IOTA

What is IOTA (MIOTA)?

IOTA is a smart contract platform designed to handle transactions between Internet-of-Things (IoT) connected devices using distributed ledger technology. However, IOTA isn’t actually a blockchain.

IOTA’s proprietary Tangle consensus algorithm sees users of the network validate other transactions as it forms a direct acyclic graph (DAG) consensus algorithm. Thanks to this technology, IOTA doesn’t have miners, validators, blocks, or transaction fees.

IOTA’s focus on the Internet-of-Things comes from its ability to facilitate microtransactions among ubiquitous IoT devices and allow investors and companies to monetize the data feeds from these devices.

IOTA’s mission is to evolve this exchange of value and data, dubbed the “machine economy,” to optimize various industries such as manufacturing, supply chain, civic engineering, transportation, and finance.

However, IOTA remains a feeless network secured by users themselves. As such, the potential for human-to-human usage of the network remains considerable alongside machine-to-machine and machine-to-human use cases.

Referring to the Greek letter Iota and the English definition of the word "a very small amount of something,” IOTA uses the lowercase “iota” as its basic unit. However, it trades as MIOTA, which stands for mega iota, or a million iota.

When Was IOTA Launched?

The Berlin-based IOTA project launched in 2015, with the vision of a technology that could scale to the level required by enterprise and civic projects while reducing or even eliminating the fees incurred by transacting on the blockchain.

These two ideals of scalability and low- or no-fee transactions have guided IOTA’s development ever since.

Exactly 999,999,999 MIOTA were sold at IOTA’s launch crowdsale in 2015, raising 1,337 Bitcoin. At the time, Bitcoin was worth around $325.

When the IOTA Foundation was formed in 2017, it received around 5% of the circulating supply of MIOTA, which was donated by the community. The Foundation pledged to use the majority of these funds to build “an army of developers and researchers.”

Who are the Founders of IOTA?

IOTA was founded by four crypto veterans who met on an online forum and began developing the protocol in a distributed manner. This distribution remains a core part of IOTA’s DNA, and the IOTA Foundation has revealed that its team members are based across over 25 countries.

Berlin-based Dominik Schiener serves as Chairman of the Board of Directors of the IOTA Foundation, while Prof. Serguei Popov is on the Supervisory Board.

The Foundation parted ways with co-founder David Sønstebø in 2020, as per a press release on their blog. Almost a fortnight later, Sønstebø penned a lengthy blog post, detailing his side of the story.

In this post, Sønstebø boiled his concerns about the IOTA Foundation down to its maturation, its finances, and its role going forward.

However, he also called into question Schiener’s credentials as a project founder, writing that Schiener “had no clue or interest in IoT and played no role in the vision of The Machine Economy, Data Integrity through DLT, Feelessness, etc.”

Sergey Ivancheglo, the fourth co-founder, has also departed from IOTA. Resigning in June 2019, he said that he would transition to working on the hardware and software development of IOTA in an independent capacity.

However, Ivancheglo, known in the crypto sphere as Come-from-Beyond, or CFB, has also courted controversy. Via the social media platform Twitter, CFB threatened former partner and IOTA co-founder David Sønstebø, along with the IOTA Foundation, with a lawsuit for alleged embezzlement.

How Does IOTA Work?

IOTA is referred to as a network using DLT, which stands for Distributed Ledger Technology. IOTA's directed acyclic graph is an example of distributed ledger technology, as is a blockchain.

Blockchains take the form of linear chains, creating blocks one by one and appending them to the end of the chain. These blocks contain a cryptographic hash of the previous block as well as a collection of the network’s new transactions that need to be recorded.

In a DAG, transactions aren’t grouped and written into blocks. Instead, they are processed as they happen, and with IOTA specifically, a user making a new transaction actually validates two previous transactions.

This continuous linking of tiny or even micro-transactions creates the visual impression of a tangled web, which is what inspired IOTA to brand its system as “the Tangle.”

Distributed ledger technology, which includes blockchains as well as IOTA’s DAG, is more transparent than a private database. That’s because, by definition, it is carried out across a large number of nodes rather than by a single centralized entity.

What Makes IOTA Unique?

IOTA is unique in the sense that it has no fees. While the distributed ledger and its application of DAG technology rather than blockchain are uncommon at best, not many major cryptocurrency projects can hope to base their platform on the promise of the complete elimination of fees.

Although there are cryptocurrency projects that promise low fees and, in some cases, peer-to-peer electronic cash with no fees (for example, the Nano cryptocurrency, which also uses DAG), IOTA brings its no-cost scalability to the world of IoT.

With research estimates suggesting that the number of IoT-connected devices is rising into the tens of billions, IOTA’s platform to empower them suggests a significant business case.

Furthermore, IOTA already has significant business interest in the platform, which is reflected in its over 100 corporate and organizational partnerships. Among these partners are the likes of Jaguar/Land Rover and Dell Technologies, and IOTA participates in several working groups, including one with the city of Austin, Texas.

How is the IOTA Network Secured?

The IOTA network is secured by the “Tangle.” Rather than using miners, validators, or blocks, each new transaction made on the Tangle is required to confirm two or more previous transactions.

Because the Tangle is a DAG, it has the theoretical capability of handling a large number of small transactions in a very short amount of time. This, notably, tends to be a weakness of many conventional blockchains and has led to a variety of scaling solutions like Layer 2s.

To increase security and avoid spam attacks, the Tangle involves a form of proof-of-work. Transactions on the Tangle require computational resources to find the answer to a simple cryptographic puzzle.

IOTA also uses a leaderless consensus mechanism based on random neighbors majority consensus (RMC). Referred to as Fast Probabilistic Consensus (FPC), this voting algorithm eliminates the need for a “leader” to be involved in consensus. It is also supposed to defend the network against double-spend attacks.

It is important to note that IOTA’s proof-of-work is only used as a rate controller when it comes to transactions, while consensus is handled by the FPC. This ensures that IOTA’s energy consumption stays low, unlike cryptocurrencies that use proof-of-work for consensus like Bitcoin.

IOTA also requires a Coordinator node to aid its security as the network matures, with the “Coordicide” event aimed at eliminating this node and ushering in the era of IOTA 2.0.

What is Coordicide?

The IOTA Foundation runs a special node called the Coordinator that references transactions carried out on the network. It issues zero-value transactions called milestones at given time intervals on the network. The Coordinator validates other network transactions via these milestones.

This Coordinator node makes IOTA centralized. The reliance of the entire network on the Coordinator was demonstrated during the Trinity attack on IOTA, when the Foundation shut down the Coordinator, and therefore the network, to prevent further loss of funds. The Coordinator has also caused network outages by falling victim to DDoS attacks and bugs.

However, the Coordinator was always meant to be temporary. The IOTA Foundation has labeled their biggest upcoming milestone, the day that the Foundation “kills off” the Coordinator, as “Coordicide.”

Coordicide will eliminate the Coordinator node from the network and will enable IOTA to solve the blockchain trilemma by adding decentralization to its claims of scalability and security.

Coordicide will replace the Coordinator with a system of network voting by bringing about consensus via tallying the opinions of network nodes on a transaction’s state.

This new network state, often called IOTA 2.0, is currently in devnet with its “Nectar” release. It is composed of a total of eight modules that deal with node identities and mana: a new message layout, autopeering, timestamps, tip selection, Tangle access, ledger state, and consensus.

What is the Use of MIOTA?

MIOTA, or its smaller unit iota, is used for the transfer of value and data within the IOTA Tangle network. Thanks to IOTA’s data marketplace, users can purchase different data sets using the MIOTA token.

The MIOTA token is also used for the execution of smart contracts on the IOTA network. It is an easy token to value since its supply is in the billions, while the iota unit is perfect for microtransactions given its extremely small value.

The MIOTA token is considered by some to be a store of value since all coins have been issued, and there is no inflation.

What are Smart Contracts?

Smart contracts are pieces of code that execute predefined actions when certain conditions are met. Once deployed on the distributed ledger, these smart contracts can't usually be changed, allowing the code to be audited by anyone.

Thus, users know what a smart contract will do and can trust it. Smart contracts can replace trusted intermediaries, such as banks, escrows, lawyers, and so on, in various interactions between two parties.

Smart contracts allow developers to build more and more complex decentralized applications (dApps) that are then secured by distributed ledger networks like IOTA.

Who Controls IOTA?

IOTA is controlled by the IOTA Foundation, headquartered in Berlin, Germany. It is chartered as a “Stiftung,” meaning that it is an institution that, with the aid of a property, pursues a purpose determined by the founder. In the IOTA Foundation’s case, its goal is to assist in the research and development, education, and standardization of IOTA technology.

The IOTA Foundation is headed by Dominik Schiener, co-founder of IOTA and Chairman of its Board of Directors. There is currently only one other member on this board, Dr. Navin Ramachandran.

On the IOTA Foundation’s Supervisory Board are Clint Walker, Dr. Richard Soley, and co-founder Prof. Serguei Popov.

Before the Coordicide event taking place on the IOTA mainnet, the IOTA Foundation has full control of the IOTA Tangle network via the Coordinator node.

How Much MIOTA Is In Circulation?

IOTA’s total supply of 2,779,530,283 MIOTA is completely in circulation.

One short of a billion MIOTA were sold during the project’s initial crowd sale, and the supply has since been increased. The IOTA team carried this out because a greater supply would make the token even more suitable for microtransactions used by IoT-connected devices.

How Do You Buy MIOTA?

MIOTA is a popular cryptocurrency and can be purchased on many major centralized exchange platforms. Several fiat trading pairs can be found depending on the exchange you use, and stablecoin pairs, along with BTC and ETH, are also common.

Is It Possible to Buy MIOTA Instantly?

Purchasing cryptocurrency on most exchanges tends to be instantaneous because there is no actual settlement of funds involved. The actual settlement only happens when you withdraw your MIOTA to your own wallet, and the time it takes will depend on how fast the exchange can process your withdrawal.

Once your transaction is given the green light by your platform of choice, which is often after KYC (Know Your Customer) and AML (Anti-Money Laundering) procedures are completed, the MIOTA can finally be sent to you using the IOTA network.

The design of Tangle means that IOTA actually gets faster the more it’s used since a new transaction is needed to validate previous ones. While the Coordinator remains in play, you’ll have to wait for a milestone transaction to be sent before yours can be confirmed, and this can take up to 120 seconds.

The IOTA blockchain explorer can give you an idea of the Tangle network’s performance in real-time.

How Do You Store MIOTA?

Like any cryptocurrency, MIOTA can be stored in a wallet. Following the Chrysalis network migration in April 2021, IOTA deployed Firefly as its native software wallet and discontinued its predecessor, Trinity. If you’re looking for a hardware wallet for the security of cold storage, Ledger is also compatible with IOTA assets.

IOTA Energy Consumption

IOTA uses a proof-of-work algorithm within its network but not as a consensus mechanism. In fact, the Tangle is designed to work on low-tech IoT devices that have minimal energy consumption thanks to the simplicity of their nature.

In May 2022, IOTA announced the completion of a study into the energy consumption of IOTA 2.0. The study found that the network, based on an assumption of 450 Raspberry Pi nodes running at 50 mps, would only consume 43.3% of a German citizen’s annual energy consumption. 

IOTA 2.0’s 18,923 kWh per year equates to 0.000009% of Bitcoin’s energy consumption.

The IOTA Foundation also claims significant social responsibility and says that IOTA technologies are used to empower sustainable development and tackle various issues. Some of these include climate change, human rights violations, and the problems faced by the world’s unbanked population.

According to the IOTA Foundation, the IOTA token can be used as an incentive in circular economies and peer-to-peer initiatives to reduce waste. The Tangle, which is immutable, logs trustworthy environmental data that can enable better natural resource management and policy interventions.

These key environmental metrics are recorded on IOTA’s ledger from sensor networks. They are used to improve remote monitoring capabilities such as rapid fire detection and carbon sequestration assessments.

IOTA’s work with industries such as automotive, supply chain management, energy, and smart cities helps them become more resource-efficient and enables them to move toward a sustainable future.

Is MIOTA a Good Investment?

The IOTA network has had its share of controversy in the past, with the founders falling out with each other and the Foundation itself. Not to mention, several successful attacks on the network have not helped its cause.

The use cases of the MIOTA token also seem limited at first glance, especially compared to other tokens on the market that offer a range of utilities, from governance to profit-sharing and more.

However, IOTA is a project with solid partnerships already and is targeting a broad area in the IoT with significant potential for growth. Its ability to process transactions at scale is a significant advantage, and that performance is only likely to increase.

If IOTA can carry out the Coordicide event successfully and make the transition to a truly decentralized network while retaining security and resilience in the face of attacks, then it has an excellent chance of being considered a blue chip cryptocurrency.