A Directed Acyclic Graph (DAG) is a type of graph data structure that consists of nodes connected by directed edges, where the edges have a specific direction and do not form any cycles. It is a directed graph that does not have any directed cycles.

Each node in a DAG can have one or more incoming edges and one or more outgoing edges. The edges in a DAG represent dependencies between the nodes, where the direction of the edge indicates the direction of the dependency. For example, if node A has an outgoing edge to node B, it means that node A depends on node B.

Overview

Directed Acyclic Graphs (DAGs) differ from blockchains in that they do not use a block-based structure. Instead, transactions are represented as vertices in the graph and are linked to previous transactions. Nodes validate and add transactions to the DAG, and submitting a transaction requires completing a proof-of-work task. ^[1]

In a DAG-based network, a new transaction must reference previous transactions to be accepted, similar to how blocks in a blockchain refer to previous blocks. Referencing a transaction confirms it, and for a transaction to be fully confirmed, it needs to be referenced by subsequent transactions. ^[1]

DAGs have high transaction speeds due to the absence of block creation and no transaction fees because there are no miners, which can have environmental benefits. ^[2]