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IOTA is a distributed ledger with one big difference: it isn’t actually a blockchain. Instead, its proprietary technology is known as Tangle, a system of nodes that confirm transactions. The foundation behind this platform says this offers far greater speeds than conventional blockchains — and an ideal footprint for the ever-expanding Internet of Things ecosystem.
Because there’s no blockchain, there are no miners, and because there are no miners, there are no fees. Many established networks see costs balloon when congestion intensifies, but IOTA aims to provide limitless throughput at minimal expense.
In time, IOTA’s goal is to become the de facto platform for executing transactions between IoT devices. Given how estimates suggest there could be 20.4 billion such devices out there by 2024, this could end up being big business.
The team behind IOTA believe that the potential use cases don’t end here. They believe their distributed ledger could deliver digital identities to all, result in car insurance policies that are based on actual usage, pave the way for cutting-edge smart cities, deliver seamless global trade and prove the authenticity of products.
Originally known as Jinn, a crowdsale for the project was held in September 2014, and the network officially launched in 2016.
IOTA has four co-founders, and their names are Sergey Ivancheglo, Serguei Popov, David Sønstebø and Dominik Schiener.
According to the IOTA Foundation, the initiative has rapidly grown since then — and team members are now based across more than 25 countries.
Sonstebo and Schiener are collectively co-chairmen of the board of directors, while Popov is a board member and the foundation’s director of research.
Ivancheglo resigned from the Berlin-based project back in June 2019 but continues as an unofficial advisor. At the time, he said in a statement: “I no longer believe that the IOTA Foundation is the best setting for me to realize what we set out to create back in 2014 and 2015. I have always done my best work in a less rigid environment. I am looking forward to continuing the work on both hardware and software development of IOTA independently.”
Well, as we alluded to a little earlier, the fact that it’s effectively a blockchainless blockchain is rather unusual to say the least.
Tangle’s more technical name is the Directed Acyclic Graph — and as Sønstebø explained in a blog post back in 2015, this technology aims to retain blockchain’s ability to execute secure transactions. The only difference is that it does away with the notion of blocks.
He also wrote: “IOTA should not be considered an alternative coin (altcoin) to existing cryptocurrencies such as Bitcoin, rather it is an extension of the growing blockchain ecosystem. It’s meant to work in synergy with these other platforms to form cohesion and symbiotic relationships. IOTA is designed to provide one solution that no other crypto does: efficient, secure, lightweight, real-time micro-transactions without fees.”
New transactions are validated by approving two previous transactions from another node — and this is a novel approach because it means that the network’s size and speed will be directly related to how many people are using the platform.
And whereas some cryptocurrencies are run as a business, the IOTA Foundation says it is firmly not for profit — adding that it has the sole goal of making the network as prosperous as possible.
Finally, IOTA has distinguished itself from many other crypto rivals by establishing high-profile partnerships with the carmaker Volkswagen, and helping the city of Taipei to pursue smart projects.
MIOTA has a maximum supply of 2,779,530,283 tokens — and all of them are in circulation.
When the crowdsale was held, this digital asset was billed as a utility token that could be used for payment across its network, rather than a profit-sharing coin.
An incredibly precise 999,999,999 were sold during the 2015 crowdsale, and this generated revenue of 1,337 BTC for the foundation. Given that Bitcoin was only worth about $325 at the time, this could have resulted in a substantial windfall for the team in later years.
It is worth noting that the supply of MIOTA did increase in later years, with the team arguing that a greater level of supply would make the token suitable for the “tiny nano transactions” that we’ll likely see through IoT devices.
The IOTA Foundation launched in October 2017, and at the time, it owned approximately 5% of the tokens that are in circulation, and these were donated by the community. It said “the majority of these funds will go towards building an army of developers and researchers.”
Given how the IOTA network isn’t a blockchain, you may not think that it would have much need for a consensus mechanism. However, to help keep the network secure, a relatively straightforward Proof-of-Work puzzle is included in the process of validating a transaction.
There have been security concerns surrounding IOTA. In the past, researchers have claimed they have found vulnerabilities in the project’s code.