What is Z-DAG?
Syscoin's Z-DAG is a blockchain throughput scalability solution that adds very little complexity. It solves problems endemic across the industry, not by altering mission-critical fundamentals or reinventing the wheel, but through proper tooling and facilitation across the network to maximize the utility of battle-tested Bitcoin code.
Z-DAG is based on Satoshi’s “snack machine” concept. It was invented by Syscoin Lead Core Developer Jag Sidhu to actualize peer-to-peer electronic cash and extend means-of-exchange to tokenized assets. It utilizes mempool awareness and fast relay topology across a network of independently operating full nodes (2.4k+ at present), all of which validate first, then trust. A high degree of probabilistic security is enabled by fast propagation across time-sorting mempools. This global mempool is made interactive and useful to the recipient through tooling that provides mempool status awareness.
The probabilistic security provided by Z-DAG represents a guarantee that a transaction is not double-spent, and will be accepted into a block and settled on-chain. The probability increases rapidly across time, to 99.9999% assurance within 10 seconds. This time can be reduced further by optimizations on the network layer such as UDP gateways.
This enables a much more efficient fee market than bidding for a block. A typical Z-DAG transaction costs 0.0000582 SYS (see: https://syscoin.org/fees for a live fee comparison), and provides secure high-throughput service even if blocks are full. This is technically a layer-1 solution because the mempool resides within the blockchain security domain and all valid transactions that use Z-DAG settle on-chain through bitcoin-core-compliant consensus.
How is it useful?
Syscoin’s implementation is particularly useful for microtransactions with tokens such as buying groceries with Binance USD (BUSD), USD Coin (USDC), or simple value transfer of any token (this includes ERC-20s that use our bridge that is permissionless and trust-minimized). Z-DAG Protocol is utilized exclusively by the Syscoin token layer; all projects that tokenize on Syscoin benefit from this. Token issuers utilizing Z-DAG can also optionally enable their token with Syscoin's pre-compliance technology sometimes called Notary API which is embedded in the Syscoin Protocol of the native chain. This gives issuers the ability to opt-in to establishing their own permission layer to ensure transactions of their token fulfill their business rules or regulatory requirements like KYC or AML prior to being approved by the issuer's subsequent signature. You learn more about Syscoin's compliance tools for simple value transfer here, then learn how to implement it.
Z-DAG allows merchants or application developers to define their ideal speed/security trade-off particular to their use case, for example depending on the value involved. A merchant receiving payment for coffee might choose to wait only a few seconds before considering the payment sufficiently safe against double-spends, and redeemable. A cart full of groceries? Maybe 5 to 10 seconds. On the other hand, a nation-state settling a cross-border trade debt might wait for what they consider a sufficient number of confirmations (2.5 minute block target) on Syscoin's bitcoin-core-compliant and merge-mined blockchain.
Z-DAG is more ideal for payments than other scaling approaches that try to change the court-of-record (blockchain) consensus to force it to function as a payments service, ultimately tampering with proven security and creating severe trade-offs that are global.
Industry-proven decentralized consensus is valuable to enterprises. Our solution leaves the base layer intact. Syscoin Core is “religiously” maintained to remain bitcoin-core-compliant and up-to-date in a timely fashion (sometimes involving multiple commits in a single day), with 90%+ code coverage.
Whiteblock Inc, a third-party auditor, provided performance benchmarks of Z-DAG within realistic network conditions, using hosts with standard Syscoin masternode hardware specs. Whiteblock is well-known for its benchmark service and Genesis platform, particularly among the Ethereum community. The results for Z-DAG can be summarized as follows.
- Parameters: network latency, quantity of nodes, quantity of assets.
- Average throughput: 8k - 15k TPS depending on a range of latency
- Burst throughput: 61k TPS (this rate can be sustained as long as the mempool is not full and latency conditions are conducive)
- Zero-latency control group: 145K TPS (how most projects measure their TPS)
These represent some of the most positive throughput statistics in the industry for a decentralized ledger network. We plan to perform even more thorough testing once sufficient optimizations have been introduced. Substantial resources would be required to even approach pushing Z-DAG to its limit on the live mainnet.
Scaling to Global Population Demand
The Syscoin Team understands Z-DAG itself does not solve scalability for global population demand - the semi-absurd notion of 7 billion people transacting. Rather, we see it as an absolutely critical component to achieve this. The other component needed is multi-asset payment channels that use Z-DAG as a resilience fallback. One of the biggest problems with payment channels today is that when they aren't available (for any reason, e.g. lack of channel liquidity) the transactions roll directly to blockchain settlement. That destroys convenience and cost-savings, making payment channels non-viable as a decentralized payments solution compared to existing rails like centralized credit card networks.
Z-DAG fills this significant gap by providing a performant decentralized fallback with a reasonable and predictable fee-market. Syscoin and some academic partners like TU Delft are currently involved in R&D toward secure multi-asset payment channels - a technology which the industry has not yet achieved. We will combine this with Z-DAG.
FACTOID: Is your favorite blockchain truly viable as a base layer for global payments? The Lightning Network paper provides math to calculate whether a blockchain is viable for global payments with payment channels. Two transactions per year, per person on earth (one to exist on-chain, one to settle when the channel closes), without subjecting either tx to competing for a block. Interestingly, Bitcoin itself, and many other blockchains mathematically do not fulfill this, even calculated with lower population. Syscoin’s blockchain can because its parameters like block size & target time were set in consideration of theoretical global payment channel demands, along with an efficient tx footprint.
Have other projects designed similar tech?
There are projects pursuing variations on the idea of facilitating and using a global ordered mempool. One example is Facebook's Libra. However, ours has actually been working on mainnet for a good while, is about fast relay across a decentralized network, and has undergone optimizations. We are exploring things like UDP gateways to optimize further.
Is Z-DAG just like Dash InstantSend?
No. There are significant differences between these designs and the security they offer. The only similarity is on the surface; Dash provides a fast means of payment with DASH coins, and like Syscoin, happens to have a network that includes masternodes. With Dash InstantSend, a randomly selected group of masternodes (quorum) are the only nodes responsible for validating transactions that use the InstantSend service. A big part of what makes InstantSend fast is using this subset of validators. The transaction inputs are locked during that time with the intention of preventing double-spends.
In contrast, with Syscoin Z-DAG all full nodes perform validation (not a subset) in-line with the Bitcoin security model. This is accomplished quickly across a high-throughput relay network with nodes validating in a multi-threaded fashion. Furthermore, locking inputs (which is not a Bitcoin standard) is unnecessary for Z-DAG. As for Syscoin masternodes relative to transactions, they simply serve as bonded validators providing a baseline of resources to the network and perform the same functions as all other full nodes. This is just one part of how Syscoin remains bitcoin-core-compliant. Furthermore, Syscoin provides a token layer while Dash does not.
Why didn’t I think of that?
More Z-DAG Resources
Z-DAG White Paper (note this paper does not reflect all the optimizations that came after)
A recent technical discussion between Jag Sidhu (Z-DAG inventor) and Goncalo Pestana (Lead Brave Software Research Engineer):