Blockchain Vs Tangle: Which Is Better?
Let's look at different cryptocurrency platforms and which is the best.
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Blockchain was a real technological breakthrough back in 2008. A new milestone in the world of money, security, e-commerce, and the Internet as a whole — it is literally everywhere now, and modern business utilizes it worldwide. The idea of recording the information without any ability to change it afterward was brilliant. Firstly, as you know, it was implemented in the first cryptocurrency, Bitcoin, but later, it came to banks, security providers, insurers, farmers, governments, etc.
Why were people so obsessed with the blockchain? Because this system guarantees that no one, no matter how powerful or rich this person is, can tamper with the information encoded within the public ledger. Yet, even the sun has dark spots. With time, people have realized that this system is not ideal, and there are problems to be solved. For example, the ledger gets heavier and slower with every new transaction, as the blockchain grows. Or, it cannot exist without miners, and thus — the fees are inevitable.
Anyway, after some years of development and evolution, other approaches to data verification and protection were invented. Can you imagine a cryptocurrency with no transaction fees at all, where there is no need for miners or anyone else to maintain the network, where you can send and receive the tiniest amounts of coins and shares? Recently, that dream has come true. And if you still do not know about it, this article will bring you up to speed.
What Exactly Is Tangle (DAG)?
One of the technologies that seem the most interesting to me is called DAG. This stands for the directed acyclic graph. I will explain the name further. If you have not heard this term, then think about this one — Tangle. Does it sound more familiar? Let’s see what is Tangle, how it works, and why many experts think this is the future of storing and verifying information. Tangle is just another name for DAG, used in IOTA (Internet of Things application). This is different from the blockchain structure, but it does the same thing — builds an independent and self-managed network of transactions.
In further detail, DAG is an architecture and a mathematical model used to organize, record, store, and verify information. Talking about cryptocurrencies, and more specifically IOTA, Tangle is a system of records of transactions that are not gathered in blocks or organized linearly, like in the blockchain. Instead, it's more like a tree, or a graph. Imagine many chains intertwined with each other. This is what it looks like. When you want to make a transaction via DAG, you have to verify two previous ones. This is why the graph is directed. And the word “acyclic” means that past transactions cannot verify future and present ones.
IOTA, as of now, is the biggest cryptocurrency that implements this technology. The Internet of Things is a concept where all kinds of devices directly communicate with each other and can make machine-to-machine transactions. Sensors, cameras, home appliances, vehicles, cell phones, etc. — everything will be interconnected into one huge network. In 2017, it comprised over 8 billion devices, and the predictions are that it will be more than twice as big in 2020.
Without miners, the M2M transactions can be tiny, thus the devices that are connected to the network can freely talk to each other and independently perform their functions. Another problem solved by the DAG approach is scalability — in Bitcoin, the bigger the ledger becomes, the heavier and slower it gets. We’ll talk about that further. Tangle is quite the opposite technology. The computing power of the IOTA network grows with every new device connected to the system. This promises the creation of a whole self-directed microeconomy, where machines can cooperate with each other and work independently.
How Does Tangle Differ From Blockchain?
As you can see, the two technologies are based on cryptography, but this is the only thing that binds them. Tangle and blockchain have more differences than similarities. The straight line of blocks in the blockchain, where each next record verifies the previous one and comprises the information about all transactions made before which is distributed among special users who maintain the whole system — miners. All the more, every node, or in layman terms — every blockchain user – needs to have the valid updated version of the public ledger. This is how Bitcoin works, and until now, it has been the most effective and successful cryptocurrency.
This system has its ups and downs, obviously. The block size is limited, and the number of blocks created every hour is limited, too. The ledger becomes bigger, and the task of mining becomes harder, which leads to higher block rewards. Thus, the system gets slower and more expensive. However, the scalability issues have become proper for the blockchain-based cryptos only recently, and the reason for it is their long history. Who knows how other systems will solve this problem in the future?
The novel crypto ideas are following the blockchain’s heels, and even claim that they are the future of the cryptography. The DAG approach means that the ledger is distributed among all users, not only miners. Actually, we can say that there are no miners here, or that every participant of the network is a miner. This is why the system gets more powerful with every new user. And, with more transactions made via Tangle, they do not become heavier and slower, as each new record in the ledger contains the same volume of information as the previous one. You only need to verify two transactions, without the necessity of maintaining the whole network.
Well, let’s try to make a simple and understandable comparison of blockchain vs. Tangle:
- Tangle is more fluid and scalable, and it becomes quicker and more powerful with time, while blockchain gets slower and less productive;
- Tangle is free, it has no block rewards and nodes do not need fees to verify transactions. In a blockchain, either the fees are too high, or there is a lack of miners. Both situations are bad because you have to either wait too long to transfer the money or you have to pay an unreasonable price;
- Blockchain technology is reputable and trusted. I cannot say the same about IOTA and DAG; they have yet to show their true effectiveness and reliability;
- Bitcoin and Ethereum are, without any doubt, much more secure and hacker-resistant than IOTA. This is thanks to their complex algorithm for verification;
- Despite IOTA being a cryptocurrency, its decentralized nature is rather debatable.
Well, I think it’s worth looking at some differences in more detail.
The vulnerability of Tangle is much higher than that of the blockchain. It is stated that it can withstand the 34 percent attack, meaning that if more than the third part of all computing power that facilitates the network is controlled by one person or entity, they will be able to hack it and make fake transactions. With Bitcoin, one party could control over 50 percent of all hashing power of the blockchain, which is only possible in theory.
In order to avoid such problems, IOTA has included the position of coordinator node in its structure. Many cryptocurrency experts say that this is a sign of a central party, an authority that has more power than any other IOTA user. However, developers of Tangle claim that this measure is temporary, figuratively speaking — the training wheels for the newborn technology.
Transaction Speed and Fees
As the structure of the data records in the two networks differs, these variations lead to further inequality in the cost and time of transactions. Let’s see:
- A miner has to verify the Bitcoin transfer and add the block to the ledger, which is a hard mathematical problem. The bigger the blockchain, the harder it becomes. Miners are incentivized by the system of fees, but here lies one of the main BTC issues. When fees are high, there are more miners to maintain the network, and theoretically, it is good. However, Bitcoin users need lower fees to make transactions. What are the main goals for cryptocurrencies? More freedom, comfort, and speed. So, if you want to, say, pay for a pizza with BTC, you need some Satoshis, not the whole Bitcoin. Such tiny payments become senseless when the fee is higher than the amount you transfer. So, low fees are also good in theory. But when the miner reward is low, too few nodes want to do this job. Thus, in the Bitcoin network, you have transactions that are either too slow or too expensive.
- On the contrary, with Tangle, users do not receive any fees for verifying transactions. When sending IOTAs, you have to confirm two transactions chosen by the algorithm, and the task is just to make sure that they do not come in conflict with each other. You also have to solve a cryptographic task, but it does not affect the agreement on the entire history of all deals made before, like in Bitcoin. Thus, the task is much easier, and the time it takes is much shorter. This is why the DAG-based cryptocurrencies are fee-less and work much faster than the blockchain ones.
We talked about the decentralized nature of Bitcoin in the previous section, and I’d like to add something here about this issue. With time, blockchain may become so huge that only very powerful nodes can maintain it. I’ve told you before — you need to host the whole ledger to be able to verify transactions. Hence, these large servers and mining farms may overtake 51 percent of all hashing power and become a central party that makes decisions on its own. This conflicts with the main idea of Bitcoin.
As I’ve already mentioned, IOTA is less secure than Bitcoin and Ethereum. The slow and complicated process of verification in the blockchain is, at the same time, more stable, and guarantees that, unless no one controls 50+ percent of nodes, the system is stable, unchangeable, and unhackable. Unfortunately, Tangle has yet to become as secure and reliable as BTC. The developers and proponents of this system claim that this problem will be eliminated with time naturally as the network grows and more nodes participate in it.
Is DAG Technology the Future of Payments?
Serguei Popov, the author of the Tangle’s white paper, says that his brainchild is the next step in the blockchain’s evolution. However, the issues with its decentralization and security make this statement doubtful so far. The network has to grow and mature to become a solid, trustful and stable payment system. If you want my opinion, I believe that this technology was born ahead of time, and in the near future, it will show significant growth.
The Internet of Things is a reality already, and this new model of the economy implies the direct communication of devices with each other and their independent work, which in turn means that they need some instrument to send instant and cost-free transactions to each other.
The IoT network is too small now, but when it inevitably grows, IOTAs will be in great demand. With the increasing usability and number of system nodes, Tangle will improve its security. Popov said that it will not always be exclusively the base for IOTA. Tangle will find its application in many other spheres, just as the blockchain has done lately. It will only elevate the value of the new cryptocurrency and make it more reliable and acceptable everywhere.
What I want to say is that IOTA and Tangle are to become the future if the developers do everything right and implement all Popov’s ideas. Which, of course, does not mean that it will supersede Bitcoin in the market. Only time can show how the crypto world will accept new currencies and technologies, but I do not think that there ever will be only one token to rule them all.
Let’s not forget that blockchain, in general, and Bitcoin, in particular, are not treading water and are making steps in development to solve existing problems. It is a long-standing technology, proven over time, and I am sure that those who manage and support it are aware of the issues with the speed and fees of transactions, scalability and growing security threats. And certainly, they know what to do.
Bitcoin will hold an edge and remain the main cryptocurrency with the greatest market cap for a very long time, simply because it is extremely popular, both with merchants and regular users. I believe that the task of new cryptos is not to overtake Bitcoin, but to find their own use and role in the economy of the fourth Industrial Revolution. IOTA is obviously something that fits harmoniously with this economy, and it is a good start for this novel crypto concept and currency.
Opinions expressed by DZone contributors are their own.