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What is IOTA

November 29, 2017 10:41
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Bitcoin has been facing a lot of issues lately, with the biggest being Scalability. Bitcoin has been slow recently with increasing transaction fees which has split the community with multiple forks. IOTA is a Cryptocurrency, unlike anything we’ve ever seen before. IOTA does not work on the simple principle of Blockchain we know and understand for Bitcoin, Ethereum and the others.

IOTA is the 8th largest Cryptocurrency according to CoinMarketCap. IOTA has a market cap of $3 Billion and has been increasing. It recently crossed the $1 mark and is set to expand more. IOTA is available in very few exchanges now, limiting its opportunity to grow more.

Bitcoin requires miners to keep things running. In return, we add a transaction fee while making each transaction which is distributed among the miners. This transaction fee has been increasing because of the number of transactions being made every day [See also: Bitcoin Fees Explained]. Also, it is estimated that the electricity used to verify each transaction can be used to power an average home for a week. IOTA aims to solve this problem by not using the Blockchain, but still be decentralised.

If you want to make a transaction on the IOTA network, you have to confirm two transactions before you make yours. This method ensures a self sustaining network where users verify each other.

IOTA does not use a Blockchain. Instead, it runs on a concept called Tangle where two transactions are confirmed for your transaction to be confirmed by others. There are no blocks, so no issues of scalability. Here scalability just requires more users to start using IOTA.

The biggest advantage of IOTA using Tangle network is that there is no specialised infrastructure running. So, the transactions are much faster, and most importantly there is no transaction fee.

As the name suggests, IOTA is not just for transactions between people. It is also for Internet of Things (IoT) devices. Smart devices will be able to send and receive money using IOTA automatically. Devices will automatically and securely be able to pay for services they use like electricity, power and space.

A lot of the IOT devices are elementary and even run on battery. So IOTA is extremely lightweight that simple IOT devices will be capable of implementing it. Imagine your device paying your electricity provider for the energy it uses in real time! This is what IOTA is capable of.

Another significant feature of IOTA is Quantum Computing Resistance. A key feature of Bitcoin and other blockchain-based Cryptocurrencies is Encryption. Wallets are locked down using encryption and users authenticate themselves and make transactions after decrypting their wallet using a private key. Right now, there is not enough computing power to break through this encryption. But it is estimated that in ten years’ time when Quantum computers start arriving, there will be enough computing power to break the network. This is a hypothetical scenario. IOTA has implemented a quantum-resistant algorithm called “Winternitz One-Time Signature Scheme”. This is extremely technical. But rest assured, if we end up having super-computers capable of breaking through traditional encryption, IOTA will be able to defend it.

IOTA will be ideal for all sorts of transactions, but especially for small micro-transactions since they cost nothing to send. App developers and services will be able to implement IOTA and get paid in IOTA without having to spare a penny in fees to anyone or any service. Convenience like this has never been seen before.

IOTA also allows offline transaction. Blockchain follows the blocks. Once a block has been created, it cannot be removed from or edited on the blockchain. Also, the blocks have to be in proper order for it to function and each block is connected to the blocks before it and the blocks coming after it. IOTA does not need this. So you can send someone money without the internet now and attach your transaction to the tangle whenever you connect to the internet.

One thing to notice is that IOTA is not decentralised yet. IOTA is not yet ready for widespread adoption. Its still in its early stage where we don’t have wallet options and just not enough transactions being done. For this reason, IOTA runs a central coordinator to clear transactions.

The central coordinator prevents 33% attack. Since IOTA is relatively small right now, an individual with 33% hash power will be able to create fake transactions and cheat the system. The central coordinator prevents this. Also since IOTA is in its early stages, there might not be enough people to confirm your transaction when you’re making one. At that moment, the central coordinator steps in to verify your transaction. But once enough transactions are being made on IOTA, the coordinator will be turned off, making the network truly decentralised.

IOTA might be a worthy coin to invest in. IOTA is priced at around $1 with a market cap of $3 Billion. For some reason, IOTA is the only coin in the top 10 cryptocurrencies which is not available in most of the exchanges. You are limited to BitFinex and Binance if you want to buy IOTA. Also, there is no easy way to store them. You’ll have to run a node (Either Light or Full) which is available for Windows, Mac and Linux.

The total supply of IOTA is at 2779530283277761. That is nearly 2 Quadrillion! Remember, IOTA is not just for us to transact, it is also made for machines. So this number makes a lot of sense. When you’re buying IOTA in an exchange like BitFinex or Binance, you’re actually buying MIOTA. MIOTA is nothing but One Million IOTA. So if you buy 1 IOTA in an exchange for $1, you’re actually buying 1 Million IOTA.

Bitcoin has its own value, but it might not be ideal for everyday transactions. IOTA might just be it. IOTA is capable of becoming a truly decentralised currency ideal for everyday use to be used by machines and humans equally without having to pay any transaction fee.

If IOTA manages to pull off this future, where smart devices host nodes to interact with each other, there is no stopping it. IOTA has the potential to grow bigger than any other cryptocurrency. The strength for IOTA comes in its numbers. The more number of people (and devices) that start using IOTA, the faster and reliable the transactions get.

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