IOTA is the first open source ledger that is being created with a vision to support future internet of things. This guide is all about learning what is IOTA and how it works?
Everyone is focused on Blockchain technology as the only way to create a decentralized platform but the reality is different.
To create any scalable network, the issue with Blockchain network is the blocks itself, which are connected in sequential order and waiting to get approved.
Many existing networks on the Blockchain are not efficient for Micro-Payments and more adoption due to their transaction fees.
If the future is to onboard more people on the network than every network should be ready to support as much as possible.
To report all these issues IOTA came into the picture and aimed to solve the problems associated with the existing Blockchain network.
What is IOTA and how it works, will this really going to change the future of the internet of things will discuss all in this guide.
What is IOTA or IOTA coin?
IOTA was first launched in ICO in the year 2015 and it raised around 3000 BTC which worth around $0.5 Billion and by the end of 2017 its total market capitalization reached up to $4 Billion.
It is currently handled by a German nonprofit organization IOTA foundation, which is lead by David Sonstebo and Dominik Scheiner as the co-chairman of the board.
IOTA is a new revolutionary data transfer and payment settlement layers for the internet of the things.
The main vision behind its creation is to support machine to the machine economy, which helps in the future when more systems start communicating with each other.
It is mainly focused to solve the Blockchain scalability issues and Micro-payment supports on a decentralized platform.
Current Blockchain network requires mining and Proof of work to process any transactions on the network which restricts this to be scalable in the future.
Current Bitcoin has most scalability up to 7 transactions per seconds, which are not enough for future internet of things as there will be billions of transactions per seconds in the future.
Hence IOTA has eliminated the concept of Blockchain technology and introduced a Directed Acyclic Graph which calls Tangle in the IOTA network.
How Tangle and IOTA works will discuss later in the guide.
IOTA also help to process any transactions on the network without paying any transaction fees which makes this best suits for Micro-Payment.
As I said IOTA also owns its own network Cryptocurrency which people calls IOTA coin and this is the smallest unit which works on the network.
People also discuss MIOTA where 1 MIOTA =1 Million IOTA.
IOTA is a distributed ledger technology which is open for everyone to use as it is fully open source.
IOTA has a total supply of around 2.7 Billion and all coins are already been created as there will be no miner and no mining happens on IOTA network.
What makes this IOTA network free to use and how this network would be Scalable will discuss one by one.
How IOTA works?
IOTA is not using the Blockchain technology, where the number of blocks will be added sequentially in the long chain public ledger to get any transactions to confirm.
To verify any transaction in the legacy Blockchain network requires either Proof of Stacks or Proof works (POW vs POS) to be done by the miner.
Whoever miner is able to clear that transaction will get the reward or incentives from the block transaction fees.
But this verification of the blocks will require consensus and this makes the process very slow as multiple nodes are waiting to approve that blocks.
That is why it is not well suits for future millions or billions of transactions per second. To get used of any network in the Internet of things will require to be Scalable as the user increases.
IOTA is filling that gap of Scalability and having the ability to scale up to infinite as the actual user on the network will get increases.
IOTA works on Directed Acyclic Graph (DAG) protocols and IOTA calls this Tangle.
Here directed means something which is only moving in one direction and Acyclic means no direction starts from one will come back to the same and Graph means the node is pointing to others.
From the below graph you can see how a network of transactions have been created and for reference, I am referring node as the transaction.
Every new unconfirmed transaction initiated in the network call TIPS in the network. To confirm any transaction and to be added in the ledger will require to clear 2 previous transactions.
Means let say, A has initiated a transaction to send this to B, in that case, A has to do some proof of work mechanism which will auto pick two previous transactions of the network.
This consumes only a few electricity not as much as consumed in real Proof of work Bitcoin mining.
A Transactions will be clear only if he clears the pending 2 transactions which we called TIPS and after the successful process it will be reached to B.
Now If B initiates any, in that case, he has to do the same job as A has done means parallel multiple transactions can be initiated at a time.
There will be no limitations of how many transactions per second as more will be the user the more will be the transactions speed.
Well, there will be no miner means no reward and no transaction fees requires, it solemnly depends on the user of the network.
Currently, the network is at a very small scale which means the transactions could be on hold for a longer period.
To solve this problem the IOTA team has deployed a centralized network called Coordinator which ensures nothing will stop in the network.
The coordinator does the same job as we the user of IOTA does but it also ensures where the next transactions must put on the Tangle network.
The above process explains how this network could be Scalable and what makes this more efficient for Micro-Payments.
Security of IOTA network
Mining on Blockchain network ensures the network will be secure unless anyone able to achieve 51% of the total network ownership.
But in the virtual world, it is close to impossible for a network like Bitcoin for which billions of nodes working parallel to each other.
In a similar way, IOTA is also prone to 34% or 1/3rd attack instead of 51% attacks and to prevent this Coordinator has been deployed.
IOTA requires very small computational power to confirm any transactions but the current network is small, so every transaction must be referenced directly or indirectly by Coordinator.
Coordinator digitally signs the transactions and adds those into the tangle and it also signs the locations so it can not be reattached to the different location.
Currently, IOTA is at the early stage once this got improved in future they will remove the use of Coordinator.
If any moment Coordinator stops working you will face many problems with the network and that is why this is placed under a very high-security zone to prevent from any cyber attack.
Use of IOTA network?
IOTA is made with a vision to support the internet of things or machine to machine economy where each machine can talk to each other.
Future is looking for a network which allows communication with different devices using the internet and in that case, maybe millions of transaction per seconds.
IOTA is getting ready for the same Scalability and what if the user wants to process very small Micro Payments.
Bitcoin in 2017 for a single transaction was asking the price up to 40$ and this not suits if you want to process a minor payment of 0.01$.
However, IOTA is offering free transactions where it is well fit for Micro-Payments.
IOTA can be used in the advertising industry where an Advertiser can pay the publisher to display his ads, which build upon IOTA network
In result, the advertiser has to pay a very low amount of CPC, if the user clicks on the link as that clicks will count as transactions and IOTA won’t charge for any transaction.
Publisher will get CPC for Ads to click and Advertiser will not have to pay any transaction fees.
News has been reported from sources that in Netherland IOTA is planning to set up an electric charging system which allows Electric car to pay electricity bills as they use.
There are competitor likes VeChain who is building a network which could be used in supply chain network but IOTA can be used in many ways.
Like the Automotive industry, renewable energy, eHealth, smart city technologies, and Data marketplace, etc.
In January 2018 IOTA made a public partnership with Volkswagen and in October 2017 IOTA did a partnership with BOSCH the German-based multinational electronics company.
IOTA network is designed to be resistant against the quantum computer which is projected to be developed around 2030 by NASA and CIA.
Quantum computers will have the ability to solve this cryptography and can disrupt the current Blockchain mining standards.
This means if IOTA will be successful on what they are planning to make than it will be the strongest network in the market.
Cons of IOTA Network
The technology behind IOTA is not yet simply tested and proper reviewed and that is why it is under question marks for security issues.
Currently, IOTA using Coordinator to make secure network which seems to be a centralized system, hence team is planning to remove this completely in future to make network decentralized.
Well known MIT and Boston University have reported a scratching paper and outlined the security issues with Curl hashing function used in IOTA.
This genuine issue is a concern for most of the industry, sometimes if the coordinator stops working then you can assume that the whole network will halt for a moment.
I hope I answered most of the questions on what is IOTA and IOTA coin?
How to Buy IOTA?
Let me give you a brief history of IOTA as when it was listed with CornmarketCap, its initial price was around 0.63$ but by the end of 2017, it reached an all-time high of 5.23$.
At the beginning of 2018, every Cryptocurrency was dropped and the same happened with IOTA and currently trading around 0.30-0.40$.
To buy IOTA I have written a separate detailed guide which you can refer for step by step guide on How to buy IOTA by giving 0$ trading fees.
If you are planning to buy IOTA Coin and concerned about the IOTA price prediction for the future then probably you should read our exclusive guide.
I am not an investment advisor what I can highlight is what is IOTA it would be your decision whether you want to invest or not?
Wallet of IOTA
If you have bought IOTA coin any of the above exchange than it is always suggested to store them in your own wallet.
The control of your wallet will be in your hand not with the exchanges and there are two ways to store the IOTA coin.
Desktop GUI Wallet
This wallet is available to install on the desktop as a GUI and have different variations for Macs, Window and Linux.
This wallet is listed on suggestion guide of IOTA official FAQ page and you can get that wallet here from the GitHub.
This wallet is more user-friendly wallet but currently is in beta release, you can get more detail from Trinity Wallet official page.
Trinity wallet is available for both mobile and desktop but in both cases, it is available in the beta version.
My View on what is IOTA?
Well, you got an idea of what is IOTA as it is a visionary project to solve the future problems of the internet of things.
From the architecture, it looks scalable but waiting for more user to Onboard on that network, the team has to solve the security flaws suggested by MIT university.
The future partnership of IOTA with BOSCH and Volkswagon like companies makes this project more superior.
Internet of things is the future and it will always be a first mover advantage for IOTA if they are able to make this in early future.
Current price is worth notable to buying if this is going to be boom but no one can guarantee will IOTA success or not?
Let me know your comment and share on the social profile to get an answer from the Crypto interested person.
Latest posts by Kirtish Vyas (see all)
- Bluehost Login (Review): How to Open Hosting Account (2020) - January 9, 2020
- 7 Key Points of Facebook Libra CryptoCurrency : Ultimate Review - December 31, 2019
- What is Oberlo: Is Oberlo Worth In Shopify DropShipping (2020) ? - December 20, 2019