What Is IOTA Coin? All You Need to Know

iotaWhat Is IOTA Coin?

The cryptocurrency marketplace is heating up. As more investors and tech-savvy developers jump on board, it’s only natural that this new technology will grow in popularity.

However, at the moment, all this attention is almost entirely focused on one lodestar: Bitcoin. Almost nobody is asking, “What is IOTA coin, and what are the IOTA benefits?”

That’s understandable. Bitcoin is, after all, the progenitor. And its explosive growth and commanding market lead make it a formidable currency in its own right. A $275.0-billion market cap means Bitcoin is more valuable than all but the world’s top companies.

However, behind the frenzy of the uninitiated (or the recently converted), other cryptocurrencies are working quickly to solve the very readily apparent problems that plague Bitcoin. That’s why IOTA (MIOTA) could be much more successful than its competitors.

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What Is MIOTA?

Don’t be confused by questions like “What is MIOTA?” It’s just the symbol for IOTA, and the “M” stands for “Mega,”or one million IOTA, the base unit used for trading.

Although it’s a relatively unknown currency, the IOTA market cap is already more than $13.0 billion. That’s enough to put it in the top 10 cryptos by value. Its price (just under $5.00 at the time of this writing) makes it a little more approachable for many investors.

Price aside, it’s IOTA’s new technology that offers real value to investors and users. Unlike the blockchain that powers Bitcoin and co, IOTA/MIOTA is built on a blockless “Tangle” formed from an open-source, distributed ledger protocol.

What Is Tangle?

In the decade since the conception and launch of cryptocurrencies, developers around the world have responded to numerous complaints. That’s understandable in an experimental technology, and many blockchain issues are existential ones standing in the way of broader use.

Enter something entirely new. What is Tangle? It’s a further variation on the blockchain, it’s also called a directed acyclic graph (DAG). The Tangle works on a collection of nodes (or vertices) that connect without any circular edgings. (Source: “IOTA- What Is It, Who Is It?,” The Tangler, last accessed December 14, 2017.)

IOTA Price Chart

iota price chart

Chart courtesy of TradingView.com

According to the IOTA whitepaper, the edge set of the tangle is obtained in a particular way: each new transaction must approve two previous transactions. This can happen directly or indirectly. (Source: “The Tangle,” IOTA, October 1, 2017.)

That is fundamentally different from the blockchain. This system, which Bitcoin is built on, relies on miners who verify transactions using an enormous amount of computing power and electricity (more electricity than is consumed by 160 nations combined, by the way).

Miners are rewarded based on the number of blocks they verify. But the higher the network congestion, the higher the fees. At the moment, these so-called blocks are in something of a bottleneck, driving up fees and driving down transaction times.

The Tangle, relying on each transaction to first confirm two others on the same network, is therefore freed of miners, blocks, and bottlenecks.

Who Created IOTA and Why?

As Bitcoin’s user base (and price) grew, it wasn’t only investors who took notice. Developers like Serguei Popov also watched with excitement. Bitcoin’s nascent success had demonstrated to him the real-world value of blockchain technology, along with all of its shortfalls. These issues formed a crucial part of why IOTA was created.

First among Serguei Popov’s complaints was the issue of fees. Every Bitcoin transaction carries a cost, even very small purchases. That meant that microtransactions would not be financially viable under the existing system. And removing that fee system would not be easy on the blockchain, because it serves as the primary incentive for the verification infrastructure.

Dr. Popov, a Ph.D. in mathematics, joined with David Sønstebø, Sergey Ivancheglo, and Dominik Schiener to create the solution. The math was conceived of by Popov, with Ivancheglo and Schiener writing the code. Sønstebø oversaw the entire project.

Together, they launched the new token in December 2015. In biblical terms, the white paper explains, “In the beginning of the tangle, there was an address with a balance that contained all of the tokens.” Using a “genesis” transaction, these tokens were then sent to other founder addresses. (Source: Ibid.)

So, what is IOTA, after all? It’s a token system free of the deadweight of the blockchain. And what is the IOTA coin, except for an elegant solution to a problem that many in the crypto-community don’t yet know that they have?

In a system with no miners and no monetary rewards, there was no reason to conceive of future token creation. All IOTA tokens that will exist sprang into being in that singular moment (a total of 2,779,530,277,761). The entire money supply was distributed to crowdsale participants, and 1,337 Bitcoins were raised for development.

Without the traditional incentivization model of mining, IOTA instead relies on the goodwill of its community. As a registered non-profit in Germany, IOTA supporters donate resources and countless hours to the project.

How Is IOTA Different from Other Cryptos?

From its conception, IOTA differentiated itself from Bitcoin by its lack of fees. Pegged to price, Bitcoin transaction costs can vary wildly. The Bitcoin network, which struggles to process only four transactions a second, saw its fees explode in December.

In November, the average fee was $6.00. That’s already too expensive to make Bitcoin a viable currency for the purchase of small items (like lunch). But, as the price of a single Bitcoin surged past $10,000 and then $15,000, the average fee also rose—all the way up to a high of $26.00 at one point, before sinking back down to $20.00.

IOTA Benefits

  • Cheaper
  • Faster
  • More scalable

Cheaper

Fees matter for more than just meals. For creators Popov, Sønstebø, and others, they saw a more significant potential in the surging number of “micro” transactions that take place each day between computer systems.

As the so-called Internet of Things developed (think about Amazon.com, Inc.’s “Alexa,” the now-defunct Juicero’s juice-making machines, or an Internet-connected toilet that flushes via smartphone app), Sønstebø and his team realized that transaction fees of any kind would be a huge barrier. But, with the Tangle, fees were redundant as an incentive system. (Source: “What is MIOTA Coin,” Invest Alt Coins, July 20, 2017.)

At first glance, that might seem unimportant. But the Internet of Things has its own enormous potential. Alphabet Inc (otherwise known as Google) recently purchased Nest (creator of connected nanny cams and other gadgets) for $3.0 billion.

The Internet of Things market is predicted to reach over $100.0 billion (with 20 billion devices) by the end of the decade.

As a non-profit built on the Tangle, IOTA has many benefits that other blockchain-based currencies do not share. The lack of transaction fees is a powerful incentive for regular use, which could push IOTA into the mainstream in a way that Bitcoin, Litecoin, and other blockchain currencies won’t be able to achieve.

Faster

IOTA is designed to act very quickly—in real time, even—as a secure, lightweight mechanism of machine-to-machine microtransactions. In this way, it could become the go-to currency for the entire Internet of Things.

Without bottlenecks to slow it down, the DAG Tangle isn’t just cheaper; it’s significantly faster and easier to scale. In comparing IOTA vs. Bitcoin or IOTA vs. Ethereum, it is impossible to ignore the slow transaction times. For these tokens, more users mean more frustration.

Thanks to IOTA’s peer-based tangle system, the more users on the network, the faster each transaction is processed. Theoretically, this could allow for infinite scale and infinite users.

More Scalable

The vast potential of the Tangle over the blockchain has attracted attention and brought some key allies to IOTA’s side. Recently, IOTA announced a new partnership with 20 different organizations. Together, they will launch a public data marketplace for the Internet of Things.

The goal is to facilitate further sharing and to help monetize data in a way that is safe and secure. Partners include global giants like Accenture Plc, Microsoft Corporation, and Bosch.

News of the new partnership drove up IOTA’s price by 30% almost instantly. The answer to the question “How is IOTA different?” turns out to be valuable to investors, indeed.

Other Benefits

Another aspect occasionally lost in this shuffle is the environmental impact of Bitcoin mining.  It’s estimated that more than 29 terawatt hours (TWh) of electricity was used to mine Bitcoin this year (as of November 20). That’s more than all of Ireland’s consumption over the same period, 25 TWh. Ireland’s population is almost five million. (Source: “Bitcoin Mining Now Consuming More Electricity Than 159 Countries Including Ireland & Most Countries In Africa,” Power Compare,” last accessed December 14, 2017.)

Such a huge hog of resources is not only enormously expensive; it’s wasteful and ill-fitted to a world where nearly every single nation has signed an accord to battle climate change. It is possible that IOTA’s Tangle has a much brighter role in an environmentally conscious world.

Tangle also has some other built-in features that put it ahead of competitors. It allows users to facilitate transactions even when offline. That means IOTA could be used in remote areas or places without a reliable Internet connection. This may be especially important for Internet of Things tasks that aren’t time-sensitive.

With no transaction fees, superior tech, and infinite scalability, the list of IOTA benefits is significant. The ground-breaking IOTA cryptocurrency could likely become the backbone of the Internet of Things, and a new way forward for digital commerce.