A Directed Acyclic Graph (DAG) is a data structure that consists of nodes connected by edges, where the edges have a specific direction and form a non-linear structure with no cycles. In the context of cryptocurrency, DAG is used as an alternative to traditional blockchain technology for achieving consensus and recording transactions.
Unlike blockchain, where transactions are grouped into blocks and added to a linear chain, DAG allows transactions to be processed asynchronously and in parallel. This results in faster confirmation times and higher scalability, as there is no need for miners to reach a consensus on the order of transactions.
DAG-based cryptocurrencies, such as IOTA and Nano, use this structure to eliminate the need for transaction fees and mining, making them more efficient and cost-effective for microtransactions. DAG also offers better resistance to network attacks, as the absence of a single chain means there is no single point of failure.
Overall, DAG provides a new approach to achieving consensus in cryptocurrency networks, offering increased speed, scalability, security, and efficiency compared to traditional blockchain technology.
