Read this, your smartphone, fridge and a car will get their own cryptocurrency in the near future. They will use it to process transactions with other devices. All of this will be possible thanks to the IOTA project which markets itself as an Internet of Things cryptocurrency. Although it doesn’t even feature mining, nor there is a blockchain included.
How is this possible and should I really invest in IOTA given these circumstances?
Yup, we’re gonna find that out in our article here.
Officially, the IOTA project appeared in 2015, after someone brought up the topic on the Bitcointalk forum. But a different theory goes a year back when in 2014, a developer named Sergey Ivancheglo invented a CPU based on the ternary number system. But since those didn’t get used in the modern tech, the IOTA network was developed to utilize this ternary number system, so that Sergey’s work would not have been in vain.
Alright, back to 2015 now. The IOTA ICO was held that year. A beta version was launched straight after the investments were finished. It took a whole year to test the network as the final version was released at the end of 2016. At the start of 2017, IOTA got listed on the Bitfinex cryptocurrency exchange, which made the coin available to the mainstream investors. This, in turn, prompted other exchanges to open up the trades too.
To this date, IOTA has a permanent development team of 34 people and is managed by a non-profit organization called IOTA Foundation. Initially, 5% of the ICO investments were distributed to the organization. The rest of the funds that keep the company afloat are not disclosed. Companies such as Bosch, Volkswagen, Microsoft and others are interested in this project. There is an info about the ongoing joint developments, but they are not ready for the showcase yet.
The IOTA network uses the technology of distributed ledger called Tangle which differs from the blockchain. So while blockchain is a sequence of blocks, Tangle is a network of multiple chains. Think of it as a rope woven from a variety of threads, each of which is a continuous chain.
All IOTA coins were obtained as a result of the pre-mining, and their quantity is fixed. The cryptocurrency offers instant and completely free transactions, which is achieved through a unique consensus mechanism. The network doesn’t separate miners from the users because each account confirms transactions. To make the transaction, you must first process and confirm the other two transactions. So the more operations there are, the more resources are allocated to support the network. This sets up the right conditions for unlimited scaling and no fees per transaction.
Pros and Cons
Analyzing the IOTA cryptocurrency reveals two main advantages. The first is an original idea for cryptocurrency use that shows a promising market demand. After all, humans are heavily outnumbered by the quantity of all the devices in the world which are also potential cryptocurrency users.
The second important advantage is the innovative technology that allows for commission-free payments and resilience to the scaling issue.
It’s disadvantage time! Here, a list for those:
- The network features a Central node, the so-called “coordinator". It has to double-check the transactions and ensures that everything is running smoothly. This is contrary to the principles of decentralized networks. The developers eventually promised to disable the “coordinator” over time, but what would happen to the security and the network performance in that case?
- Modern CPUs are based on the binary system, while the IOTA uses ternary one. Because of this, there are always technical difficulties when integrating devices with IOTA. This kind of narrows its application use.
- IOTA does not have smart contracts. A promise was made to add them, but it is not clear how the devices would interact with each other. I mean the existing tech still requires serious improvement.
Having analyzed all this information, we can assume that over time, the IOTA team will offer useful and widespread tech developments.
However, the investment attractiveness of the IOTA cryptocurrency raises some questions over its value. These coins do not represent the stocks of the developer team, and their success hardly affects the price rate of IOTA. In order for the cryptocurrency to grow, it must have its own utility and economy which are nowhere to be seen at the moment.