IOTA is a platform built to aid communication and transactions across machines on the Internet of Things (IoT). [IoT is basically a network of devices that can collect data using embedded sensors to exchange information amongst themselves.] However, IOTA has radically different architecture from any other blockchain project as of now. It is a public distributed ledger that is built on a revolutionary invention called the ‘Tangle.’ This consists of a new data structure that is based on mathematical concept called the Directed Acrylic Graph (DAG), and so, has no blocks, chains or even miners.
Contrary to popular notion, IOTA is not an acronym. So, no, it does not stand for the ‘Internet of Things Application’ or ‘Internet of Things Alliance.’ It is the ninth letter in the Greek alphabet which stands for the smallest possible unit. It highlights the vision of IOTA to enable micropayments, as was clarified by Dominik Schiener, the co-founder of IOTA.
IOTA is maintained by the IOTA Foundation, a German non-profit organization, with a “focus on developing the next generation of protocols for the connected world.”
The Tangle is a mesh of transactions, in contrast to a blockchain which groups data into chains of blocks. Consensus is achieved not by miners, but by the transacting individuals themselves. Hence, the consensus couples both transaction and validation. This involves each node approving two previous transactions using a bit of computational power, to provide a little Proof-of-Work. Since this removes dedicated miners from the system, it also eliminates the need to offer payments for transaction confirmations. Hence, IOTA has NO transaction fees. Another remarkable feature regarding Tangle is the fact that transaction speed increases with more number of users. Goodbye bottlenecks! In addition to this, Flash Channels also allow for individuals to transact privately off the network, to process high volumes of data without blocking the system.
IOTA seems to be simply incredible, and it’s unique Tangle system promises high scalability due to parallel transaction processing, which means instant validations. Including this, there is no limit as to the number of transactions that can take place in a specific interval. As such, IOTA brings the greatest decentralization than any other blockchain!
IOTA envisions itself to become the backbone of IoT devices, so as to power and simplify micro-transactions, and to maintain data integrity. IOTA aims to establish itself as the missing link to a permission-less Machine Economy by improving on the inefficiencies of blockchain tech.
IOTA utilizes the MIOTA coin on its network, and has a fixed total of 2,779,530,283,277,761- A number that promotes the idea of IOTA being used for small transactions.
The team behind IOTA have also designed their own hash function called as Curl that is immune to attacks by quantum computing. However, the Curl algorithm recently came under much fire when the MIT Media Lab discovered a security flaw that caused different inputs to hash to the same output, causing ‘collisions.’ IOTA’s team has since long fixed the technicality, and defend that the vulnerability was to protect others from copying the source code.
Another concern regards the use of the ‘Coordinator.’ As IOTA is still in the early stages of development, with a small network, it uses the Coordinator as a checkpoint to validate transactions and protect against attacks. This is a key criticism of IOTA, since many argue that as details about the Coordinator are not public, and so IOTA in this state is a centralized entity. Past issues also involved the Coordinator being shut down temporarily, which led to IOTA wallets being unusable for a while. Nevertheless, the IOTA team does have plans to eventually discontinue use of the Coordinator once the network is strong enough.
IOTA has already partnered with tech giants like Samsung Electronics, Innogy and Cisco Systems. Others include SatoshiPay, REFUNITE and CarPass working with IOTA. From increasing efficiency of transportation, to providing authenticity and trust to supply chains, storing of healthcare records to maintain reliability and security of data, and to promoting consumption of smart energy- IOTA has the potential to transform each industrial sector for the better.
However, it is important to note that IOTA is currently in beta form, and undergoing testing and improvement. Though it has enormous potential, it is still in unchartered waters. But, if successful, IOTA would undoubtedly surpass blockchain technology, and rewrite a new chapter for cryptocurrencies.