Directed Acyclic Graph (DAG)

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Table of contents

1. 0.2. How It Works
2. 0.4. Why It Matters

A Directed Acyclic Graph (DAG) is a data structure used in some blockchain and cryptocurrency systems, where transactions or blocks are linked in a graph, but there are no cycles (loops). This structure helps improve scalability and efficiency by allowing multiple transactions to be processed simultaneously, reducing bottlenecks.

How It Works

In a DAG-based system, each transaction points to previous ones, forming a directed graph without cycles. Unlike traditional blockchains, DAGs do not require miners to validate transactions; instead, each participant helps validate a transaction, increasing the system’s speed and decentralization.

Why It Matters

DAG-based systems offer potential improvements over traditional blockchains, such as faster transaction times, reduced fees, and increased scalability. This makes them particularly appealing for high-volume applications, like IoT and microtransactions, where traditional blockchains may struggle to keep up.