What is a directed acyclic graph in cryptocurrency? How does DAG work?

A directed acyclic graph or DAG is a data modeling or structuring tool typically used in cryptocurrencies. 

Unlike a blockchain, which consists of blocks, directed acyclic graphs have vertices and edges. Thus, crypto transactions are recorded as vertices. These transactions are then recorded on top of one another. Similar to a blockchain, however, transactions are also submitted to the DAG via nodes. Proof-of-work (PoW) tasks are required of nodes to submit a transaction. 

Simply put, whereas a blockchain system looks like a chain, DAG’s system looks more like a graph. The DAG model is currently seen in the industry as a possible substitute for blockchains in the future due to its efficiency in data storage and processing of online transactions. 

The DAG model is seen as a possible solution to the current decentralization issue in crypto. With this model, miners will not have to compete for new blocks to add to the chain. 

With nodes developed simultaneously, transactions can likewise be processed faster. Developers are eyeing DAG as a better, more secure solution that can improve a network’s usability once it becomes more scalable.

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