“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.