Blockchain 5.0 — Fusing DAG ledgers with Smart Contracts
The full article was originally published by Lukas Hetzenecker on Medium. Read the full article here.
Part 1: Introduction
Everyone of you most certainly has already heard the term “Blockchain 2.0”, that coins the drastic revolution the addition of Smart Contracts had to distributed ledger technologies. Not only could you send money in a open, decentralized, borderless and permissionless way, but now you also had the possibility to write autonomously executing algorithms with those same features. That genuinely was a revolutionary step in the Blockchain space.
A short time later, another such evolution was on the horizon.
For that, we need to understand the main shortcoming of Blockchains: Platforms like Ethereum suffer from scalability problems — as you can
see, they max out at 20 Transactions per second, on their best days. This became drastically apparent when the first game got really, really popular: the virtual breeding, collecting, and trading game called CryptoKitties. That popularity resulted in a congestion of the Ethereum network, which in turn has driven up the network fees.
The solution to this problem, as you’ve already guessed, were ledger structures in the form of Directed Acyclic Graphs (DAGs), that got rid of the bottleneck traditional Blockchains have — theoretically even offering nearly a unlimited (or, rather, only network-throughput-limited) transaction rate.
Rather ironically, the term “Blockchain 3.0” is often used to describe such platforms, which technically speaking is even doubly wrong: DAGs are no Blockchains, but rather the other way round — Every Blockchain is a DAG.
And you would be forgiven to think that they build upon the basics of Blockchain 2.0 (as Blockchain 2.0 built upon Blockchain 1.0), and therefore offer at least the same functionality as e.g. Ethereum does.
But this is not the case — to date no DAG ledger exists, which implements smart contracts.
Blockchain 2.0 + Blockchain 3.0 = Blockchain 5.0
In fact, due to the graph structure and for this reason the lack of total order in DAGs it is hard (generally even impossible) to achieve support for smart contracts in such ledgers.
So let’s do it! Let’s do some simple Blockchain arithmetic and come up with Blockchain 5.0 — a summation of smart contracts and DAGs.