1 of 22

From Blockchain to DAG:

Getting Rid of Middlemen

2 of 22

Directed Acyclic Graph

3 of 22

DAG is the next step

disintermediation

censorship resistance

DAG

Blockchain

4 of 22

Blockchains: miners are middlemen

user

miner

5 of 22

Small number of block producers

Bitcoin: 4 pools control 50%

Ethereum: 2 pools control 50%

6 of 22

Miners are gatekeepers

Block producer didn’t accept a transaction – it doesn’t exist

7 of 22

Directed Acyclic Graph

This is a problem that is inevitable in blockchains. And in order to solve it, rather than inventing another way to select block producers, we have to radically change the design and get rid of blocks and block producers completely. And instead of connecting blocks, we connect transactions directly by having each transaction include a hash of one or more previous transactions. As a result, the transactions get connected into a structure that is known in mathematics as DAG.

Now, the access to the ledger is completely direct, disintermediated. It doesn’t depend on any third parties, any middlemen. When you want to add a transaction to the ledger, you just add it. Select a few parent transactions, add your own data, sign, and broadcast to peers. There is nobody who could stop you from doing so, and your transaction is already in the ledger.

It is the most decentralized, most disintermediated, most censorship resistant way of accepting transactions into a ledger. Because everybody just adds his transactions to the ledger without asking for anybody’s permission.

8 of 22

Evolution of ledgers

DAG

Blockchain

Single gatekeeper

A few gatekeepers

No gatekeepers

Centralized ledger

9 of 22

Consensus

What happened?
In what order?

Now, with so much freedom, it should not be chaos, all nodes should still agree about the state of the ledger. And agreement, or consensus, generally means an agreement about two things:

- what happened;

- in what order.

The first part is easy: once a transaction is added to the ledger by anybody, it happened. Period. It can reach different nodes at different moments in time but still it will eventually reach all nodes and all nodes will know that the transaction did happen.

If it were a blockchain, the miners would decide what happened. Whatever a miner decides to include into a block, did happen. What he didn’t include into his block – didn’t happen.

In blockchains, miners also decide about the order. They are allowed to order transactions within a block as they like.

How do we determine order in a DAG?

10 of 22

Ordering: with partial order

11 of 22

Ordering: without partial order

12 of 22

Order providers (witnesses)

Tx by Amazon

Tx by Google

Tx by Bittrex

13 of 22

Each transaction lists 12 order providers of its choice (example)

4GDZSXHEFVFMHCUCSHZVXBVF5T2LJHMU (Amazon)
BVVJ2K7ENPZZ3VYZFWQWK7ISPCATFIW3 (International Red Cross)
DJMMI5JYA5BWQYSXDPRZJVLW3UGL3GJS (Mahatma Gandhi)
FOPUBEUPBC6YLIQDLKL6EW775BMV7YOH (Dalai Lama)
GFK3RDAPQLLNCMQEVGGD2KCPZTLSG3HN (Internet Archive)
H5EZTQE7ABFH27AUDTQFMZIALANK6RBG (Linux Foundation)
I2ADHGP4HL6J37NQAD73J7E5SKFIXJOT (Bloomberg)
JPQKPRI5FMTQRJF4ZZMYZYDQVRD55OTC (NYSE)
OYW2XTDKSNKGSEZ27LMGNOPJSYIXHBHC (Credit Suisse)
S7N5FE42F6ONPNDQLCF64E2MGFYKQR2I (Wikipedia)
TKT4UESIKTTRALRRLWS4SENSTJX6ODCW(Free Software Foundation)
UENJPVZ7HVHM6QGVGT6MWOJGGRTUTJXQ (Coinbase)

14 of 22

Ordering around order providers

15 of 22

Consensus

What happened: Everything
In what order:

in DAG order
or anchored to order providers

16 of 22

Consensus in Obyte

Admission:	Totally decentralized
Order provision:	10 by founder + �2 independent

17 of 22

Double spends

18 of 22

Double-spend

with partial order

19 of 22

Double-spend

without partial order

20 of 22

What if I accidentally

included a double spend?

orphaned?

reattach-rebroadcast?

double-spend

21 of 22

Censorship resistance

22 of 22

DAG is the next step

disintermediation

censorship resistance

DAG

Blockchain