IOTA is a protocol for a permissionless distributed ledger technology that was developed in 2017 by the non-profit IOTA Foundation. Its core proposition is a novel approach to confirming transactions called Tangle. IOTA is designed to become the standard method of conducting transactions on devices in the IoT ecosystem.
IOTA is a protocol for a permissionless distributed ledger technology meant to be the standard for transactions between machines to machines in the Internet of Things ecosystem. An Internet of Things Application (IOTA) using blockchain without the blocks.
IOTA and IoT
The Internet of Things (IoT) describes all things that are connected to the Internet. The expression is more frequently being used to represent things that “communicate” to one another. IoT is an interconnection of smart devices, from refrigerators to smartphones, and these devices need to share data.
IOTA’s design makes it ideal for the huge amounts of data required to power IoT. The distributed ledger applied for IOTA Tangle is envisioned to be used in the future when the Internet of Things will advance, and the need for a network capable of many microtransactions will be essential for honest data transfer. IOTA’s unique features are high scalability, low resource requirements, zero-fee transactions, secure data transfers, offline transactions, and quantum resilience.
What Is MIOTA?
MIOTA Price History
IOTA’s currency has been through ups and downs like any digital asset, and its price movement has been marked by major events. MIOTA started at a price of about $0.50 US in the second half of 2017. Before its price went up to an all-time high of $5.69 by following BTC’s value growth, MIOTA’s price crashed in August 2017 to an all-time low of $0.147. At the time of the writing, one MIOTA is worth 0.00002210 BTC, and there are about 2.8 billion MIOTAs in circulation.
How IOTA Works: Protocols and Architecture
IOTA empowers machines and humans to participate in growing new permission-less economies. It is an IoT application. The more smart devices connected to IoT, the more information generated. Many networks are not designed to hold as much information as these smart devices produce. With the amount of information in networks, there is a need for data management. The creators of IOTA specifically designed a protocol with block-less blockchain technology to solve this issue.
Blockchain technology experienced some drawbacks in its adoption when many people got involved, and transaction processing on the network slowed down. To achieve distributed ledger technology not only for financial transactions but also for smart devices and IoT, the IOTA founders envisioned a secure, scalable, and feeless transaction settlement layer for the devices to participate in the growing permissionless economies.
MIOTA is a cryptocurrency similar to Bitcoin, but it was created to solve Bitcoin’s scalability issues so that the technology can be applied to IoT. For IoT to work, the network needs to be able to handle an enormous amount of transactions. This is where IOTA network’s distributed ledger Tangle comes in.
IOTA Algorithm (Tangle)
Tangle, a key innovation of IOTA, is a protocol used for confirming transactions. Tangle is the link between IoT and Web 3.0.
Tangle aims to solve Bitcoin’s scalability issues with the use of a different consensus mechanism for transactions that occurs within a structure different from Bitcoin’s. The main difference is that there is no need for dedicated miners to solve cryptographic puzzles.
IOTA’s distributed ledger does not consist of transactions grouped into blocks stored in sequential chains but a stream of individual transactions entangled together using a directed acyclic graph (DAG). To participate in the IOTA network, users must perform a small amount of computational work to verify previous transactions. This method is based on the Markov Chain Monte Carlo mathematical model. There is no hierarchy of roles and responsibilities, and every agent has the same incentives and rewards for participating in the network.
Tangle is a system of nodes in which each node can be connected to multiple other nodes but only in a particular direction (the node cannot refer back to itself). Tangle does not require full nodes. New transactions are confirmed with reference to the previous two transactions, reducing the amount of time and memory to perform such a transaction. Tangle uses a Proof of Work (PoW) puzzle at the latest stage of confirming the transaction.
Tangle is a parallel system in which transactions are processed simultaneously. In theory, this design implicates limitless levels of processed transactions. The bigger the number of participants in the network, the better the security and efficiency for transaction processing.
To secure the network, IOTA uses a central server called the Coordinator. The Coordinator node processes transactions. Since its introduction, this part of IOTA’s architecture has raised doubt in its decentralised system.
To perform a transaction in the IOTA network, users must validate the previous two transactions. The transactions used as a reference are called tips. A measure for approving the selected tip transaction is based on an algorithm using “confidence”. A 97% confidence that a node will approve the future transaction if the transaction has been already approved 97 times.
The IOTA validation system is a pay-it-forward model, and it supports a system without financial rewards. Because there is no monetary incentive to validate transactions, there is no limit for transactional value settlements. IOTA blockchain empowers high scalability of the transactions. The bigger the activity in Tangle, the faster are transactions confirmed.
To support fast transactions while preserving secure data storing the architecture of the Tangle transactions carrying a large amount of information are divided over various bundled or linked transactions.
Top Three IOTA Wallets
IOTA aims to become the standard for transacting machine-to-machine (M2M) micropayments. A rough estimate of the number of connected devices by 2025 is 75 billion. To allow the infrastructure to attain this prediction as well as power the protocol, the IOTA team developed a wallet to store tokens.
The IOTA Trinity Wallet is a user-friendly mobile or desktop wallet dedicated to the MIOTA cryptocurrency. A beginner-friendly wallet for IOTA assets is the GUI IOTA Light Wallet, included in IOTA’s graphical user interface to allow for fast access to IOTA funds. Its lightweight characteristics come from the ability to choose to use a full node or a light client.
The ledger also allows users to store MIOTA assets securely on a hardware wallet. Cold storage is typically safer because it is encrypted and keeps MIOTA assets offline. Being connected to the internet all the time poses a great risk of the funds being stolen.
IOTA has many future applications and is not as limited as the Bitcoin and Ethereum blockchains. Some consider IOTA a third-generation blockchain, allowing machines to work autonomously on the network. For example, in the car industry, IOTA is already working with Volkswagen to build a proof-of-concept automobile that communicates with smart gas station pumps and pays for the fuel.
IOTA intends to empower machines to use blockchain autonomously. The IOTA Foundation launched a proof of concept with Data Marketplace in 2018, and participants include Bosch, Fujitsu, Philips, and KPMG.
With its unique design and blockchain-based technology, IOTA is the target of criticism and attacks. Unlike Bitcoin, IOTA experienced downtime, and like Ethereum, MIOTA tokens were subject to theft.
The most well-known security flaws include a collision attack discovered by MIT’s Digital Currency Initiative (DCI). This vulnerability, resolved in October 2017, suggested that the IOTA hash function had weak collision resistance, and authors from the DCI could generate signature forgeries. The IOTA Foundation was criticised more for its poor communication than the technical flaw.
Later in the year of IOTA’s announcement, another attack discovered a bug partially revealing the private keys of some users and exposing them to theft. Another attack connected to the security of the funds was an online seed-generator scam where more than $10 million worth of MIOTA tokens was stolen.
IOTA’s last known attack was on IOTA’s own Trinity wallet incident, resulting in the theft of $2 million worth of IOTA Tokens.
Similar to Ethereum, IOTA’s community is very strong. Many IOTA followers believe in the application of IOTA technology and believe it will be necessary when we reach billions of connected smart devices, and they support the cause voluntarily. IOTA’ vision of the future encourages supporters’ projects to be diverse and creative. Some of these projects are for educational purposes, others are for IOTA enthusiasts. IOTA Studios is intended for IOTA fans creating content, and there are news sites in almost every major language.