What is IOTA? IOTA is a cryptocurrency designed for the Internet of Things. The four advantages which IOTA has over the other Blockchain cryptocurrencies are:
The recent boom in the cryptocurrency market proved on more time that decentralization is a real thing and that our society will get to that point rather sooner than later. IOTA will change the economy of Internet of Things (IoT). IOTA can make a real difference to our lives. IOTA is a new cryptocurrency that focuses on Machine to Machine (M2M) transactions. The main purpose of IOTA is to serve the machine economy by enabling feeless M2M (Machine to Machine) payments.
IOTA manages to do that because it goes beyond Blockchain. It is the first cryptocurrency that provides the whole ecosystem based on blockless blockchain. Internet of Things (IoT) holds one of the biggest potential for human life change. It could become the fastest growing market in the next two years but the most important thing is that the development in related areas is interconnecting. Since IOTA has been released, the public has not only gained a whole new perspective for IoT, but for 4.0 itself.
Before Internet of Things (IoT) becomes an integrated part of our everyday life, it has to overcome many obstacles. One of these problems is scaling. The latest tech development is a cryptocurrency market. Imagine millions of tiny transactions where there is no way to proceed with a central payment processors without any fees. This is how the bank works and this is the world which we live in today.
Micro-transaction that is based on blockchain brought a revolution to our economy. Then someone invented Bitcoin. Since then we have seen lots of different cryptocurrencies and projects that tackle many problems of our economy and society. They will play an important part in sharing economy Internet of Things, however none of them will provide true real time micro-transactions. The reason for this is because all of them so far are based on blockchain, mostly connected to Bitcoin or Etherium development. The problem is that the current blockchain incarnations are not able to scale to a high number of transactions per second and at the same time provide stable infrastructure and run on a lightweight hardware. Moreover, with scaling there is always the increase of transaction fees until now…
IOTA provides efficient, secure, lightweight, real time micro-transactions without fees. It is an open-source, decentralized cryptocurrency, engineered specifically for the Internet of Things, its real-time micro transactions and providing ecosystem that is ready and flexible for scale.
The technological breakthrough that makes this possible is the Tangle. What is Tangle? Tangle retains the blockchain features of the distributed ledger and secure transactions, but does not work with blocks. Instead of blocks (regular blockchain), Tangle uses the form of a Directed Acyclic Graph (DAG).
Unlike Bitcoin, which uses a blockchain architecture for maintaining its ledger, IOTA uses the Tangle which is a Directed Acyclic Graph, known as DAG. Therefore, the Tangle solves both the scalability and transaction fee issues faced by Bitcoin and most cryptocurrency by requiring the sender in a transaction to perform a kind of proof of work which approves to transactions. In this way, the act of making a transaction and validating transactions are coupled. This makes the system fully decentralised. Directed Acyclic Graph is better than blockchains because DAG technology enables various features like zero-cost transactions, infinite scalability or offline transactions that blockchain simply cannot do and will neither probably be developed to do.
This is the way a traditional blockchain technology would work:
Various transactions are bundled in each block and after that they can be verified by miners. This means that with the increase of transaction there will be more jobs for miners. With Bitcoin and Etherium this also means an increase in transaction fees.
This is the way a Tangle works:
In the Tangle, each transaction forms a new block and it is verified by itself. To be able to proceed this verification, it has to first verify two randomly chosen transactions in the network. IOTA’s structure is decentralised on a level that no blockchain can match, due to the fact that users and validators are one and the same in Tangle. IOTA creates self-sustainable economy that is based on demand. Tangle runs with zero-cost transactions. Also, there is no limit for scaling. The problem faced with cryprocurrencies based on blockchain is scalability. The IOTA network could become indefinitely scalable with zero cost because every new transaction verifies two new transactions in the network. Tangle brings a solution for scalability with zero cost that is revolutionary.
Internet of Things is spreading like wildfire and will revolutionarize our lives on this planet. Imagine the whole world with the ability to communicate. However, we need a different perspective as soon there will be more machines than humans!