Blockchain technology may have proven itself to be highly secure, but it also has a series of inherent scalability issues that need to be overcome to drive innovation at a faster pace. The linear nature of blockchain processes means that parallel processing has been off the table, but BlockDAG is now being touted as a solution that could offer significant potential.
In this guide, we’re going to take a closer look at what BlockDAG is, how it works, and how it can be used in industries like online gambling to improve existing infrastructure.
What Is BlockDAG?
BlockDAG is a new type of blockchain technology in which multiple blocks can be validated simultaneously, as opposed to the existing sequential blockchains that take a strictly linear approach. The idea is that any given block can reference more than one previously written block, allowing a new era of parallel processing to begin. Because actions and events are being processed alongside one another, rather than one after another, the overall speed should increase. Developers are pitching this as a way to scale blockchain functionality in a way that opens the door for more high-volume applications.
Predicted Advantages of BlockDAG
Saying something should be faster and more scalable is one thing, but what does this mean in practical terms? The ability of data to be recorded at a faster rate should, in theory, ensure that data flow is improved and waiting times are reduced. As the number of users of a given application increases, the exponential increase in the number of blocks that need to be added should not prove a problem with a BlockDAG solution. At the same time, the decentralised nature of the blockchain is preserved.
How Does BlockDAG Work?
Taking a look at the specifics of how parallel processing is achieved can prove helpful in developing our understanding of how the new structure works.
Leveraging a Directed Acyclic Graph Structure
A DAG structure is able to ensure long-term order without the introduction of time-consuming loops because all of the transactions are linked by one-way connections. This prevents the formation of cycles and allows blocks to be validated and added across multiple paths. For this to occur, the transactions being added need to be grouped into blocks and added to a structure that is both interconnected and non-linear.
Achieving Security and Consensus
Integrity is maintained in a non-linear structure by the use of a PoW mechanism whereby miners are tasked with solving increasingly complex computational puzzles. This is what allows the transactions to be validated and the required new blocks to be created. The requirement for large-scale computational power is designed to block the entry of malicious actors who would otherwise seek to corrupt the blockchain.
BlockDAG Combined With iGaming
Developers are always looking for ways to enhance the playing experience, with transaction times, security, and demonstrated fairness key areas of focus. Those who champion a BlockDAG-based approach highlight that it has the potential to help with all of these.
Faster Transactions for Online Players
Everyone knows that instant deposits and withdrawals are critical in the world of crypto casinos, but not everyone understands the scaling problem. Regular blockchains have already been shown to be virtually instant in this regard, but their speed can quickly fall as scale is achieved.
The problem then becomes not one of proof of initial concept, but one of practical viability. The biggest, most successful online casinos will attract the most players, and as a result, they would then have to offer increasingly longer transaction times due to the volume of players. This would cap their growth potential. BlockDAG’s parallel validation has the potential to make near-instant settlements at scale the new normal.
Fairness & Transparency Across All Games
It is essential that provably fair mechanics are integrated into BlockDAG from the outset, and this is something that developers are championing. The very fact that this new approach has the potential to handle volume at faster rates means that live casino applications and betting platforms could be seen as inherently more trustworthy. Removing delays and bottlenecks while streamlining gameplay and the player experience is essential if players are to trust the new generation of platforms that they are using.
Examples of BlockDAG in Action
Far from being a concept that is limited to theoretical discussions, BlockDAG is being actively developed and integrated in several interesting ways:
- Kaspa, Fantom, Nano, and IOTA are all at various stages of development at the time of writing this guide
- Applications in payment-heavy sectors like iGaming are already being strongly muted in certain quarters
- Developers are actively building on lessons learnt with linear blockchains to move to a faster parallel approach
There are also reports of BlockDAG’s security being improved compared to traditional approaches as a result of its flexible infrastructure. This could play a major role in building trust so that BlockDAG-based applications can achieve the necessary scale that will allow them to outperform linear models.
Challenges With BlockDAG Adoption
The high level of complexity and the need for significant computational power in the PoW validation stage mean that some systems are behind the curve in terms of their ability to use this approach. There are also interoperability issues that need to be overcome for the new wave of applications to be launched into real-world settings. Another key challenge is that regulatory acceptance in gambling markets is still at an initial discussion phase. It will be interesting to see how developers look to overcome these challenges in the months and years ahead.
BlockDAG vs. Traditional Blockchain
While it is true to say that most popular cryptocurrencies on CryptoSpinners.com and other similar sites run on a traditional blockchain, there is always something to be gained by innovation.
Improved Scalability and Greater Speed
Parallel block validation will always be faster than a sequential approach because more than one transaction can be processed at any given time. This means there is an inherently higher throughput for BlockDAG, making it better suited to high-volume applications. The ability to maintain transaction speed as scale is achieved is important for the user experience and for the practical function of the application in question.
Risks and Trade-Offs
One potential downside of this approach is that there are fewer audits, and so other trust-building mechanisms and processes need to be put into action. There is also the issue of the complexity of adoption, especially in terms of the level of computational power needed for the validation stage. While it may be the case that more substantial technical infrastructure is needed, champions of the DAG approach will highlight its greater ability to handle high volumes.
The Path Ahead for BlockDAG Developers
Right now, it is fair to describe BlockDAG as promising yet experimental. There is nothing wrong with this — all new technology must be at this stage at some point in history — but critics may be concerned by the amount of time the development process is taking. As with any new technology, there will be successes and failures with breakout companies competing against startups that soon find themselves under resourced.
One of the most interesting areas of current development is iGaming, where the scalability benefits and ability to maintain security could come into their own. As iGaming platforms scale, linear blockchains typically result in slower transactions and longer processing times. BlockDAG could hold the key to avoiding this issue once and for all.
Investors and developers would be well-advised to watch closely to see how real-world applications unfold, especially in industries that are actively looking for solutions. The ability of BlockDAG to solve existing problems, but only with the introduction of more computational power, may see an institutional investor backing a large-scale development in the near future.