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IOTA is a revolutionary public distributed ledger that uses a new system, called "Tangle", at its core. The Tangle is a new data structure based on a Directed Acyclic Graph. It doesn't use blockchain, and as such it has no blocks, no chain and also no miners.
At the time of writing of this article IOTA is the 16th largest cryptocurrency and has a market cap of $821M.
A Bit of History
IOTA was launched in 2015 with the purpose of integrating the altered blockchain to the “Internet of Things”, maximizing the efficiency of the payments made between the segments of the IoT devices. After the system was launched, it went through an almost 2 year period of beta-testing.
Even during testing, IOTA was functioning as a payment system and it was possible to buy/sell it only in the off-market space. IOTA listing on the cryptocurrency platform was postponed till any mistakes were fixed and significant testing was completed.
What is IOTA?
IOTA (Internet of Things Application) is a crypto technology that facilitates transactions between devices on the Internet of Things (IoT). IOTA addresses the transaction fees and scalability issues of blockchain technologies by getting rid of the block and chain. Instead, in order to submit a transaction to the IOTA ledger, you must verify two other previous transactions.
This method of verification means there’s no central ledger, and there’s no need for miners to power the network. As the devices on the network randomly verify each other’s transactions, they build consensus through the web of connections between transactions. This type of verification in cryptograph is known as Directed Acyclic Graph (DAG), but the developers of IOTA call it the Tangle.
Because computing power in the Tangle increases as the network grows, IOTA is promising free, and expedient transactions. It can also process micro-payments and payments between machines, facilitating a whole machine-to-machine micro-economy.
How Is IOTA different from Bitcoin?
Transaction Fees. In order to contribute to this network, a participant merely needs to accomplish a small amount of computational work that authenticates previous two transactions. Rather than producing a hierarchy of roles and responsibilities in the network, every user has the same incentives and rewards. In order to make a transaction in the Tangle, two previous transactions must be validated with the reward for doing so being the validation of your own transaction by some subsequent transaction. With this ‘pay-it-forward’ system of authentications, there is no need to propose financial rewards.
Security. To issue a transaction with IOTA, a small amount of Proof-of-Work is required. Unlike Blockchain where Proof-of-Work works as a decentralized lottery of sorts, in the Tangle this aids merely as a spam measure. As more and more transactions occur, an increasing amount of Proof-of-Work is added to the system making it more secure against attacks. The Tangle grows more secure as more activity is added. This is because necessitating a minute amount of Proof-of-Work makes it costly for an attacker to “outpace” the number of honest transactions. The cost to issue a transaction for an honest user is immaterial, but the cost for an attacker to overpower the collective quantity of honest transactions would be forbiddingly high.
Scalability. By syncing in line, the transaction issuance and authentication, IOTA is able to accomplish a meaningfully higher transaction quantity. In a blockchain, because an increasing amount of miners are always attempting to add the next block to the chain, with noteworthy overlap between the transactions included in their own blocks, transactions are forced through a bottleneck – this is how the double-spend problem is fixed and how consensus is ultimately accomplished. However, the vast mainstream of users are not trying to fraud by double-spending their coins, yet they are forced through this bottleneck, however. Instead, IOTA lets all transactions through and cleans up any conflicting transactions using the “heaviest Tangle” rule.
Consensus. A common misunderstanding about the differences of Blockchain and the Tangle is how consensus is attained. Blockchain achieves consensus through the “longest chain” rule, while with IOTA, consensus tails the heaviest Tangle instead of the longest chain. In the Tangle, because transaction issuance is strongly coupled with network authentication, transaction finality (commonly called “confirmation”) can be attained in a fraction of the time than it takes for Blockchain. The more activity there is in the Tangle, the more authentications occur, and the faster confirmation becomes.
IOTA Explainer Video
This video was created by IOTA and may be biased. For more information about IOTA, please visit https://www.iota.org/.