IOTA; The Cryptocurrency Without a Blockchain
In the year 2009, Bitcoin, the first decentralized currency, was introduced into the market. Its inception paved way for different developers to come up with alternative digital currencies (altcoins) such as Monero, Litecoins, among many others in the subsequent years. An indisputable similarity between the Bitcoin and altcoins is that a majority of them run on blockchains; digitized and decentralized public ledgers of cryptocurrencies transactions that constantly grow as completed ‘blocks’.
As a result of the constant growth in completed ‘blocks’ in Bitcoins and other altcoins blockchains, the issue of scalability and transaction fees has become a huge challenge to concur. IOTA aims to solve the issue of both scalability and transaction fees by running on a different architecture know as the ‘Tangle’.
What is IOTA?
- IOTA is a cryptocurrency that is designed for The Internet of Things. It is an open-source distributed ledger that was founded in 2015 by IOTA Foundation, a German Nonprofit Corporation comprising David Sønstebø, Dominik Schiener, Dr. Serguei Popov, and Sergey Ivancheglo.
- The rally behind IOTA begun when IOTA foundation made it public that it will be colluding major technology firms (Microsoft, Deutsche Telkom, Fujitsu) to come up with a decentralized marketplace where people and companies can acquire data.
According to David Sønstebø- a co-founder of IOTA, “IOTA was established particularly for utilization on connected devices. Organizations gather huge amounts of data from different devices such as weather tracking systems to sensors that monitor the performance of Internet of Things. Apparently, nearly all the information is wasted, siloed in databases and not making any money for the owners.”
“This is what IOTA aims to solve in two different ways. First, by assuring the integrity of data through protecting it in a robust decentralized ledger. Second, by facilitating fee-less transactions between data owners and anyone potential buyers who want to get their hands on data.” Says David.
What technology does IOTA use?
- Unlike Bitcoins and many other altcoins that operate on blockchains, IOTA uses Tangle.
- Tangle is a Directed Acyclic Graph (to be discussed as the paragraphs unfold), that solves scalability and transaction fee issues faced by cryptocurrencies build on blockchains.
It achieves this through requiring the Sender in a given transaction, to perform a proof-of-work which validates two transactions. It couples making and validating transactions.
- Tangle eliminates dedicated miners, thereby wholesomely decentralizing the IOTA system.
- Those making transactions are the only actors who can affect the system, unlike in blockchains where miners are not using the system but facilitating its operation.
- The result of eliminating miners in the IOTA system increases the speed of transactions with an increase in the number of users.
With blockchains, transactions speeds get slower as the number of users increases.
- Additionally, since Tangle eliminates miners, there is no need for paying anyone for doing proof-of-work, which are carried out by the users themselves.
This means that there are no fees charged to make transactions in IOTA
- The IOTA development team took the Tangle approach after concluding that blockchains are too costly and inefficient to operate, at the speed required by connected computing devices.
Pros of the technology behind IOTA
- Tangle speeds up transactions with an increase in the number of users.
- The technology charges zero transaction fees regardless of the amount and sizes involved.
Cons of the technology behind IOTA
- For transactions to become faster there is a need for many users. With a low number of users, transactions can get unconfirmed for days as experienced by IOTA’s pioneers.
What is the IOTA meaning?
- The IOTA definition in Greek is an extremely small amount of something.
- One of the building blocks behind Iota meaning is the technology’s ability to handle micro-transactions.
- The smallest unit of account for the IOTA cryptocurrency is One Iota. Apparently, Iota (i) is the smallest letter of the Greek Alphabet.
- Larger units name of Iota are created by adding prefixes before it.
For example, One Million Iota is called Megaiota/Miota (Mi).
What does Directed Acyclic Graph (DAG) mean?
- You must have encountered a linear graph at some point in your lower or higher levels of education. In a linear graph, you can cover the entire graph beginning from one edge.
- A graph is a series of vertexes connected by edges.
- A Directed Acyclic Graph (DAG) is outrightly the opposite of a linear graph.
In a DAG, the edges are linked in such a manner that the graph goes in one way.
This means that covering the entire graph starting from one given point is impossible. A spreadsheet is a good example of a Directed Acyclic Graph.
- It is the application of DAG in IOTA that has made it unique to a huge chunk of other cryptocurrencies.
- A Directed Acyclic Graph is what shapes up the Tangle.
- Once a transaction is broadcasted into the IOTA Tangle, two previous transactions must be approved.
The network nodes will have to ensure that the approved transactions are not conflicting.
- Application of DAG, therefore, tackles the threat of double spending in virtual currencies.
- The application of DAG in IOTA eliminates the need for miners who naturally make the system complicated in case they have conflicting interests at heart.
- When platforms using miners become big (blockchains), a conflict of interest might arise between the miners and the users.
This might make such platforms unfit for commercial use and applications.
Differences between IOTA and Bitcoin
IOTA operates on Tangle whereas Bitcoins work on a blockchain.
- In a blockchain, transactions are validated by third parties referred to as miners. On a different note, Tangle requires that users validate transactions.
- For new Bitcoins to be generated, they have to be mined; a process which is becoming difficult and expensive over time.
- On the other hand, IOTA doesn’t require any mining; in fact, there is a fixed number of Iota coins in supply, valued at 2,779,530,283,277,761.
- Lack of the mining process in Iota makes it relatively cheap to transact compared to other mined cryptocurrencies.
- IOTA charges no transaction fees regardless of the size transactions. This makes Iota coin the perfect option for making micropayments.
- Bitcoins, on the other hand, charges transaction fees.
One of the biggest flaws of Bitcoins and other altcoins operating on blockchains is their higher transactional fees used to pay miners.
Resistance to quantum computations
- Quantum computers pose imminent threats to the security of Bitcoin’s Blockchain.
- In the event that the quantum computations manage to decrypt the security protocols that Bitcoins operate on, the leading cryptocurrency will be rendered obsolete.
- Surprisingly, IOTA has founded on exclusively quantum resistant algorithms as explained in details in its whitepaper.
- The Tangle has been proved to mitigate the impact of quantum attacks by a million times. This makes IOTA a futureproof currency, just in case anything happens.
- Frequent partitioning of the Bitcoin network can lead to a huge reversal of transactions. This makes the cryptocurrencies blockchain impossible to partition even when necessity demands so.
- IOTA nodes can operate without being linked to the main tangle. In the event that a network partition is necessary, IOTA can easily adjust to the demands.
The IOTA market
- Iota is currently ranked as the ninth best cryptocurrency based on market capitalization.
- Upon its launch in the year 2015, an Iota traded at a value of $0.64.
- In late 2017, Iota coin gained prominence and rose above $2.40 without a stop.
- This was a more than 180% rise compared to its value in the previous weeks.
- Iota cryptocurrency is consistently gaining prominence among investors, especially after it established a series of partnerships with renown tech hubs such as Microsoft and Deutsche
- The current market capitalization of the Iota coin is $10,265,500,218.
- Being a seemingly clear investment with organized strategies and collaborations with big players in the tech world; Iota is a cryptocurrency to watch.
- It is likely to experience a tremendous growth over the subsequent years and turn into a key player in the cryptocurrency market.
How to buy Iota coin/cryptocurrency
Iota is one of the largest cryptocurrencies in the market based on capitalization. You might, therefore, be interested in how and where to buy it. There are currently limited exchange websites where you can buy the Iota cryptocurrency. Some of the most popular options to buy Iota coins include:
Is IOTA mining possible?
- Mining is the process of validating transactions in a cryptocurrency It is majorly applied in cryptocurrencies operating on blockchains such as Bitcoins and Monero.
- Instead of having a central authority that validates transactions, mining makes it possible to decentralize validation of transactions across the network. These validations are carried out by entities referred to as ‘miners.’
- It isn’t possible to mine Iota directly.
- This is because unlike many other cryptocurrencies, Iota operates on Tangle; thereby eliminating the need for miners.
- IOTA is pre-mined, and stands at a fixed value of 2,779,530,283,277,761.
- IOTA cryptocurrency is customized in such a manner that requires users (senders) to validate two transactions.
You can mine IOTA by mining Monero!
- Despite there being a fixed amount of IOTA, you can still mine IOTA by Mining Monero.
- The process is very simple; you mine Monero and get paid in Iota
- Monero is built on a blockchain, and can, therefore, be mined.
The key difference between Monero and other cryptocurrencies based on blockchains such as Bitcoin is that it uses CryptoNight Algorithms.
A technology that makes it possible and economical to mine using regular computers.
- Mining IOTA using Monero is economical and profitable if made using IOTA faucets. The faucets link one to a mining pool, which enhances the gains he or she can make within a given period of time.
IOTA Wallet; Where to store your Iota coins
Digital currencies are secured, stored, received, and sent from a digital wallet. The key difference between your physical leather wallet and Iota wallet is that the former requires you to do all the thinking and record keeping.
Types of wallets
The different types of cryptocurrencies wallets include;
- Desktop Wallets: These are wallets installed and used on desktop or laptop computers.
- Mobile wallets: These are installed used on mobile devices such as Android Mobile Phones, Phablets, or Tablets.
- Web Wallets: These do not require any kind of installations. They are web-based and simply require logging in from any secured device.
- Hardware wallets >> These are physical wallets, which are USB-like in shape. They are the safest for storing cryptocurrencies as they can’t be directly accessed by the internet.
- Paper wallets >> are an inferior form of hardware wallet. They are a piece of paper containing all wallet information.
Not many types of wallets support Iota coins; however, the few wallets where you can store Iota cryptocurrency include;
- Original Iota Wallet: This is a desktop version of the Iota Wallet.
- Iota Mobile Wallet: As the name suggests, this is a mobile version of the Iota Wallet.
How to use an Iota Desktop Wallet
- First, you have to set up your wallet with entails a number of actions including;
- Checking your windows version to verify if it is a 64-bit version.
- You will then get the Wallet Software from github.com/iotaledger/wallet/releases
- After getting the software, you will have to choose the wallet type presented as either Light Node or Full Node.
Light node Wallet only syncs up the important parts of the Tangle required executing various transactions in your wallet. It is good for beginners.
Full node wallets, on the other hand, are for users who would want to create nodes themselves. This type of desktop wallet is good for users who have garnered a solid experience in how Iota operates.
- Going by the Light Node Wallet; you will connect to a host on iotasupport.com/gui-lightwallet.shtml
- You will then set up the login seed by clicking on ‘Tools’ in the menu and choosing ‘Generate Seed.’
A seed is a string of letters used to recover your wallet if the device on which it is installed is lost or stolen.
- After generating the seed, you will then copy and paste it into the login field, which will lead you to your Iota Wallet.
- From your wallet, you can send or receive Iota based on the set of instructions provided therein.
Factors to consider while choosing your Iota Wallet
- It is good to opt for an officially endorsed wallet.
- Safety: Consider using a wallet that promises many safety measures in protecting your coins.
- Ratings: Be on the lookout for genuine customer ratings on the wallet you intend to use based on their different experiences.
- Reliability: Check if the wallet you intend to use matches your convenience such as portability and privacy.
- Fees: Different wallets charge different transactional fees. A wallet with the fairest fee rates is the best.
Iota is a unique type of cryptocurrency that operates on Tangle. Iota aims at solving the high transaction fees charged hundreds of other digital currencies such as Bitcoin by eliminating miners. Additionally, it also aims at making fast the speed of transaction as well as providing a secure commercial platform resistant to quantum computations.
Thanks for reading along and getting to learn so much on IOTA; the digital currency without a blockchain.
We welcome you to garner more on other potential cryptocurrencies and all that pertains to digital currencies on our other posts.