Directed Acyclic Graph is a system that doesn’t form a chain. Just like how it was called, it forms a graph. A decentralized technology that is basically blockless. Many people used to hype DAG-based cryptocurrencies a lot due to their theory of infinite scalability. Some people even were very convinced that DAG-based cryptocurrencies were like blockchain 3.0. But what happened to them? Why are they no longer the hype like they used to be?
The Trends Of Cryptocurrencies
To understand why DAG coins are no longer the hype, first of all, we need to understand the trends of cryptocurrencies. These trends decide the mindset of the traders and thus, where the money is going.
For example, we had all these craziness with Initial Coin Offering back in 2017. Everybody suddenly became rich due to bagholders buying their tokens at 10x-20x of ICO price. However, this trend didn’t last very long. In the beginning of 2018, the bear market happened, and the whole crypto market crashed for a very long time. The ICOs never made a comeback even when BTC and ETH slowly recovered in 2019 and 2020.
And then, we had the trend of IEOs back in 2019, where Binance Launchpad successfully gave birth to some high profile projects such as MATIC and BitTorrent Token. Once again, this trend didn’t continue.
And in 2020, so far, we have been stunned by the craziness of DeFi projects. Even top centralized exchanges like Binance had to launch its own launchpool, where they basically copy-pasted everything from yield-farming protocols and put it on their centralized Binance ecosystem. They do this just to keep up with the DeFi trend.
As you can see above, the trends of cryptocurrencies never lasted. They come and go. The thing about DAG crypto projects is that none of them seem to care about following the trends. With the rise of DeFi, many DAG-based coins don’t even bother to try to build DeFi protocols on top of their ecosystem.
And because of their unwillingness to tap into the latest trends, they slowly become irrelevant. IOTA, NANO, and others are no longer on crypto headline, and big money like to pour into altcoins that at least try to stay relevant with the current DeFi trend.
DAG Coins Need Smart Contract Capabilities
The thing about the crypto trend is that they are very dependent on one thing – that thing is called smart contract. Ethereum can stay relevant on top of the crypto market cap rankings because it can do one thing, which is to create other tokens.
It was the king of the ICO platform, it was used for the token creation of IEOs, and now it’s also used for the DeFi ecosystem. That’s why they can stay in the runner up position, only behind Bitcoin. Recently, all the other top altcoins that also try to tap into the DeFi game have been gaining a lot of attention as well. For example, Binance Coin (BNB) with its launch of Binance Smart Chain. NEO with its launch of Flamingo Finance. Tron with its SUN Market.
However, most DAG cryptocurrencies are not into smart contracts. IOTA used to claim they would have smart contract capabilities that would rival the one in Ethereum but their progress has not been very convincing in that aspect. NANO is not even capable of doing anything except for transferring NANO from one wallet to another.
It would be hard for DAG-based cryptocurrencies to get hyped again unless they tap into the smart contract ecosystem and try to get on with the trend. At the end of the day, whales and daytraders are always hungry to see the current profitable investments in the altcoin space. They don’t really care if DAG coins are faster than traditional blockchains. What they care about is profitability.
And unfortunately for IOTA and others, that profitability is not about TPS (transaction per second) or scalability anymore, but it comes from incentives. And what kind of incentive is more lucrative than staking for yield farming?