by Babar Khan Javed

Here’s why Dubai just embraced this DAG blockchain alternative

News Analysis
Jul 20, 2019
BlockchainDigital TransformationEnterprise Applications

The agreement with the Fantom Foundation paves the way for directed acyclic graph (DAG) technology to serve as IT infrastructure.

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Credit: Manjik / Getty Images

DAG (directed acyclic graph) distributed ledger technology, an emerging alternative and potential complement to blockchain, has just received a significant vote of confidence in Dubai.

In an effort to accelerate Dubai’s ambition to base its IT infrastructure on distributed ledger technology by 2021, the Private Office of Sheikh Saeed bin Ahmed Al Maktoum has signed an agreement with the Fantom Foundation​ to offer a DAG platform for the city’s digital transformation projects.

Al Maktoum holds a number of high-ranking positions, including CEO of the Emirates Group, an aviation holding company, and chairman of the Dubai Supreme Fiscal Committee. The agreement with Fantom paves the way for the company’s commercial operating presence in Dubai and is intended to provide opportunities for experimentation with DAG technology.

What is DAG (directed acyclic graph)?

Though DAG is a distributed ledger technology, like blockchain, it compromises a different processing architecture. Unlike blockchain technology, individual DAG transactions are linked to one another directly instead of being grouped together and processed in blocks.

DAG architecture is designed for, among other things, fast transaction speeds. This is essential due to the ambitions of Dubai’s leadership and the impact it is meant to have on the citizens of the urban populace, affecting traffic management, healthcare, and education — all of which require quick one-to-one processing.

In contrast, blockchain-based platforms continue to demonstrate relatively slow processing speeds as they scale, which can impede initiatives relying on real-time confirmations. Validation of blockchain blocks are verified by various stakeholders via a compute-intensive confirmation procedure. Depending on the specific blockchain platform, the work required to validate transactions — which can be costly — is performed by some participants (sometimes called miners) and is paid for by other users.

On a DAG network, individual transactions are linked one to another, eliminating the need for miners, which is why most projects that use DAG have no or low fees.

The DAG structure also facilitates micro-transactions because the nature of the ecosystem is fast and cheap. An IT infrastructure that relies on the DAG structure only works well, however, when the user base is large. For these reasons, widespread B2B, B2C, and G2C (government to user) adoption is key.

DAG offers route to scalable digital ledger

Korea-based Fantom Foundation has expressed an ambition to create an open-source and scalable platform that paves the way for real-time transactions and data sharing, arguing that the speed and fee-based limitations of existing blockchain solutions has impeded adoption by enterprises and end-users.

Smart Dubai, the government entity entrusted with driving Dubai’s smart transformation projects, meanwhile already has a very mature blockchain strategy, launched in early 2016, which has made the city a global leader in blockchain in government, with some signature projects.  For example, DubaiPay, the online payment portal of Smart Dubai, is based on blockchain technology.

“Fantom with its application geared towards smart cities will be a perfect fit for Dubai,” said Usman Khalid, CEO of​ ​Centric DXB​, a digital transformation consultancy. “The best thing about Dubai IT scene is that the government has a department called ‘Smart Dubai’ that provides services to different government entities. It also operates a government network to connect with different departments.”

Khalid added that like any government, Dubai has quite a few government departments and sometimes they work in silos. For instance, the Safe City initiative is managed by Dubai Police and can track motorists using the vehicular number plate. He said that with Fantom in place, this information can be shared with the Roads and Transport Authority (RTA) to manage traffic as the safe city cameras can be easily upgraded to send the count of traffic to RTA.

Applications of DAG technology

The agreement with Al Maktoum private office calls for the Fantom Foundation to apply the DAG structure to internet of things deployments, governance, transport, and social services. Working with manufacturers of smart devices, appliances, and home connectivity networks, the Fantom Foundation says it intends to bridge data collected from water, drainage, energy, sewage, and water distribution networks to predict real-time automation and capacity planning.

In line with Dubai’s vision to be paperless by 2021, the DAG structure is also intended to help residents and citizens to reach government services and transactions through digital channels such as web apps, mobile apps, and smart devices.