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Difference Between DAG and Blockchain

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  • Last Updated : 22 Jul, 2022
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Blockchain is a digital, decentralized public ledger that records every data transaction on the network, and has great potential to build the future Internet system. It begins to shape the world of transactions in a new way, with the ability of tracking orders, payments, and more on the network.

Now that we all know how much information plays an important role, getting it quickly and accurately will also be very important. Blockchain enables us to quickly, accurately, and securely transfer information from one point on the network to another. There are many fields of blockchain application, such as finance, education, medical care, etc.

  • Blockchain provides excellent data security and integrity. Blockchain technology helps businesses by providing better protection against data breaches. Blockchain uses hashing technology to store data securely, which helps businesses with data backup and data sharing.
  • As blockchain is a decentralized ledger, which makes data exchange between organizations easy and secure by storing the information in a special ledger in a blockchain database to keep it safe. 
  • Blockchain provides data immutability for businesses and helps them in protecting their information.
  • Because of decentralization, blockchain requires a peer-to-peer network to maintain the system. 

Introduction To DAG

The full form of a DAG is a directed acyclic graph. This is a commonly used data modeling or structuring tool in cryptocurrencies. As we all know, a blockchain has blocks, and a directed acyclic graph has nodes and edges. Where encrypted transactions are recorded as nodes. Most importantly, transactions in a DAG are recorded on top of each other. Similar to the blockchain, transactions are also transmitted to the DAG through nodes, and in DAG nodes require a Proof of Work (PoW) Consensus Mechanism for transactions.

  • The blockchain structure looks like a chain, while the DAG structure looks like a graph.
  • Many decentralization problems in the encryption field can be easily solved with the help of the DAG model. Because with the DAG, miners don’t have to wait or fight to add new nodes to the graph.
  • There are no transaction blocks in the DAG network, they have nodes and edges. Therefore, transactions are faster due to the simultaneous development of nodes.

Blockchain vs DAG

Basis

Blockchain

DAG

Launch 

Satoshi Nakamoto introduced the blockchain in 2008 when he released the Bitcoin white paper.DAG is first introduced by the NXT platform and it came in 2015.

Structure

As I told you above, a blockchain is a decentralized public ledger that has distributed ledger. Due to distributed ledger, it forms a chain of many transaction blocks arranged in an immutable chronological order. To add a block to the chain, the block must first be verified. Each verified block is added to the previously verified blocks.There are no transaction blocks in the DAG network, they have nodes and edges. The blockchain structure looks like a chain, while the DAG structure looks like a graph. In a DAG, a single transaction is linked to multiple other transactions.

Consensus Mechanism

The blockchain has a “Proof of Work” consensus mechanism, which means that the blockchain requires miners to solve various types of computationally intensive problems, and miners are rewarded for each successful verification.As in DAG, a single transaction is associated with multiple other transactions, so they depend on each other for validation. In a DAG, users can be miners or validators. Although they cannot verify their own transactions.

Cost-Effectiveness

Blockchain is not as cost-effective as DAGs like Ethereum, which is a blockchain network with high network or transaction fees, making blockchain more expensive to use.DAGs are more cost-effective than the major public blockchain options available in the market today.

Transaction Speed

In the blockchain, we have block time (the time interval or wait time between recording a transaction and confirming it), which makes a blockchain not as fast as a DAG.In DAG, we have no block time, so the transaction process in DAG is fast. Therefore processing speed of DAG is faster than Blockchain.

Transaction validation

The decision to approve or reject the transaction depends upon the miners or validators in the blockchain system. In a DAG protocol, the success of a transaction depends on its ability to approve previous transactions. 

Popular Networks

Popular networks running on the blockchain are Bitcoin, Ethereum, IOTA, etc. There are many other companies or organizations that have private networks using blockchain technology.There are few networks running on the DAG. Some of the most popular are NXT, Tangle, and Byteball.

Internet of Things

Blockchain does not support IoT.DAG supports IoT because IoT requires fast and cheap payment infrastructure.

Microtransactions

Blockchain does not support microtransactions.DAG supports microtransactions. This gives DAGs an advantage over blockchains.

Large payments

With blockchain technology, large payments can be easily made without any difficulty with high security.It is currently not possible to use DAG for large payments because the semi-centralized nature of DAG is not so secure.

P2P energy tradings.

Blockchain does not support P2P energy trading.DAG supports P2P energy trading which makes DAG the first choice for P2P energy trading.

Pros

  1. Widely used in cryptocurrencies such as Bitcoin and Ethereum.
  2. It provides data immutability to businesses and helps them protect their information.
  3. Cost-effective for high-value transactions.
  1. DAGs are best for microtransactions. 
  2. The DAG fee is very small and greatly reduced.
  3. Very low energy consumption in DAG. DAG does not require any mining equipment.
  4. DAG can also be used for bulk transactions.

Cons

  1. Blockchain consumes a lot of power.
  2. It has high transaction fees.
  1.  The transaction volume is small and vulnerable to attack.
  2. DAGs are still new and thus have not maintained a high degree of decentralization.

Conclusion

Blockchain and Directed Acyclic Graph (DAG) come from different distributed ledger technologies. Both have some similarities, and in some ways, the two are completely different. Many developers say that DAGs are an improvement and the future of blockchain technology. Distributed ledgers already solved many difficult challenges. Therefore, many new technologies trying to solve other difficult problems of distributed ledgers in various other fields, such as blockchain in genomics, etc. Now day businesses upgrade themselves according to new technologies which came into the market.

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