What is IOTA?
According to IOTA website, IOTA is a revolutionary new transactional settlement and data transfer layer for the Internet of Things: It’s based on a new distributed ledger, the Tangle, which overcomes the inefficiencies of current Blockchain designs and introduces a new way of reaching consensus in a decentralised peer-to-peer system.”
In order to understand IOTA and its purpose, we need to first explain the Internet of Things or IoT.
Internet of Things (IoT)
IoT refers to the network of internet-connected physical objects able to collect and exchange data using embedded sensors. Computers, microchips, kitchen appliances, hospital devices and cars are all part of IoT. IOTA, the cryptocurrency, accurately refers to itself as the backbone of IoT.
For example, one day, your self-driving car will be able to connect to the parking meter and pay the corresponding amount of IOTAs without your direct involvement in the transaction. This machine to machine transactions will be recorded on the IOTA ledger.
How does IOTA work?
One of the central features of IOTA is that it does not have to be “mined”, like Bitcoin, because it’s totally decentralised and blockless. What does that mean? It means that IOTA transactions can be made by anyone or anything without fees and there is no limit of how many transactions can be confirmed per second.
By removing the traditional blockchain design and implementing Tangle, every transactions in IOTA requires that the sender approves two previously made transactions. Thus, making transactions extremely fast and avoiding scaling issues. In other words, the more users IOTA has, the faster and more secure the network becomes.
If you are wondering how the Tangle works, here is a short video:
So far, so good, but what’s next?
So far, so good. IOTA looks promising as it is without fees and infinitely scalable. The more users it has, the faster and more secure transactions become. IOTA seems to have multiple applications, especially in the future with a machine to machine based economy.
The Internet of Things is a glamorous buzzword, but it might be a while before a sensor-filled future of machines becomes reality. Moreover, IOTA’s technology is still under development and recently flaws in its code have been found. However, the team is working hard on improving the IOTA protocol. As IOTA is still in its development stage, even though the project offers multiple advantages over current blockchain projects, its success must not be take for granted.