DAG technology or directed acyclic graph models are the future of blockchain.
As blockchain technology gains traction and provides a proven track record of benefits, developers and users are beginning to see some of the weaknesses and issues within the standard blockchain methodology.
Ethereum, along with most blockchains structures, uses a model representing a chain to operate. So-called layer 1 blockchains (like Ethereum) act as highways and freeways for vehicles to drive on. Even though we can successfully travel on highways, we are all aware that they become congested with high-volume traffic, leading to less efficiency (or toll charges, i.e. gas fees) .
Ethereum’s blockchain is like an overcrowded, congested highway, like many others with similar blockchain-like structures. The initial wave of new blockchains tried to solve the problem of scale and congestion by improving the highway (making it wider, or raising the speed limit.) These highways are all Layer 1, built above the ground (Layer 0).
On these highways travel different vehicles: passengers cars, trucks, busses, with various speeds and configurations: some for freight and some for people. Big SUVs with one occupant and tour busses with many. This is the layer 2 solution, improving throughput, speed, efficiency, or cost on the freeway.