Blockchain-less technologies — Too good to be true?
Last year crypto-boom has seen the rise of many projects based on Distributed Ledger Technology (DLT), if most of them were based on the tamper-proof 10- years old blockchain technology inspired by Bitcoin, some crypto-currencies have chosen to use a new kind of DLT, better, faster, stronger… and blockchain-less: the Directed Acyclic Graph.
IOTA, Byteball & Hashgraph are paving the way of this new generation of cryptocurrencies. In this article we will try to cover the following:
- What is a DAG?
- Who are the top blockchain-less players and what differentiate them?
- Is the DAG really the future of crypto-currencies?
1. What DAG fuck?
Let’s start with what it’s NOT. A DAG, is not:
- A dance move
- The Deputy Attorney General
- An alternative band from North Carolina
However, a DAG is:
- Directed: All links (vertices) between different nodes (edges) of the graph have a direction (eg: going from one node to another and not the other way around).
- Acyclic: One node cannot reference itself through any path
- Graph: A collection of edges (nodes) and vertices (link between the nodes)
As we can see, the Graph in the Figure 2 is:
- Not Acyclic: A can reference itself by going through B, C, D, E, F vertices
- Not Directed: D & E are linked by a bidirectional vertex
2. Blockchain vs DAG: Is DAG really the future?
One obvious advantage of DAG vs blockchain is that at any point of time a DAG can have an infinite number of tips (nodes at the very limit of the graph that are not yet referenced by other nodes), if we assume these nodes are transactions, it means an infinite number of transactions can be added to the graph at any point of time and can therefore be validated simultaneously if the network is large enough.
In contrast, a blockchain only has one tip at any point of time which is the latest block that has been validated and therefore a blockchain scalability is tied to the number of blocks that can be added per second and the number of transactions a given block can contain.
Recap of Blockchain vs DAG strengths & weaknesses:
In conclusion, DAG provides more flexibility to adapt to the increasing volume of transactions, however without any implementation of sharding-like technology it will remain constrained by the speed of the network and the size of the graph that needs to stored by the respective nodes of this network (cf. discussion with Jackson Palmer below whose great DAG 101 video really helped me for the article).
Additionally, this higher flexibility also comes at a security cost that explains why DAG-based cryptocurrencies are not fully-decentralized yet.
3. Who are the top blockchain-less players? How are they different?
As of the time this article is being redacted we can clearly isolate three main players leveraging the DAG for the Distributed Ledger Technology:
- IOTA: Open source DLT aiming at powering IoT with feeless microtransactions and data integrity for machines
- ByteBall: All in one cryptocurrency aiming at competing with Ethereum that already includes privacy features
- Hedera Hashgraph: The public ledger of the Hashgraph technology patented by Swirlds.
How are they different from a tech standpoint?
Overall, it looks like the three of them are trying to build the best fully scalable, decentralized platform in the long run but for now no one has managed to grow a network as large as the Ethereum network.
IOTA seems to be the only one that can be fully decentralized even if they are not for now. The two others have to rely on a secondary layer of power-user to guarantee the security of their graph.
All things considered, it is very likely that the tech itself will have to face several adjustments when it’ll start serving concrete use cases and estimating any of these three will outpace the two others simply based on their theoretical scale & features would be really naive.
So, who has the strongest business profile?
Taking a business perspective, both in terms of market cap (whatever that means currently) and partnerships, IOTA seems to be the most promising DAG network bet for now.
Conclusion
Today, most DAG network put a huge focus on finding the perfect technical and most secure solution with many fancy features
However, DAG allows to solve short term scalability issues but will have to overcome the graph loading issue in the long run
Therefore, it is not clear yet whether or not DAG will overcome blockchain (cf. Nano, Ark…) or if it has to be separated at all (PHANTOM initiative on Bitcoin)
Overall, the one that will succeed will be the one with the most applications in production & usage and IOTA seems to be leading the path for DAG-oriented cryptocurrencies
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