Directed Acyclic Graph (DAG)

A Directed Acyclic Graph, or DAG, is a way of structuring data that differs from the traditional blockchain approach. In a classic blockchain, transactions are grouped into blocks, chained one after another in a strict linear sequence. A DAG throws out that linear structure — each transaction can reference several previous transactions at once, forming a web-like structure that branches and merges but never loops back on itself.

The “directed” part means all connections flow in one direction — from older transactions to newer ones. The “acyclic” part means there are no circular loops. Together, these properties allow a DAG to maintain a verifiable history without requiring every transaction to wait in line behind all the others, opening up the possibility of processing many transactions simultaneously. DAGs are used in projects including IOTA, Nano, and Hedera Hashgraph, though they require more sophisticated coordination to remain secure.

Example: Think of a traditional blockchain like a single-lane road where all cars must drive one behind the other. A DAG is more like a highway interchange with multiple lanes and on-ramps, where many cars can move at the same time as long as they are all heading in the same general direction and following the rules of the road.