Beyond the basic blockchain
The core blockchain protocol implements a distributed ledger capable of performing cryptocurrency transfers. Smart contract platforms add additional functionality by running programs on top of the blockchain.
However, distributed ledger technology is not limited to the traditional blockchain or smart contract platform. Distributed ledgers can run on alternative architectures, support second-layer protocols and use advanced cryptography to provide additional functionality and guarantees.
Alternative distributed ledger architectures
Blockchain is the most common and widely-known architecture for implementing distributed ledgers. However, other protocols and distributed ledger architectures also exist. These alternative ledger architectures are often designed to address limitations of blockchain-based ledgers, such as limited transaction speeds and scalability.
Directed acyclic graphs
A DAG is a graph with two main properties:
- Directed links: Connections between nodes have a set direction (like blockchain blocks pointing to the previous block)
- Acyclic: An acyclic graph doesn’t contain cycles. This means that it is impossible to start at a given node, follow directed links and make it back to that node
DAGs can also be used to implement a distributed ledger. An example of a leading DAG-based blockchain is IOTA and its Tangle.
Without blocks, DAG-based ledgers have to implement consensus in different ways. The security of these ledgers is heavily dependent upon the details of these consensus algorithms.
Sidechains take the blockchain as a basis and build on it. Sidechains are implemented using pegging.
Pegged sidechains are two independent blockchains that support cross-chain swaps. Users can send cryptocurrency to a set address on one chain and release cryptocurrency on the other. This provides the ability to take advantage of different features on different chains.
Sidechains are built out of completely independent blockchains that are linked in some way. Each blockchain has the same security concerns as a traditional blockchain, but (Read more…)