What does IOTA mean?
IOTA (MIOTA) is a distributed ledger used in the Internet of Things (IoT) environment to record and carry out transactions between machines and devices. A cryptocurrency known as the ledger uses MIOTA to keep track of activities in its network. Tangle, a network of nodes used to confirm deals, is IOTA’s most important new idea. IOTA says that Tangle is faster and more efficient than most blockchains used for cryptocurrency.
The ledger’s nonprofit creator, the IOTA Foundation, has made deals with well-known companies like Volkswagen and Bosch to make the platform more useful for all connected products.
How to Understand IOTA
By 2020, billions of things were linked to the Internet. When devices are part of this Internet of Things (IoT) environment, they can trade data and payment information with other devices all day.
IOTA wants to become the standard way for gadgets to do transactions. The company that created it has called the ledger a “public permission-less backbone for the Internet of Things that enables interoperability between multiple devices.” This means that it will let linked devices do business with each other, and anyone will be able to get to it.
The people who created IOTA say that it fixes a lot of problems that exist with cryptocurrencies that are built on normal blockchains. Some of these problems are that mining is centralized in one group, there are slow network speeds, and the system can’t grow. When talking about cryptocurrencies, scalability means how to make a blockchain handle more transactions without changing any other measures.
Those problems are caused mainly by too many transactions on Bitcoin’s blockchain simultaneously. Because of things like small block sizes and challenging puzzles that miners have to answer to get the cryptocurrency as a reward, there is a backlog. IOTA fixes these issues by changing the blockchain structure to Tangle, a fresh method for keeping track of data and ensuring accurate transactions.
The history of IOTA
Along with Dominik Schiener, Sergey Ivancheglo, Serguei Popov, and David Sønstebø, they helped to create IOTA.
In October 2015, a post about a token sale in an online Bitcoin group brought attention to the project. 1 The Jinn project is where IOTA started. That project aimed to make ternary hardware, which means low-cost and energy-efficient hardware for the IoT environment. This hardware would mostly be general-purpose processors. In September 2014, Jinn sold its tokens to many people. About 100,000 tokens were bought during the crowd sale, bringing in a total of $250,000.
The Jinn tokens got into a lot of trouble quickly because they were sold as profit-sharing tokens, which could be seen as protection tokens. At that time, initial coin offers (ICOs) were still gaining popularity, and how they were regulated wasn’t clear. Jinn changed its name to IOTA in 2015, and there was another coin sale. In this case, the tokens were sold as utility tokens. In the new scheme, people who owned Jinn tokens could trade them for tokens of the same value. David Sønstebø said that the Jinn project “spawned” IOTA, so it made sense to talk about IOTA first and then say something about Jinn later.
IOTA’s first transaction was an account with a balance holding all its cryptocurrency, MIOTA, that will never be mined. People say an online picture of the Genesis deal has not yet been found. Tokens like these were sent to other “founder” addresses. It is planned that there will be 27 quadrillion MIOTAs in life. The people who started IOTA say that the number of MIOTAs fits “nicely” with the most significant integer figure that can be used in JavaScript. Miata hit a high point of $14.5 billion during the 2016–2017 bull market, just three months after it first appeared on cryptocurrency markets. After that, though, its value dropped along with most other cryptocurrencies.
Not sure about IOTA
Most of the complaints about IOTA have been about its technology problems. Like most cryptocurrencies, the IOTA technology is new and hasn’t been tested yet. Because of a hacking attack on its network, $3.94 million worth of MIOTA was stolen. Because of the attack, the IOTA development team made a blog post with steps to make a potent seed for using its cryptocurrency.
The people who worked on IOTA should have “rolled” their cryptocurrency. They didn’t use Bitcoin’s popular SHA-256 hash function; instead, they made their encryption from scratch. Curl, IOTA’s hash function, was found to have significant security holes by MIT’s Digital Currency Initiative team. When two different values were given to the function, it always came back with the same result. This is called a collision, meaning the hash function is broken. The MIT team said that someone could have used their method to destroy or steal user funds from Tangle when they looked into the flaw. IOTA’s team has fixed the flaw.
IOTA says that DAGs will solve the problem of blockchains being unable to grow, but this could be false. Vitalik Buterin, one of the founders of Ethereum, doesn’t think that hashgraphs, which are the data structures that make up DAG, can solve problems with growth. He says that the way hashgraphs work now doesn’t fix the fact that blockchains need a lot of computer memory and processing power. How big a system that uses hash graphs can get still depends on how fast and how much space each computer in the network has.
By 2020, IOTA’s network had a central server called a coordinator that ensured transactions were safe. By adding a coordinator, this practice has made it less of an autonomous system because there is now only one place where something could go wrong. The network’s speed has also slowed because a coordinator-based system doesn’t allow multiple processes. On the other hand, IOTA had a plan called “The Coordicide” for getting rid of the Coordinator in the future.2
The Future of IOTA
IOTA’s market value was still far below its all-time highs in 2017, but by late 2020, the cryptocurrency’s luck was improving. It was worth $446 million at the beginning of 2020 and more than $900 million by December 19, 2020. That’s more than a 100% gain, but the road was rough. Focusing on the growing Internet of Things (IoT) and continuing to work with big companies are two things that make IOTA stand out from other coins and get investors interested. IOTA’s market cap is about $3.2 billion as of September 28, 2021, so it looks like it’s working.3
To be successful, cryptocurrencies need to offer something new. IOTA wants to make the Internet of Things (IoT) better.
How is IOTA not the same as Bitcoin?
IOTA’s answer to Bitcoin’s issues is to eliminate some essential ideas and the physical limits of a blockchain. IOTA’s cryptocurrency, MIOTA, is premised, and transfers are agreed upon in a way that is different from a blockchain. Tangle is the name of a new data structure that IOTA makers have developed to organize numeric representations in a computer’s memory.
Tangle is a decentralized acyclic graph (DAG), meaning its nodes don’t connect in a particular order. In a triangle, each node can be linked to more than one other node. Conversely, a node can’t connect to itself because the connections only go one way. Standard blockchains are also DAGs because they are linked sets in order. But IOTA’s Tangle is a parallel system that lets transactions be handled simultaneously instead of one after the other. Because more systems are connected to the Tangle, processing deals becomes safer and faster.
For confirmations and consensus in Bitcoin, you need a group of computers running full nodes that hold a ledger’s entire history of transactions. This process uses a lot of energy and computer power.
In Tangle, you don’t need total node miners. Two previous transactions are used to prove each new transaction. This cuts down on the time and memory needed to verify a transaction. At the end of the deal, a simple Proof of Work (PoW) puzzle is added that can be solved right away. Tips are the names of the two deals that are picked. The tip selection method in IOTA’s system uses “confidence” to decide if the transaction is okay. Let’s say that a deal has been okayed 97 times before. After that, there is a 97% chance that a node will accept it.
Another idea related to “confidence” is the “weight” of a deal. A transaction gains weight as it goes through Tangle. The more approvals a deal has, the more critical it is. The whole network is told about a deal as soon as it is confirmed. Then, a different transaction that hasn’t been confirmed yet can pick the newly confirmed transaction as one of its tips to become confirmed.
This way of confirming a transaction doesn’t cost anything and doesn’t use much power, so MIOTA can be used on many different machines and gadgets that need different amounts of power.
Conclusion
- IOTA is a distributed ledger that was made to handle transactions between IoT devices linked to each other. MIOTA is the name of its cryptocurrency.
- It began as a hardware project whose goal was to make cheap general-purpose computers.
- To fix Bitcoin’s main problems with scalability and speed, Tangle, a system of nodes in which each new transaction confirms two previous transactions, will be used instead of Bitcoin’s blockchain.
- IOTA has its issues with scaling, and hackers were able to get into some parts of this coin.
- Even though IOTA’s market value was still far below its highs in 2017, it looked like the cryptocurrency’s luck was about to improve by late 2020.
