What is IOTA

In 2015, David Sontebo, a crypto enthusiast from Norway, gathered a team of programmers which included Dominik Shiener and Sergei Popov. Together they have founded the company IOTA Foundation and conducted an ICO that resulted in a serious interest from investors towards this unusual start-up.

The core idea behind this project was to create an understandable and convenient means of payment that would serve as the basis for the realization of a rather futuristic concept of the Internet of Things or IoT in short, which is basically what the name of this cryptocurrency stands for.

Defining IOTA and its place in the world

First of all, it might be necessary to explain the term “the Internet of Things” in detail. The contemporary life in the era of the massive flow of information and unceasing communication is accompanied by the continuous interaction between people and their devices, and the number of spheres where devices exert influence on human life is growing exponentially. To put it simply, even such a thing as making the morning coffee can be completely delegated to home devices, such as alarm clock and coffee-maker; their synchronized work will result in a steaming cup full of hot beverage that will be ready just when as you get out of bed. According to the concept of the Internet of Things, such synchronization could be feasible only through the global network.

According to the developers, IoT is destined to become the cornerstone of such network which would make IOTA an integral part of billions of devices. By the way, the popular statistics portal Statista claims that by the year 2025, the number of connected devices throughout the world will reach 74.55 billion. It is obvious that IOTA has an enormous potential, so it is necessary for every crypto investor to gain a good insight into IOTA and the technology that stands behind this coin.

The specifics of IOTA

The main factor that distinguishes IOTA from other projects is the technology called Tangle which significantly differs from the blockchain technology. Whereas blockchain is designed as a consecutive chain of blocks and it can branch out only as a fork, Tangle is a ramified system that is constantly developing in various directions. From the technical point of view, Tangle is a directed acyclic graph or DAG, a graph that has no directed cycles. The DAG network is comprised of a multitude of transactions. Whenever a new transaction is created, it has to be confirmed by the next two transactions. The system nodes check whether or not there are conflicts within the system and disapproves (directly or indirectly) all of the conflicting transactions. The essence of this system is that when a transaction gets more direct as well as indirect approvals, it becomes more acceptable by the system.

In other words, the large quantity of approvals makes double spending virtually impossible. It is achieved due to the so-called weight of transaction or the amount of work that was executed by the issuing node and the cumulative weight that is calculated as the sum of transaction’s own weight plus the weight of all previous transaction which had directly or indirectly approved the given transaction.

The description of the technology itself might sound cool but the majority of people are more interested in whether or not IOTA has the edge over blockchain which seems to be on everyone’s lips at the moment.

The advantages of tangle over the blockchain technology

growing network of people visualizedDespite the fact that the creators of the blockchain, as well as crypto fanatics, constantly pontificate about its benefits, this technology has many flaws which remain unfixed to this day. The primary purpose of IOTA was to resolve most of these problems, though now it positions itself more like an adversary of the mighty Bitcoin. The following advantages of IOTA may deprive Bitcoin of the dominant position in the crypto world.

The Bitcoin network is characterized by strict segregation between validators or miners, who are responsible for confirming all transactions, and ordinary users. Any disagreements between miners usually lead to disruption of the network and increase of transaction cost. IOTA has no such separation. In some way, each user has the same duty of confirming the previous two transactions. It should be also noted that this process is carried out automatically thanks to the in-built algorithm. In other words, the system confirms itself by employing the users’ computers and the points of entry and exit. In short, you don’t have to spend all day clicking on stuff, just log into the system and the confirmation chain will launch automatically.

The blockchain network forces you to reimburse the miners for confirmation of each transaction. The big difference between Bitcoin and IOTA is that the latter has no miners, so you wouldn’t have to pay to anyone. There are no commissions in the IOTA network which makes it the perfect system for microtransactions.

Scalability is one of the major issues that the Bitcoin network has to face. The speed of transaction processing in blockchain tends to fall drastically when the system is overloaded, which results in longer pending periods and higher commissions. The speed of transaction processing in IOTA doesn’t decrease even at the peak load. In contrast to Bitcoin, the speed of processing within the IOTA network increases along with the growth of the number of transactions.

The blockchain networks impose certain restrictions with regard to the number and the volume of transactions. IOTA allows the users to transfer even the smallest amount of funds and carry out an infinite number of transactions.

The future of IOTA

Many experts predict that by the end of the next decade, the Internet of Things will be comprised of hundreds of billions of devices and it will be necessary to ensure their flawless intercommunication. IOTA is by far the only technology that can deal with this issue. From the point of view of an investor, the IOTA coin is a promising but also a rather risky asset. On the one hand, it is backed by the advanced technology that has the universal use and the value of token has risen dramatically over the last year. On the other hand, a lot of tokens are concentrated in the hands of people who bought them dirt cheap. There is no guarantee that they won’t dump them in one of the next waves of panic that happen quite often in the crypto market. If that happens, the price of IOTA coin and its capitalization could fall dramatically, which will result in the stagnation of IOTA’s further development. Moreover, despite having many advantages over current blockchain projects, IOTA would still have to prove its preponderance over the upcoming advancements in the blockchain, such as Ethereum’s Serenity protocol.

All in all, IOTA has a lot of potential, though it still has to overcome the dominance of blockchain, and prove its universal usability.

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