The IOTA project intends to transfer data and value between people and devices connected to IoT. Started in 2015 by IoT professionals David Sønstebø, Serguei Popov, Sergey Ivancheglo, and Dominik Schiener, the project is headed by the IOTA Foundation.
IOTA (an abbreviation for ‘Internet of Things Application) has native open-source, decentralized digital currency referred to as MIOTA or simply IOTA. The IOTA cryptocurrency makes use of a scalable distributed ledger. It supports machine economy by allowing feeless, frictionless, stable, and scalable microtransactions within the IoT ecosystem.
The supply of IOTA coins is limited, with a market capitalization of over $3 billion. The project founders claim the IOTA network to be a trust layer and protocol for IoT, making digital transactions efficient. Moreover, IOTA allows developers to develop decentralized applications on the IoT interface.
How IOTA Works?
As opposed to traditional cryptocurrencies using blockchain technology, IOTA relies on IoT applications and uses a new tamper-proof technology called Tangle. Based on the direct acrylic graph structure, Tangle immutably records transactions and communications in parallel. The globally distributed and trustworthy network provides resiliency and robustness against cyber-attacks.
Unlike blockchain technology, there are no miners involved in the Tangle network, making transactions free. However, it still uses a consensus mechanism similar to Proof-of-Work (PoW). The sender (or central coordinator) must validate two random transactions over the network before sending the IOTA coins. Because of a device used for making a transaction contributing to its confirmation itself, the processing becomes feeless and faster.
Transactions going through the PoW mechanism incur a fee for using more computing power and electricity. Additionally, the higher frequency of transactions makes the PoW network slower and costlier. Tangle solves these problems by eliminating miners from the equation, making the IOTA network more cost-effective and flexible, allowing for limitless transactions in minutes. Eventually, bringing IoT to transactions will make machines more connected and expand the Tangle network. All this will encourage more people to participate in the IOTA system.
Advantages Of IOTA
- Zero-Fee Transaction – IOTA Tangle network enables users to process all the transactions for free.
- Scalability – IOTA offers much-enhanced scalability that would reach infinity with more people joining the system.
- Less Energy Consumption – The elimination of miners saves a lot of energy in the process.
- Micro-Transactions – No transaction costs allow for micro-payments.
- Data And Value Transfer – IOTA is not only limited to financial transactions, but it also facilitates data sharing.
- No Mining – As senders contribute to validate IOTA transactions, there is no concept of mining.
- IoT Adoption – The increasing adoption of IoT will lead to the acceptance of IOTA.
Disadvantages Of IOTA
- No Smart Contracts – Although IOTA can execute smart contracts, the excessive computational power it employs eliminates any chance of their verification.
- Relatively New – IOTA has only started yet, so very few people and organizations have vested interest in it.
- Scalable Transaction Is A Mystery – Even though IOTA promises to conduct endless transactions quickly, the small community size creates a mystery over its potential.
How To Buy And Use IOTA?
IOTA is a popular digital currency and available for purchase and trading on the leading international cryptocurrency exchanges, including Binance and Bitfinex. You can buy IOTA coins as other cryptocurrencies – create an account with the trading platform, fund the account with fiat currency like Euros or Bitcoin or Ethereum, and convert them into IOTA.
As far as storage of IOTA coins is considered, you can opt for the crypto exchange wallet. However, the IOTA network recommends using a desktop application, or a mobile digital wallet, such as Nostalgia Light or Trinity, or a hardware digital wallet. From there, you can use IOTA coins for transaction purposes.
The Future Of IOTA
When attempting to make an IOTA forecast, the convergence of IoT technologies with the digital payment system is one factor that must be considered. It means that IOTA’s success is directly dependent on the adoption and expansion of IoT in the future, which seems exciting at present. It has already shown tremendous potential with innovative machine-to-machine payment processing.
So far, IOTA has taken a progressive approach in partnering with corporates like Bosh and Samsung and designing a quantum attack-resistant protocol. It must improve the security functionality of the transaction framework to draw more users to the network. Furthermore, IOTA can become an essential component of IoT due to its ability to increase connectivity and knowledge distribution between machines.
Conclusion
IOTA is taking the existing blockchain technology by the horns with its creative consensus mechanism, Tangle. Furthermore, its decentralized payments network leverages the IoT applications, which is quite a unique concept in the cryptoverse. Though there are security and adaptability challenges to tackle, IOTA is well-positioned to succeed as long as the Internet of Things persists.
