Unlocking The Crypto Puzzle- Part 10 — DAG and the future of Blockchain
Over the past few years, the cryptocurrency industry has gone through a number of changes — the rush to ICO’s; the potential of government regulation; and the move of “mainstream” investment to embrace crypto as a legitimate investment structure are just a few examples. But the world’s perception of cryptocurrency is inexorably tied to another core concept in the world of crypto — the blockchain.
I discussed the concept of blockchain, as it is currently used with Bitcoin, in detail in the very first episode of Unlocking The Crypto Puzzle. While the purpose of that original article was to present a simplified explanation of what a blockchain was, I did not go into any of the potential issues that using the Bitcoin blockchain has created.
The Bitcoin blockchain is a strong example of failure caused by too much success. When Satoshi Nakamoto first proposed the use of “a chain of data blocks”, no one could have imagined the level of success his concept would achieve. And in the early days of Bitcoin, the blockchain worked admirably and relatively quickly. But as the system, and the blockchain, grew we discovered that there are inherent issues with the Bitcoin blockchain.
Among them is the cost of not only the expensive equipment to do mining, but the exorbitant cost of power (electricity) to run the rigs. These costs have risen in proportion to the increase in difficulty in successfully mining Bitcoin. It has been estimated that the bitcoin blockchain ranks higher, in terms of energy consumption, than over 159 countries, including Ireland and Nigeria.
There is also an issue of speed. The Bitcoin blockchain only produces a new block every 10 minutes. And each block can only hold a maximum of 1MB of data. When you add in the amount of data that must be included in each block, it equates to approximately 7 transactions per second.
While that may not have seemed like an issue when Bitcoin was simply a concept on paper, as the coin skyrocketed to fame over the past few years it quickly became obvious that the structure of the blockchain would not smoothly scale in size. During the boom in the fall of 2017, it was not unusual to have to wait hours, or in some cases days, to see your bitcoin transaction completed.
If you really think about it, blockchain technology is nothing more than a method for structuring data. It takes information, in Bitcoin’s case it is the name of the previous block; the time and date of block creation; and the information being saved. Already linked to the previous block by the data, it now awaits the next block to be created, which will link to the new block. The blockchain moves in a linear fashion, creating one block after another, lengthening and growing the chain. This linear and 2D structure is why Bitcoin transactions are so slow and have difficulty scaling.
So the question quickly became, how do we improve on blockchain as a way of conducting peer-to-peer business, whether it be cryptocurrency or some other commodity?
In the last few episodes of Unlocking the Crypto Puzzle, we explored Proof of Work, Proof of Stake and Proof of Trust. These concepts serve as a cornerstone in the functionality of blockchains. And the newest one, Proof of Trust, is currently being combined with a new type of blockchain called a DAG.
A DAG, or Directed Acyclic Graph, is a revolutionary new way of looking at blockchain as it applies to cryptocurrency. Forbes magazine referred to DAG as “The Real Blockchain 3.0”.
In this episode of Unlocking The Crypto Puzzle, we are going to explore what a DAG is, how it works, and take a look at how it is being applied in the cryptocurrency space.
A Directed Acyclic Graph is far from being a new structure, at least in the computer science world. We know a graph is nothing more than a network of connected nodes (think blocks in crypto terms). As implied by the terminology, information passes through a DAG acyclically, meaning it cannot circle back and reattach to the beginning (that would be a cyclical graph). This means that information (a crypto transaction) in a DAG network also prevent information from starting at any one point and then travelling through the entire network. You are essentially creating a one-way street for information.
The real difference between blockchains and a DAG is that the DAG allows for multiple chains of data blocks to co-exist. A normal crypto blockchain network only allows the primary chain. This is made possible because the nodes can operate parallel of each other, as long as the flow of information is directed.
Where a blockchain is linear (one block following the next), a DAG is sequential and simultaneous, meaning that the nodes can only go from earlier to later but also can happen as previous blocks are still being created. Whereas Bitcoin is inefficient because blocks can’t be created simultaneously and the linked blocks meant there could only be one chain on the network. By switching from traditional blockchain’s chain-shaped structure to the more fluid width of a DAG, it eliminates the bottle-neck in node or block creation.
One of the most interesting uses of a DAG structure is being done by COTI. Their “Trustchain” algorithms are operating at well over the 10,000 transactions per second benchmark they had set, and they have announced confidence that hitting 100,000 transactions per second will not be difficult. As an enterprise-grade fin-tech platform, that would immediately put their capabilities beyond that of MasterCard/Visa, which operate between 10,000 and 25,000 transactions per second..
By focusing their DAG Trustchain on 7 key areas of performance — Scalability, Simplicity, Security, Cost-Effectiveness, Price Stability, Buyer-seller Protections and Instantaneous Transactions, they are literally moving into a position of leadership in the race to make cryptocurrency a useable tool for retail transactions worldwide.
COTI is also partnering with Key companies in providing their cutting-edge technology for the integration of the Trustchain globally. Among those is Ormeus, who has created a new transactional coin, the Ormeus Cash Coin (OMC) specifically to run on the COTI Trustchain. By creating a coin specifically designed to take advantage of all the unique qualities of the Trustchain, Ormeus is positioning itself to become a major player in retail transactions globally.
Blockchain, in its original Bitcoin form, was an amazing concept that served as a starting point in the growth of blockchain technology and its mainstream acceptance. However, like the Ford Model T or the Wright brother’s airplane, it is destined to be honoured for starting the cryptocurrency revolution, even as newer, more explosive technologies, such as DAG, move to the forefront and bring cryptocurrency into the mainstream of worldwide acceptance.
