Cryptocurrencies not based on blockchain

Endy Callahan

It may come off as a surprise, but a lot of people in the crypto community believe that these two concepts are almost synonymous. It may seem surprising, but not all cryptographic currencies are built on blockchain. In the article "Alternatives to blockchain" you can learn about other technologies and platforms for digital coins.

The first coins without blockchain technology

The first digital money platform that worked without blockchain was launched in autumn 2015. It was DagCoin. In coin, Dag has become an alternative to Blockchain. The abbreviation stands for "directed acyclic graph". The system is an approximate graph without directed cycles.

On the Dag platform, the subsequent operation confirms the preceding ones. As a result, a directed structure of transaction blocks is created. When forming DagCoin the goal was to create an algorithm that represents the performed operation in the form of a DAG-chain.

In the first half of 2016, an IOTA coin based on Tangle technology was released. It works without blockchain. Coin is designed to make payments between users of the Internet of things. Tangle technology is an improved DAG. Developers were able to reduce the number of operations that must have confirmation in a new transaction. In IOTA each subsequent transfer approves not less than the previous two, in DagCoin minimum value unit. 

The advantages of digital coins without blockchain

Coins without the use of blockchain technology have such advantages:

  • Reliability. Multiple confirmations of transactions in coins, that DAG provides, allows to ensure preventing of "double payment". In this case, the transactions branch out. Each direction has no information about parallel saves. Therefore, the coin cannot be spent twice.
  • Speed. Special modification of the structure without blockchain allows to increase the speed of operation processing. In it, the primary element is a transaction. When using a miner or mining pool, its processing requires a short time.
  • The simplicity of mining. In case of bitcoin and other classic cryptocurrencies, individual mining is impractical. Many choose to work in pools that fairly divide the rewards among all. With low processing power, personal miners cannot quickly "mine" a block and get coins. They use special algorithms, in which the volume of controlled power does not provide advantages in the "production".

Will cryptocurrencies, the algorithm of which is based on DAG technology, completely replace blockchain? It is impossible to say for sure. DAG-systems have undeniable advantages, while they have some centralization and certain dangerous solutions. They have not yet been widely used. Although IOTA is in the top fifteen cryptocurrencies, investments in it are accompanied by high risks. Therefore, it is necessary to use such solutions as carefully as possible.