Most people assume that Bitcoin was the beginning of the blockchain, but in fact there were versions of crypto coins in existence before its arrival. BMoney and BitGold are a couple of examples. However, they didn’t have much success, partly because Bitcoin became the one to buy and put every other coin in the shade. But, there is another reason for their lack of success – they were on a centralised structure, whereas the key selling point for BTC was, and remains, the “decentralized, immutable, transparent” ledger in which transactions could be recorded.”
This aspect of the blockchain gave Bitcoin a huge advantage, but now it looks like developers are searching for another way to create crypto. The first one to emerge is the Direct Acyclic Graph (DAG). In mathematical and technical terms, this is a finite directed graph with no directed cycles. DAGs can model all kinds of information – a spreadsheet is one example and they are very handy for data processing networks. It can also be used to create a decentralised ledger, and one of its advantage sis that it has the capacity to solve old problems and add new features. Some believe it will even replace the blockchain eventually.
Back in 2013, Yonatan Sompolinsky and Aviv Zohar introduced the GHOST protocol, which proposed a change to Bitcoin’s structure from a blockchain into a tree, thus reducing confirmation times and improving security. Although this change has not been implemented in Bitcoin, other cryptocurrencies are using the DAG-based system successfully.
Byteball is one. This is a DAG-based currency without any blocks. Instead, transactions are linked directly to each other and each transaction contains one or more hashes of previous transactions. The set of links between the transactions forms what is known as the DAG, as opposed to the block system used in Bitcoin and other cryptocurrencies.
There is still a lot of work to be done on Byteball and its DAG-based system, but one thing is clear: this system is a viable alternative to blockchain technology and can even solve some of the most prominent problems found in the technology, such as such as speed, sustainability, scalability, security, privacy and legal compliance. However, and this is of particular interest to me; when compared with Ethereum, Byteball smart contracts are not as powerful, but they are simple, allowing them to be displayed in user-readable form.
Will DAG-based cryptocurrencies replace blockchain? It’s hard to tell right now, but we need to keep an eye on this development as some projects are making a bit of noise in the cryptosphere, which suggests DAG-based coins will be more popular in the future.