IOTA is a cryptocurrency platform whose vision is to create a foundation for the “Economy of Things”. The Economy of Things is a marketplace for that data which is produced by the Internet of Things (IoT).
The term “cryptocurrency platform” may sound like a very poor way of describing a blockchain, but that’s because IOTA doesn’t actually use one. The underlying technology is what’s known as a Tangle which is an alternative, blockless approach to enabling a distributed ledger.
IOTA is built around the emerging IoT which is the term given to the collective amount of devices which access the internet and create or use data. Devices can include anything from a smart fridge to digital door locks, all the way to the GPS built into many new cars.
However, the IoT is still in its very early days as a concept, and there is a gap in the marketplace. Currently, there is no standardized means for which these devices and networks can exchange value and data, a shortcoming for which IOTA is working to solve.
IOTA’s Unique Philosophy and Goals
IOTA was always destined to be more than just another cryptocurrency. The project, which first started in 2015, was designed to capitalize on the IoT, which developers realized was an inevitable step forwards in how the world operates. However, there are still some roadblocks.
There is such an abundance of products that are currently a part of the IoT – and so many more with the potential to do so – but there is no viable way for these fragmented microcosms of technology and industry to connect with each other and exchange value.
It’s not so much a bottleneck in infrastructure as it is trying to drive down a highway that hasn’t been built yet.
The IOTA foundation, established in 2015, believes that the progression of the machine ecosystem is inevitable, and they want to be the ones laying down the initial roadwork. However, there are many ways to go about building it and, if enough money is initially invested in an inefficient method, manufacturers might not want to change it at a later date.
For example, HD-DVDs were better quality than Blu-Ray, while Beta Max was better than VHS. There are many instances where prominent manufacturers jumped the gun when adopting an early technology to get the edge on a competitor, and the lesser technology stuck around.
Strategy and Practical Matters
On its front page, IOTA outlines its underpinning concepts:
THE ECONOMY OF THINGS
As the Internet-of-Things keep expanding, the need for interoperability and sharing of resources become a necessity. IOTA enables companies to explore new business-2-business models by making every technological resource a potential service to be traded on an open market in real time, with no fees.
LEDGER OF THINGS
In this new autonomous Machine Economy IOTA will be the backbone. The Tangle ledger is able to settle transactions with zero fees so devices can trade exact amounts of resources on-demand, as well as store data from sensors and dataloggers securely and verified on the ledger.
Its potential uses include:
- Supply Chain
- Finance Services & Technology
- Smart Cities & Infrastructure
- Research & Development
- And much more…
IOTA Faces a Setback: $4,000,000 Hack
Before they can make progress, IOTA needs to overcome a dramatic setback to their reputation.
At the time of writing, we’re barely two weeks after a hack that stole $4 million of users funds. Some news sites and online resources are claiming that this was the result of a DDoS attack, implying huge security flaws.
This information is incorrect.
The theft of the funds is the result of a 6-month long phishing scam. The hacker, whose identity is still unknown, was running the site iotaseed.io as a seed generator for creating IOTA wallets. The site creator linked back to a GitHub repository, indicating that it was using legitimate code from the developers. The reality was that they were using the code with an additional script so that the private keys of all users would be predictable.
The funds were stolen at the same time that a DDoS attack was taking place on the IOTA network, while the developers were conveniently distracted. It’s possible that the DDoS attack was entirely coincidental, though it is far more likely that it was a case of intentional misdirection.
Complications to IOTA’s future now stem from the fact that the hack was not due to their network’s weakness at all, but it is being portrayed as such by the media as well as by many users on social media.
We can see where the IOTA foundation wants to take their technology and the movement it has created. Let’s take a look at how they might get there.
Research conducted by Gartner indicates that, as of February 2017, the IoT is comprised of over 8.4 billion devices. It’s clear that the scope for IOTA is massive and, if they get their execution right, they will be onto a winner.
The question is: are they executing their strategy well?
When they announced their new partnership with over 20 international companies – Microsoft, Bosch, and Fujitsu among them – the price of MIOTA (IOTA’s cryptocurrency) rose by a staggering 30% in the space of hours.
IOTA clearly has a lot of momentum behind them, and they are determined to forge new relationships, scale their network, and charge ahead in bringing about a clear definition for the Economy of Things. Because of this, there is every reason to be optimistic about where they’re headed.
4 Reasons IOTA Should Continue to Gain Ground
Now that IOTA has demonstrated the strength of their network and their ability to work with manufacturers, the public has echoed their support. Here are the top reasons why we believe that IOTA will not simply be a flash in the pan.
1. The Internet of Things Is Hugely Underrated
If blockchain technology was not making headlines for being the greatest technological disruption since the dot-com bubble, we would probably be hearing about the IoT instead.
The market for the IoT is expected to top $100 billion by 2020. For such a colossal market value, it has been surprisingly undertapped. IOTA is at the very forefront of this emerging market and, barring some further development in technology, it’s likely that they will become the domineering force in this area.
2. Offline Capabilities
Blockchain technology cannot work on devices that are not connected to the internet. And, while the IoT does have the word “internet” in its name, many devices that can be considered a part of the IoT are not always online, putting them outside the scope of blockchain. These can range from cars that have smart entertainment and GPS systems, which will routinely be outside of cell phone reception, or could simply just cover areas where internet connectivity is not reliable.
The Tangle, on the other hand, does not work in a series capacity with all transactions being sequential. Because it works with parallel processing, any transactions can be added to the network after the fact once the device is online again.
This is hugely important for many devices that are expected to be online all of the time, as internet is not always 100% reliable. If IOTA was blockchain-based, the devices would not be able to work during down times, whereas with Tangle it has that advantage of being able to function without constant internet.
3. DAG Uses Less Processing Power, Yet Offers More Scalability
Because directed acyclic graph (DAG) technology works differently from blockchain, it requires less processing power and is more scalable, thus being capable of handling a greater number of transactions.
With 8.4 billion devices (at least) worldwide, it’s easy to see that as IOTA grows, it will require a tremendous amount of processing power to be able to handle transactions in parallel. While DAG technology and IOTA are blockchain-inspired, it is quite likely, with the current limitations of our physical computer technology, that eventually they will outgrow blockchain’s abilities.
4. Free Transactions
Instead of relying on miners and nodes to process transactions as blockchain does, the Tangle works a little bit differently.
For every transaction that a device makes, it will first process two older transactions. Not only does this enable free transactions that would be impossible with blockchain, it spreads the network across a greater number of devices. It is theoretically possible to achieve decentralization on a far greater scale with DAG than with blockchain.
This is not only relevant to IOTA, but it could result in a greater prominence of DAG in a crypto world currently dominated by blockchain.
As we can see, IOTA has the potential to tap into a colossal market that is currently underexploited.
By using a scalable technology that would be impossible with blockchain, it is very possible that we will see IOTA and its free transactions capturing a $300 billion market that is currently up for grabs.
No one knows how long it will take the IoT to blossom, but we do know that we will be waiting to see just how far it goes.
Related: IOTA Gains Ground In Asia and Europe