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IOTA (mIOTA): Simple Explanation

What is IOTA, mIOTA & the Tangle ?

IOTA is a distributed ledger protocol for recording and executing transactions between machines in the Internet of Things (IoT) ecosystem. It has a cryptocurrency called mIOTA but some cryptocurrency exchanges also refer to it as simply IOTA or IOT . IOTA allows people and machines to transfer money and data without any transaction fees in a decentralized environment. Most other cryptocurrencies such as Bitcoin make use of the Blockchain protocol. However, IOTA makes use of the Tangle which is a different type of data structure (aka. Directed Acyclic Graphs or DAGs). By 2025, 75 billion connected devices are projected to be in use. From tiny sensors on roads and bridges to wearable electronics, mobile phones, and more, every day the world is becoming more and more interconnected. The vision of IOTA is to become the backbone protocol for all connected devices & enable true interoperability between them.


How is IOTA different from blockchain, Bitcoin and other cryptocurrencies?

Imagine a classroom of students submitting their homework to the teacher. Blockchain is analogous to the teacher collecting everyone’s homework and checking it one by one. Whereas the tangle is analogous to the teacher having all the students grade each other’s homework. The main difference between IOTA’ Tangle and other blockchain projects are the following:

  1. Transaction Fees: In a blockchain, every transaction has to pay a fee to the miners for their work. On the other hand, there are no miners in the Tangle. A transaction inherently performs the role of miners as every transaction has to first verify two previous transactions. With the elimination of transaction fees, even nano payments are viable.
  2. Data Structure: All the transactions in a blockchain are clubbed together into blocks forming a ‘linked list’ data structure. These blocks get verified one by one and on verification, they point to the previous block in a chronological order. However in the Tangle, every transactions refers to two previous transactions forming a more complex data structure called the Directed Acyclic Graphs (DAGs).
  3. Consensus: With IOTA, consensus is achieved through the “heaviest tangle” as opposed to the “longest chain” in a blockchain. The more activity there is in the tangle the faster will be a consensus on the transactions’ confirmation.
  4. Scalability: As illustrated in the image below, blockchain leads to a bottleneck where all the miners are trying to add just one block at a time to the longest chain. Whereas, in IOTA, all the transactions are allowed to go through and are later cleaned up, following the rule of heaviest tangle.

IOTA, Tangle vs Blockchain

What can I do with IOTA? What are the main use cases ?

Along with enabling the emerging IoT (Internet of Things), IOTA will be the transaction settlement and data integrity layer for the Internet of Everything. This includes smart cities, smart grids, infrastructure, supply chain, financial services, peer-to-peer payments, insurance, and much much more. On IOTA’s website, the following main use cases have been listed under verticals.

  1. Mobility & Automotive: The first proof of concept for charging stations running entirely on IOTA has already been built. In cooperation with the ElaadNL foundation which developed the leading protocol for the communication between charge points and back-end software.
  2. Global Trade & Supply Chains: IOTA foundation claims that their technology is the only one that can support the millions of transactions that global trade depends upon. Their vision for tomorrow is to build the distributed ledger that can merge e-signatures, e-permits and e-payments into a single process.
  3. e-Health: Healthcare needs to tackle two important problems surrounding the increasing data generation in and around its institutions. First is the security and integrity of this data. Second is its siloed nature which lacks the ability to share data seamlessly across institutions. The IOTA MAM (Masked Authenticated Messaging) protocol aims to provide a backbone for secure and inter-operable healthcare data (both patient and research data).
  4. Smart Energy: The energy sector is now undergoing a massive transition towards distributed or smart decentralization of the existing grid system. IOTA sensors aim to enable a two way trans-active smart grid solution. For example this will incentivize people to sell their surplus energy to the grid for a profit.

Current Applications/Developments

Besides their main use case verticals, following real world applications are currently under development/PoC stage:

  1. Taipei Smart City: The IOTA foundation has signed an MoU with the city of Taipei. TWO IOT is currently installing sensors on waste bins to measure fill levels on the first three floors of Taipei City Hall Building as a Proof of Concept. This holds great promise as the Taipei city plans to integrate similar initiatives into their smart city project.
  2. MatchX: A German company called MatchX provides the technology to enable even the tiniest devices be connected to the internet. Looking at this tweet, it is obvious that they are collaborating with IOTA to make use of the Tangle.

Other important features of IOTA:

  1. Quantum-Secure: A quantum computer is a threat to most cryptocurrencies as it would be about 17 billion times more efficient than a classical computer for mining. IOTA is quantum immune as the tangle utilizes a next generation trinary hash function called Curl-p (Winternitz signatures).
  2. Token Supply: The total IOTA token supply is fixed and will never change. It is now impossible for anyone to “mint” or “mine” new tokens. The total supply is 2,779,530,283,277,761 tokens.
  3. Qubic: With Qubic, IOTA can execute smart contracts just like ethereum. They are also infinitely scalable, feeless transactions with the ability to have continuous money flows within smart contracts.
  4. Coordinator: In order for the tangle to be secure it requires a higher number of transaction throughput. Currently, the network has a very low throughput thus the need of the coordinator. IOTA Foundation controls this role and it issues zero-valued transactions every two minutes. Co-ordinator verified transactions are considered to 100% confirmed at the moment. Eventually, as the transaction throughput increases, this role will become distributed by using an algorithm that reports a % confidence on every transactions’ finality.

Click here to view the IOTA development roadmap

Read this article for step by step guide to buying IOTA.


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