks that carry data for one or more transactions. Group many transactions together for space efficiency. Every block is added and verified by miners or validators.
On the contrary, all transactions within a DAG structure exist independently without being grouped into blocks. This structure does not require miners or validators and is not sequential like blockchain structures. Before a transaction is added, the user’s device does a very small amount of work to prove it is genuine. This small effort helps prevent spam and also helps keep the network safe and orderly by checking previous transactions.
Every new transaction in the DAG structure must connect to a previous unconfirmed transaction. Alternatively, if all previous transactions have already been confirmed, the new transaction need only refer to the last transaction. In this structure, previously unconfirmed transactions are referred to as “tips.” When you propose a transaction to the network, it is connected to several previous tips and automatically confirmed according to references. Yours is only ascertained by what others have built on top of it.
Advantages of DAG structure
No delay
In blockchain, transactions have to wait until a block is created. If you send too many transactions at once, a queue will form, causing you to wait longer or pay higher fees. However, by confirming previous unconfirmed transactions, the DAG network can process transactions at once. The wallet automatically checks the transaction you are trying to confirm by tracing it all the way to the first transaction on the network. Therefore, there is little chance of accidentally confirming an invalid transaction.
No scalability issues
Think of blockchain like a highway. The highway is sometimes congested, so we need to add some lanes. These additional lanes are a scalability solution. Because there are no issues such as block latency, DAGs do not require scalability solutions and can handle more transactions on their own.
No miners, no validators, no fees
The DAG structure does not work with a consensus mechanism, so there are no miners or validators. Therefore, transactions are processed free of charge. However, there are some special nodes that charge a very small fee to protect your network.
Disadvantages of DAG
Centralization poses significant risks to DAG progress. Certain special nodes or coordinator nodes run by companies tend to dominate. This carries a potential risk of fraud and attacks in the future. Additionally, DAG is eight years younger than blockchain technology and is therefore unproven.
conclusion
Blockchain and directed acyclic graph technology both aim to enable decentralized and secure transactions, but they approach the problem in completely different ways. While blockchain remains a more mature and widely adopted solution, DAGs offer notable improvements in speed, scalability, and transaction costs. However, concerns about centralization and its relatively short track record continue to limit widespread adoption. As innovation accelerates in 2026, DAGs are likely to complement blockchain rather than completely replace it, with each technology serving the use cases where its strengths are most effective.
FAQ
What are the main differences between DAG and blockchain technology?
While blockchains record transactions in sequential blocks, DAGs process individual transactions in a web-like structure, allowing for faster, more scalable verification.
Are DAGs more scalable than blockchain?
Yes, DAGs can handle larger volumes of transactions without relying on block creation, which reduces congestion and scalability issues.
Does the DAG require miners or validators?
No, DAG Network does not rely on traditional miners or validators. Each new transaction helps validate previous transactions, keeping the network operational.
Can DAG replace blockchain in the future?
While DAGs are unlikely to completely replace blockchain, they could complement it by powering applications that require high speed, low fees, and scalability.
