“Blockless” networks can help businesses embrace blockchain and take it mainstream

Over the years, we’ve spent way too much time talking about the benefits of blockchain technology for businesses. Indeed, it can drive a wide range of enterprise use cases that require high scalability, throughput and security. However, the underlying infrastructure faces a unique set of challenges compared to the traditional Web2 ecosystem where centralized companies control data.

Decoding the blockchain trilemma

Blockchains must be highly secure in the absence of a central authority. And they must be highly scalable to accommodate a rapidly growing number of users, transactions and other data. But the traditional blockchains have yet to catch up with the needs of businesses.

For example, the Bitcoin network is quite decentralized and secure. It would be incredibly difficult, if not downright impossible, to break Bitcoin, due to its decentralized nature. But it’s not very good in terms of scalability, being able to process only around 5-7 transactions per second. Not ideal for enterprise or mass adoption.

A newer breed of blockchains like Solana, Avalanche and others have attempted to solve the problem of scalability that plagues the likes of Bitcoin. Although these new blockchains can process more transactions faster and with lower fees, their lack of security has led to the emergence of several new obstacles for the young ecosystem, namely in the form of security breaches.

The blockchain trilemma is the concept of the struggle to achieve a harmonious combination of three core properties scalability, security and decentralization.

• Scalability: The ability to offer higher transaction confirmation speeds and lower gas fees.
• Security: The ability to protect the data stored in distributed systems from threats.
• Decentralization: The ability to maintain equal ownership for all network participants.

Most blockchain networks excel in only two of these three characteristics. Finding the right balance between decentralization, security and scalability is the holy grail of the Web3 movement. But there is no concrete solution so far. Older blockchains such as Bitcoin and Ethereum have not been able to achieve that.

For companies, security and scalability are two of the most critical requirements. Scalability is essential for blockchain technology to support the growing number of users and ease the transition from centralized Web2 model to a decentralized Web3 version.

However, decentralization is not so important in enterprise-level use cases, as there are minimal chances of enterprises wanting to store sensitive data in public blockchain networks.

Overcome the limitations

If being scalable and secure is more important than decentralization for businesses, isn’t it better to develop a blockchain that delivers on that?

This is where the Directed Acyclic Graph (DAG) can play a promising role in driving enterprise adoption. DAG is a “blockless” data structuring tool that looks more like a graph than a chain you see in traditional blockchains. There are no blocks to add transactions to. Instead of storing data in one block at a time, it’s like a tree where new branches grow out of old branches. So it can simultaneously process many more transactions as tree branches, solving the scalability problem for businesses.

Standard blockchains have problems with scalability because they store all data in blocks, and one block is added after another to form the chain. There is a waiting period between executing a transaction, creating a block, validating it, connecting it to all previous blocks and finally adding the block to the chain.

On the security front, DAG validators that confirm transactions can never refer back to themselves. Each approved transaction must refer to two previous transactions. Since there are no miners, the transaction fee is negligible. Simply put, each new recorded transaction is first verified with two previous transactions, thus eliminating the need for multiple validations like traditional blockchain networks.

Despite the benefits that DAG offers for enterprise adoption, no one had managed to issue tokens on top of it until recently. Issuing new tokens is essential to attract projects, funding and companies that want to serve their customers or use more complex reward systems.

Affordable mechanisms to drive use

We developed a DAG-based solution that supports this extended functionality, while addressing the blockchain trilemma, and empowering enterprise use cases that require high scalability, throughput and security.

The MultiDAG protocol allows developers to issue tokens using the CMD (COTI MultiDAG) standard, just as you can create new ERC-20 tokens on the Ethereum blockchain. However, unlike Ethereum, transaction costs can be minimized and managed by the issuer, making it easier for users to adopt the solution without considering how much it will cost to trade on the network. For businesses, having a low-cost mechanism to process a large number of transactions is very valuable and will ultimately help increase usage.

Given the value of this approach, the Directed Acyclic Graph (DAG) has emerged as a practical solution to overcome the scalability and throughput limitations of existing networks, especially for more widespread enterprise adoption.

For large organizations that value speed, regulatory compliance, and an intuitive user experience that supports streamlined onboarding, choosing MultiDAG can be a powerful accelerator in the transition toward a greater embrace of Web3 ideals.

Shahaf Bar-Geffen is CEO of COTI.