Directed acyclic graph is made up of vertices and edges. Unlike a blockchain, there are no blocks here. Instead, transactions appear as vertices stacked on top of each other. Nodes submit transactions to the DAG, similar to how it’s done on a blockchain. To submit a transaction, a node needs to finish a Proof-of-Work task.
Understanding about Directed Acyclic Graph
In a DAG, every new transaction needs to point to earlier transactions to get accepted into the network, much like how blocks in a blockchain reference previous blocks. When one transaction points to another, it gets confirmed. For that transaction to be confirmed, it has to be pointed to by yet another transaction, and this process continues.
The tip where a new transaction will be added is decided by an algorithm. Tips that have more confirmations are more likely to be chosen for building.
DAGs come with several perceived benefits. Transaction speeds are fast since processing isn’t held back by block creation. There are no transaction fees because there are no miners — plus, the absence of mining brings significant environmental advantages.
On the flip side, there are notable downsides as well. The biggest one is that they aren’t fully decentralized, unlike blockchains. Also, using DAGs in cryptocurrency is still pretty new. These two issues mean that, for now, DAGs are mostly used to kickstart a network rather than as a foundation for a stable and enduring network.
Some Examples of DAG
It’s 2025, here is some examples of DAG and you can check it on coinmarketcap or coingecko:
- Hedera (HBAR)
- Kaspa (KAS)
- IOTA
- Nano (XNO)
Conclusion
Directed Acyclic Graphs could play a key role in the next generation of decentralized systems, offering a glimpse into a faster, more scalable future for cryptocurrencies and blockchain technology.