With a dictionary, BFS is optimal, but the running time needed is proportional to its size (V+E). With n letters, the dictionary might have ~a^n entires, where a is alphabet size. If the dictionary contains all words but the one that should be on the end of chain, then you'll traverse all possible words but won't find anything. This is graph traversal, but the size might be exponentially large.
You may wonder if it is possible to do it faster - to browse the structure "intelligently" and do it in polynomial time. The answer is, I think, no.
The problem:
You're given a fast (linear) way to check if a word is in dictionary, two words u, v and are to check if there's a sequence u -> a1 -> a2 -> ... -> an -> v.
is NP-hard.
Proof: Take some 3SAT instance, like
(p or q or not r) and (p or not q or r)
You'll start with 0 000 00 and are to check if it is possible to go to 2 222 22.
The first character will be "are we finished", three next bits will control p,q,r and two next will control clauses.
Allowed words are:
- Anything that starts with 0 and contains only 0's and 1's
- Anything that starts with 2 and is legal. This means that it consists of 0's and 1's (except that the first character is 2, all clauses bits are rightfully set according to variables bits, and they're set to 1 (so this shows that the formula is satisfable).
- Anything that starts with at least two 2's and then is composed of 0's and 1's (regular expression: 222* (0+1)*, like 22221101 but not 2212001
To produce 2 222 22 from 0 000 00, you have to do it in this way:
(1) Flip appropriate bits - e.g. 0 100 111 in four steps. This requires finding a 3SAT solution.
(2) Change the first bit to 2: 2 100 111. Here you'll be verified this is indeed a 3SAT solution.
(3) Change 2 100 111 -> 2 200 111 -> 2 220 111 -> 2 222 111 -> 2 222 211 -> 2 222 221 -> 2 222 222.
These rules enforce that you can't cheat (check). Going to 2 222 22 is possible only if the formula is satisfable, and checking that is NP-hard. I feel it might be even harder (#P or FNP probably) but NP-hardness is enough for that purpose I think.
Edit: You might be interested in disjoint set data structure. This will take your dictionary and group words that can be reached from each other. You can also store a path from every vertex to root or some other vertex. This will give you a path, not neccessarily the shortest one.