A directed acyclic graph (DAG) is a type of data structure aiming to improve upon shortcomings of a conventional blockchain, particularly scalability. A DAG has no blocks, though transactions come through via nodes, and works like a graph with various vertices and edges. It moves in only one direction and records in the form of vertices on top of each other, with each vertex representing a transaction.
When a new transaction arrives, it must first reference another that occurred previously. This allows the transaction to be received on the network and the DAG to work efficiently. Nodes can also confirm multiple transactions simultaneously, since each one can have more than one parent root.
A DAG has many different solutions and benefits compared to a traditional blockchain. For example, it offers high transaction speeds since blocks do not limit DAGs and minimal transaction costs compared to blockchains like Ethereum and Bitcoin.
Since DAGs do not require blocks, they do not require mining, allowing for more environmentally friendly and energy-efficient networks.
