Bitcoin Q&A: Directed acyclic graphs (DAGs) and IOTA

“What is your opinion on directed acyclic graphs (DAGs)?
[Do they] truly have the potential to replace… open and decentralized blockchains?
Or is it vaporware?” I don’t think the question is an ‘either / or.’ I don’t think directed acyclic graphs, tangles,
or other similar formulations, can replace proof-of-work or open decentralized blockchains. I think that’s
because proof-of-work brings some very specific and very valuable characteristics that simply
cannot be achieved with other consensus algorithms. Or, at least, no one has been able to demonstrate,
at scale, achieving those [characteristics]… with other algorithms.
Immutability is a big issue there; the ability to change history without anyone noticing, or without a recent entrant into the network being able
to detect a false history from a true history. More broadly, I think proof-of-work — with anonymous participants in an open decentralized network — makes a cryptocurrency very resilient to coercion,
to controlling regulations, to censorship. I think those are very important capabilities. The technologies that I have seen [using] directed acyclic graphs are essentially a mixture of either proof-of-stake (PoS) or
proof-of-authority systems. Proof-of-stake is where control of the network is based on staking the currency. We have yet to see proof-of-stake being demonstrated
at a scale and under duress of authorities, to the point where it [has proven] it can
remain decentralized and censorship-resistant. More importantly I think proof-of-authority, which is
what you see in some blockchains [such as] IOTA, is where you have vetted nodes that are trusted.
That is not decentralized, that is a centralized system. Centralized systems are susceptible
to coercion and censorship. So once again, there are many people who
bring “evidence” of “the new best thing since Bitcoin,” “the latest improvement since Bitcoin,”
“something better than proof-of-work.” This isn’t new. This is something that’s been
happening almost since the beginning of Bitcoin. As soon as people saw that this was
valuable and viable, copy-cats emerged. At first, various people try to find other ways of doing
the same thing. That’s not a bad thing, that’s great. That’s where innovation comes from. So far, nobody has been able to show a
system that can replace proof-of-work and still maintain the same immutability guarantees. Or a system that can replace decentralized
open mining and proof-of-work, and remain decentralized [without depending] on centralized actors. When you have a centralized system,
it may look the same at first, but once you have a lot of value, a lot of
interesting applications running over that, there will be increased pressure, coercion, and censorship by governments. The real test is whether you can resist that. I think direct acyclic graphs are interesting,
but I don’t think they have the potential to replace open and decentralized blockchains.
That doesn’t mean they are vaporware though. It’s not an either / or question.
They’re simply an alternative consensus mechanism. If you don’t have decentralized proof-of-work mining,
you don’t really need blocks. You can just chain transaction together,
which is the basis of directed acyclic graphs. But in my opinion you’ve sacrificed something,
and what you have sacrificed is decentralization.

75 thoughts on “Bitcoin Q&A: Directed acyclic graphs (DAGs) and IOTA”

  1. I predict that in the near future we'll actually retrograde and someone will create a Proof of Work algorithm that requires a (very) small amount of human interaction like a CapTCHA, tiny puzzle, etc. combined with enforced, provable geographic entropy, perhaps with the help of the FOAM token proof of location network, to make a POW algorithm that is completely impossible to game. The interaction would not be required on each and every transaction, just a 1 of N sampling of them. However, the 1 of N sampling human assisted transaction would be a "key" to unlocking the actual payout from the full block of transactions, most of which are computer generated with a the 1 of N sampling human assisted proof of work based transactions. This proof of work method should also ensure a * near optimal level of global decentralization * .

    There will be enough people that are sick of insanely volatile mining difficulty levels, getting hand-me-down ASIC's after the manufacturer's have drained the juicy part of the profits, or rapidly increasing GPU prices. These people won't mind spending a few minutes a day to help maintain a network protocol that uses such a POW algorithm with a little human interaction, especially if the ROI is really attractive. HumanCoin or something like that.

  2. Andreas, I got another serious question. Do you think "Tree Protocol" will replace or be an alternative to open blockchains? Thank you.

  3. Thx for ur services to the community. Sound familiar with what you said about POS years ago. Now most BC's run POS and those that don't will have tremendous pressure to move into POS including BTC's one. Is Tribler's Graph POA? I don't think so. As new as it may be in general Graphs held networks, have properties to be exponentially more decentralized than POW @ 53% already, Where are we going with that as the network for society??? I think your insight lacks its usual imagination.

  4. We’ll see how IOTA matures. It’s still relatively young. If they succeed in removing coordinator then I don’t see how they wouldn’t be among the most decentralized systems.

  5. Running mining farms 24/7 and wasting absolutely mindboggling amounts of energy will never fly with general public. Bitcoin is gen 1 of crypto, like Myspace was, emotional connection to it does not mean it has right to be the only meaningful crypto currency. If anything, capitalism and competiton will be the end of it.

  6. its going to be a hard road ahead for decentralised currencies guving the laws and regulations that all governments are bringing in cryptos will be the currency and it will be scrutinized but its a small price to pay

  7. The Coordinator will be shut down within 2018 and IOTA will then be more decentralized than Bitcoin (3 Mining Pools have >50% of the Hashing Power). You definitely should look more into it! I don't think it will replace Bitcoin but DAGs fit perfectly for IoT and the upcoming Machine Economy.

  8. I am very new to Bitcoin and I have limited understanding of the technology.

    I wonder if introducing random selection can work to improve speed and scalability.

    The idea here is to make the difficulty of solving the mathematical puzzle less difficult and produce more blocks and then introduce random selection by the protocol to select successfully verified blocks instead of waiting for longer chain to be formed. If this approach will work then it will achieve the followings:
    Faster speed and improve scalability.
    More decentralization since you do not need extremely powerful mining hardware.
    Needless to say, this will create less incentive for miners since it is not enough to be only faster, you need some luck as well since randomness is introduced. However, still you need to be very fast in producing blocks to increase your chance of winning.

    Do you think such approach will be workable or it is completely nonsense for any technical reasons.

    I appreciate your thoughts on this.


  9. Great video Andreas.
    However I think there is one miss here: not all DAGs come to replace PoW, actually there are very high-quality peer reviewed acadenic papers discussing DAG protocols which do utilize PoW, and gain layer 1 scalability without increasing probability for 51% attack.
    Also today there are initiatives to start implementing that idea.
    Latest is PHANTOM introduced in BPASE18, check it out 🙂

  10. Hasn't Cardano's proof of stake system been proven (at least peer-reviewed publication level of proof) to be capable of the same immutability guarantees and level of decentralization? Could somebody please tell me if/how I've misinterpreted this information?

  11. All in all, DAG has not prove that it can scale. Ok, I'll take it. In theory, it should scale much better then BTC though.

    What we know in practice is that BTC proved it CANNOT scale. Its unfortunately a reason why more and more bitcoin maximalist talk about store of value and "digital gold" when they talk about open sourced software that is in nutshell a glorified excell table.

  12. Directed* acyclic graphs are not a consensus mechanism. They're a data structure. Andreas seems to think the nodes in the graph cannot be blocks, but they could be and you could have a proof of work as difficult as you wanted on them.

    I think the main problem with this video is that Andreas went for a very generalized approach and that sacrificed some accuracy. Anyway, knowing Andreas I can be sure he means well and that he'll do better research in the future to be as precise as possible.

  13. What happens to coins that are mistakenly sent to a wrong address? BTC to a BCH or vice verse after the Segwit implementation…? I saw that in the App Store, the coinbase update says once the update is complete, they will no longer be able to recover incorrect address sends. Just curious

  14. Great vid as always. I would personally like to hear your weekly thoughts about the crypto space and like a ‘legder’ of what had happened

  15. Dear Andreas, do you know Nano? We'd like to hear your opinion about NANO. NANO is a DAG coin.
    IMO it has imutability garantees and is decentralized (no coordinator). The only feature it aims to do is tranfer of value.
    Have a look on it.

  16. any centralized organization will be not trusted once huge money is associated with because of conflicts of interests! Only decentralized node with “emergent trust” can be trusted. This is the core or true spirit

  17. Spanish subtitles are ready! This information must spread all over the world! we will live in a free world, and this world will be backed by Blockchain Technology!!!! TKS Andreas A. for inspiring us!!

  18. Reinventing the wheel is the reason cars don't have stone circles but tires. I get a feeling there's some similarities here. All good tech needs to reinvent itself every now and then. As soon as the tech is sufficient to fulfill one need, reinvention and further development might not be relevant for the old use case but might open up new. If iota will prove to be this is the question. I also see Byteball have a shot at some of the things ethereum do well.

  19. Follow up question on all of this. What about the new platforms coming out that are hybrids that combine both proof of work and DAGs/tangles so that proof of work doesn't have to carry the entire load of confirming a transaction?

    In such hybrids DAGs/tangles can be seen as similar to side chains or channels on the lightning network – not for exchange, but for proving the basic integrity of transactions, with a proof of work element that requires less energy and expense to verify integrity.

    Are such hybrids a promising evolution of cryptocurrencies?

  20. Actually, DPOS is way better than PoW….like Steemit running @ 10,000 txns/sec, EOS expected @ 1 M txns/sec.
    What's your opinion on this?..

  21. How about Nano (former Raiblocks)? On the surface it looks better than IOTA but it is also questionable what would incentivize people running nodes…To me, proof of stake is simply not resilient enough.

  22. That's very interesting and enlightening.
    I personally am a blockchain skeptic due to its limited scalability, and I think that alternative or off-chain solutions will pave the way toward better understanding and a better approach to a global/universal currency of the future.

  23. You can not trust an ICO. Because there is no proof that those coins were sold at all. I believe the majority of them is still owned by the project authors. It would be different with ICM (Initial Coin Mining).


  25. IOTA uses proof of work, so not sure why you are going on about it trying to replace that.

    About the coordinator: Yes with coordinator iota is somewhat centralized. But what is necessary to remove it is simply the network being big enough so that it has enough hashing power so that a 51% attack becomes impossible.
    They are running simulations to see how much is needed and based on that they will determine when to turn it off.
    Coordinator limits tangle to about 1000tps so it needs to be turned off at some point unleash the tangles true potential. There is no reason to keel it in place after a certain point. But removing it too soon might risk users funds and nobody wants that.

    Some bitcoin mining pools have had over 51% of the mining power at some point which is even more centralized then the coordinator is.

  26. You are a very intelligent person, but you forget something very important in relation to IOTA: it is not only about DLT but about a paradigm shift in computer science. With IOTA we talk about Ternary computation, trits, qubits. That is, another level in computer science and not just a DLT software.

  27. Most DAGs uses weighted voting, or something similar, for conflict resolution. Similar to NoSQL distributed databases. Banks don't use NoSQL database to manage the currency for these very reasons. Centralised ACID databases are ideal for money management. PoW single threads the transactions making it ideal for an adversarial public network protocol and removes those nasty edge case race conditions.

  28. PoW doesn't make sense on an operational aspect in the future, when you're scaling for 10-20 yrs in the future and talking about petabytes of data being moved around

  29. i bought your book, mastering bitcoin . but you seriously need to step up your research on iota. it's painfull to watch tbh

  30. Hi Andreas,

    First off, I want to thank you for the amazing resources you provide on YouTube. I am able to learn so much from your lectures and discussions.

    One of my favorite videos "Bitcoin and the coming "Infrastructure Inversion" – Zurich Meetup March 2016". I had no idea how messy the transition from dial-up to our current system actually was. And I love your comment about simulating the old banking system on bitcoin.

    I was wondering why the comments were disabled. I was hoping to read the comments to get some more perspective. Just wanted to ask why.

    Ian Prado

  31. Everybody needs to chill a bit. IOTA is in Beta still. We'll see if it works or not. But BTC & ETH were not perfect when they started. Everything adds to the innovation.

    Doesn't matter which particular coin does better. What really matters is that there is no way back. The power is changing sides. We are in a tipping point and this will be HUGE. We are part of it.

    Whether is IOTA, BTC or ETH… the future looks great! Enjoy the ride, boys!

  32. Let's all wait and see when IOTA turns 9 years old and lets having this discussion again. Bitcoin and the blockchain have a good head start, but it seems like Bitcoin is needing to learn new tricks to stay in the game. If Bitcoin and the Blockchain had been around as long as IOTA. What would your perspective be on Bitcoin and the blockchain, that would be a far better comparison / judgment call.

  33. When it comes to DAG people forget to mention Byteball while probably that's the most complete and feature rich DAG implementation with beautiful multiplatform GUI wallets, smart contacts, custom assets, private assets, chat bots and more. Far from vaporware.

  34. Short, concise, sharp, clear, unequivocal. As usual. Thanks Andreas. Keep up the great teachings. Best from Catalunya, the land of Barcelona.

  35. Please check Radix Andreas. New consensus algorithm, 7 years in the making, scalable, fast, stable coin, privacy, dapps and runs even on raspberry pi. Ah and as a bonus you can make your own credit cards that work anywhere in the world with existing pos.

  36. May I translate this video to Chinese and publish it to a video site such as Bilibili hosted in China? Due to Great Fire Wall, Youtube cannot be accessed from mainland China without VPN.

  37. Bitcoin is far more centralized then most common POW (Like Ethereum). Its being held up by 8 main miners while Ethereum at least has far more.

    IOTA while is centralized could be far far far better than ethereum aswell. So your example of Bitcoin is just plain wrong. Ethereum is a much better example.

  38. proof of worlk already fails : 3 ppools are boss in bitcoin. they can collude and start double spending anyday. even dpos with more decentralisation are better as 3 pools lol we need more decentralisation.. not less .bitcoin is centralized as f*ck. this is even worse as banks

  39. Even if DAGs don't ever match the blockchain in some ideological aspects, from a infrastructural/industrial point of view the trade offs are well worth it they provide better scalability and consume less energy. And using your same argument about blockchain and scalability as technology evolves, why wouldn't you say the same thing about DAGs and decentralization.

  40. @aantonop I am sorry but you need to familiarize yourself in regards to the technology. DAG, especially the Tangle is a completely different distributed approach compared to not just slow but centralized mining system with hashing capabilities along the old proof of work methodology. This is a completely different tech that even you don't understand, apparently.
    Even Bitcoin itself has been centralized for a period of time. Please educate yourself, Andreas before giving a speech world live next time.
    Thank you and wish you all the best!

  41. How mining with ASICs is decentralized, a very very few companies areable to make cutting edge ASIC devices, so if I own such company I wont sell a very profitable chips to somebody else to make more profit with the chips I produce OR if I want to destroy bitcoin (if I am chinese or US government for example) I will do prohibition/confiscation of those chips, then I will destroy this network and everybodys free money and will let them to use my shitUSD. I how there is alternative – IOTA, Maidsafe something like those, but PoW is not thee future, it's dead end.

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