What is IOTA? A beginner’s guide

How IOTA is reimagining the blockchain for the Internet of Things.

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IOTA cryptocurrency physical coin

The driving force behind IOTA is the rapidly growing network of interconnected devices, or the “Internet of Things.” IOTA’s goal is to provide an infrastructure that enables machine-to-machine transactions to happen between all the different devices that are hooked into the Internet.

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What is IOTA?

Icon Symbol Initial release date Algorithm type Max. supply
IOTA 13 June 2017 DAG 2779530283277761

At the core of IOTA is an innovative new spin on the blockchain, called “the tangle.” IOTA’s tangle architecture is designed to manage transactions in the rapidly growing digital economy that undergirds the so-called Internet of Things. Here’s how it works:

  • If you think about all of the devices that are connected to the Internet, such as computers, the vast majority of them are not running at their full capacity most of the time.
  • Many people use computers for things like checking e-mail or browsing the web, but behind the scenes their computers could be doing a lot more without impacting performance.
  • Part of IOTA’s vision is to provide a secure way for people to earn money by letting others access some of that unused power.
  • In the real world, the potential for this new machine-to-machine economy spans far beyond personal computers. IOTA plans to be the backbone of a new kind of sharing economy designed for a wide variety of smart devices.

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How is IOTA different from bitcoin?

Bitcoin introduced two fundamental concepts to the world: decentralised digital currencies and the blockchain. IOTA has built upon both of those ideas to create a new kind of infrastructure designed for the expanding network of Internet-connected machines, or smart devices. Instead of focusing on peer-to-peer transactions, like bitcoin, IOTA is designed primarily for transactions that happen on a machine-to-machine level.

Is IOTA a cryptocurrency?

The IOTA cryptocurrency is one aspect of the larger IOTA platform. Designed with mass adoption in mind, IOTA hopes to provide a foundation for digital transactions to occur throughout the Internet of Things. The IOTA cryptocurrency is intended to serve as a universal method of payment for the future of machine-to-machine transactions that happen on the IOTA network.

The IOTA Tangle

One of the most unique and exciting parts of IOTA is the tangle. Building on the idea of a distributed ledger, a central component of today’s blockchains, the tangle has emerged as a new kind of data structure. The tangle is a decentralised, peer-to-peer network that does not rely on “blocks,” mining or an external consensus process. This allows secure data transfers to happen directly between digital devices, without transaction fees, in a self-regulating manner.

How to buy IOTA

Currently, IOTA is only available through a few exchanges, most notably the Bitfinex exchange. CoinSpot exchange, which is active in Australia, does offer IOTA, as does the invite-only YDX. As the project develops, it’s likely that more exchanges will begin to offer IOTA. US residents may be unable to purchase IOTA from a reliable source, and should investigate further.

Can I make money with IOTA?

At this phase of IOTA’s development, traders located in a country with access to an exchange that offers IOTA may buy into the currency. Particularly because the project is still very new, it’s possible that early investors may earn a profit as the technology develops. As with any cryptocurrency, it’s important to be aware that there’s risk involved, there are no guarantees, and the cryptocurrency market is notoriously unstable.

When the IOTA network is ready for mass distribution, users will have the potential to earn money by allowing others to harness the unused power of their connected devices. While the project is not currently at this stage, IOTA launched a public test-net in May of 2017 to give people a chance to interact with the platform. A “bug-bounty” program is ongoing, which pays rewards to individuals who find bugs within the IOTA framework.

What to watch out for

  • While IOTA has gained considerable traction, the project is still in the early stages of development. It’s unclear when the IOTA network will be ready for mainstream implementation and whether it will achieve mass adoption.
  • The tangle architecture, which is central to IOTA, is a new kind of data structure. As with any new technology, there is no way to know how it will work in the real world until it’s implemented.
  • In August 2017, researchers at the Massachusetts Institute of Technology (MIT) and Boston University published an article discussing potential vulnerabilities in the IOTA system. While the IOTA team has responded, it’s unclear at the time of writing this, in September 2017, how these issues will be addressed.

What’s on the roadmap for IOTA?

  • Central to IOTA’s stated vision is making the platform accessible and geared towards real-world adoption. In keeping with that goal, IOTA has been working on creating clients in several different programming languages, making the system flexible for developers.
  • IOTA is currently researching solutions to improve networking between the many different kinds of devices connected to the Internet of Things. Different devices use different protocols to interact with the network. IOTA’s goal is to streamline this process to enable fluid machine-to-machine communication.
  • One of the biggest problems for many existing blockchain-based applications, including bitcoin, is scaling. IOTA is confronting this challenge by using a method called “snapshotting” to handle data on the tangle ledger in a way that enables the network to efficiently process many transactions at once.

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