What is IOTA?
Iota (MIOTA) is an open-source, lightweight and decentralized cryptocurrency which was created to facilitate real-time micro transactions within Internet of Things (IoT). Unlike the complex, disk-consuming blockchain of bitcoin which was designed with other uses in mind, Iota was created to be as lightweight as possible, acting simply as a mechanism of information transfer for ‘IoT’-based systems.
History of IOTA
Serguei Popov published the Iota white paper on April 3rd, 2016, where he introduced the idea of a blockless blockchain – the backbone of Iota – called Tangle. Iota was launched via Initial Coin Offering (ICO) on June 11, 2016. The ICO process was made available worldwide.
Iota was developed as a solution to scalability issues faced in IoT technology. The core team of Iota consists of Sonstebo, Sergey Ivancheglo, Serguei Popov and Dominik Schiener.
How IOTA Works
The backbone of Iota is the ledger called Tangle. It is similar to the blockchain of bitcoin in the sense that it is a distributed ledger and offers secure transactions, but unlike the bitcoin blockchain architecture, Tangle doesn’t work with blocks. Instead, Iota utilizes a blockless blockchain which is otherwise known as a Directed Acyclic Graph (DAG).
When a node (a sender, in simpler words) initiates a payment, it can verify the payment by itself. However, to verify, it needs to verify two previous transactions by other nodes. By removing the idea of a linear system of blocks, Iota also helps solve other problems associated with classic blockchain architecture by offering a degree of quantum resistance, the ability to perform cost-effective micropayments, and a discrimination-free hierarchy in which all participants in the system are equally valued by the network.
Iota aims to become the currency of Internet of Things and beyond, for example, Internet of Everything (IoE). Some very futuristic and inherent advantages of Iota are:
- Zero Transaction Fees: In bitcoin, miners earn a small fee. However, as there are no miners, no third party and no validators except the sender himself, there can be no mining charges. Thus, transactions within Iota are free.
- Infinitely Scalable: Because there is no blockchain and every transaction is basically a blockchain itself – which is initiated and verified by the sender – the system is infinitely scalable, and there is no blockchain congestion. This means that irrespective of the number of users, the system will always remain equally fast.
- Faster, Advanced Security: Iota uses Winternitz hash-based cryptography signatures instead of ECC (Elliptic Curve Cryptography) which is faster and more secure. This means that transactions are faster without compromising security.
- Micro and Nano Transactions: Iota allows micro and nano transactions to be processed more easily because there are no associated transactions fees.
- Everything is a Service: Iota allows every resource to be treated as a service, whether lending your idle computer or renting a drone, or even obtaining free bandwidth. With IoT covering the whole of world, this can be the new mode of instant, hassle-free and automatic payments between all ‘things’ connected to the internet.