What is a tangle
A tangle, also known as a Directed Acyclic Graph (DAG), is a new approach to blockchain. Blockchain technology has taught us that mining might not be the ideal solution, especially for tackling scalability issues. A tangle has no mining, no blocks, and no transaction fees. The security and consensus of the network are not divided among miners and validators.
A tangle has found a solution for the problem of unwanted centralization. Users of the network have to validate two old transactions, via proof-of-work or other implementations, in order to be able to conduct one transaction of their own. Users won’t receive a reward or have to pay a transaction fee. Basically, the users become the miners. This is beneficial as it becomes impossible to form large mining groups. However, a tangle avoids conflicting visions between miners and network users.
A tangle doesn’t use the principle of linking bulky blocks to each other. Instead, a tangle builds a graph of transactions which reference older transactions, and therefore can confirm transactions immediately as they are received by a node, instead of having to wait for the next block. In theory, this enables parallel verification of transactions.
Blockchain's limitations
Not everyone is aware of the limitations of a blockchain. Understanding these limitations will help you better understand a tangle, and the problems it tries to solve. Below are some illustrations of blockchain limitations.
Unwanted centralization
As we have seen from many cryptocurrency communities, a small number of minors get together to form big groups and reduce the variation of the mining reward. This leads to a concentration of power that can be seen politically and computationally. These groups can abuse their power to postpone transactions, mine their transactions first, or filter for certain transactions.
This is not the only form of unwanted centralization. As the blockchain, or so-called ledger, continues to grow, smaller nodes won’t be able to store a full copy of the ledger leaving only big mining farms who have the capacity to store the full ledger. If only the larger nodes operate a blockchain, this is also a form of centralization.
High transaction fees
Transaction fees are already rising for bitcoin. Transaction fees for bitcoin are very expensive for transactions below $100. One excited investor included a $2,220 transaction fee in order to secure his investment in the BAT ICO. Transactions which include a low fee can even take up to several days before they get confirmed.
Blockchain scalability
At the time of writing, the Bitcoin network is currently facing a backlog of over 156,000 unconfirmed transactions. You can find a live stream of all transactions being pushed to the backlog at blockchain.info.
Additionally, other blockchains face more severe scalability issues. The Ethereum network has been the center of attention several times, regarding scalability. A recent ICO, selling virtual cats that can be bred and collected, congested the Ethereum network on December 10, 2017. The marketplace for these CryptoKitties accounted for almost 15% of Ethereum’s total network transactions.
CryptoKitties has overwhelmed Ethereum’s network, which means slower transaction times for all applications running on the decentralized architecture. As the underlying problem is an inefficient consensus algorithm, the cost and time needed to conduct those transfers grew and became out of control.
Use cases
Obyte
Obyte wants to solve all trust issues in our economy. With Byteball you can make safe contracts that will be executed exactly as agreed upon. Even with total strangers, you don’t have to trust anybody. They remove the need for an escrow, as they see this as an additional party one needs to trust. The platform holding the escrow contracts gets a disproportionate amount power and makes the environment dangerously centralized around these huge single points. Byteball has chosen to use a DAG because they want to get rid of blocks for several reasons. One reason is that the entity creating the block decides what gets into the block.
IOTA
IOTA’s distributed ledger is a tangle which is based on a data structure, referred to as a DAG. Blockchains are not ideal for micropayments, especially fast machine-to-machine payments. This is the main reason for IOTA to be using a tangle. The world of connected devices is here and now. Micropayments between devices seem to be the missing puzzle for the ‘Machine Economy’ to fully emerge.
Possible limitations of a tangle
A tangle has the ability to confirm transaction quickly due to its graph structure. However, existing implementations in crypto projects like IOTA and byteball suffer from synchronization issues. Synchronizing the state between nodes seems to be a major issue for existing tangle implementations. IOTA currently relies on a single coordinator node, while Byteball relies on 12 witness nodes which are all controlled by the developer himself. Both are not ideal, as we have a single point of failure and human intervention.
Conclusion
Fees are integrated, by design, into the blockchain system as a monetary incentive for miners and as protection for the network. A tangle is a good start towards a safe way of storing tamper-proof data.
Moreover, the implementation of a tangle is much greener than mass consumers, like bitcoin. A tangle has the capability to solve issues such as unwanted centralization, blockchain scalability, and conflicting visions between miners and network users.