A directed acyclic graph (DAG) is a type of data structure that can be used as a substitute for or complement to blockchains.

Here’s what it means:

• Directed: Each connection has a defined direction, so there’s a single directional flow from one node to another.

• Acyclic: Vertices never loop back on themselves, meaning transactions are immutable.

• Graph: A data structure composed of nodes and the connections between them (which can represent transactions/token movements).

So how are DAGs different from blockchains?

While blockchains are also directed and acyclic, they are made up of blocks of grouped transactions connected in a chain and authenticated by miners/validators. In contrast, DAGs are an expanding graph of individual transactions where new transactions validate previous transactions.

Pros vs. cons:

DAGs are highly efficient and viable infrastructure for micropayments. However, because DAGs are secured by network traffic, low transaction volume can leave them vulnerable to attack.

Are DAGs used in crypto?

Absolutely. Both the Avalanche and Fantom networks combine DAG and blockchain structures in their consensus protocols. For example, the Fantom network uses its DAG 2.0 model to stack transactions and approve them simultaneously before incorporating them into a blockchain for greater security. Other protocols, such as IOTA and Hedera, use DAG-based systems without blockchains.

What’s next for DAGs?

The Chainlink Labs Research Team has published an array of cutting-edge research around DAGs that could potentially lead to the next scalability breakthrough for Web3. Highlights include:

• BFT on a DAG: blog.chain.link/bft-on-a-dag/

• Execution and Parallelism: blog.chain.link/execution-and-parallelism-for-dag-based-bft-consensus/

• MEV Resistance on a DAG: blog.chain.link/mev-resistance-on-a-dag/

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