Blockchain is often perceived as a product of one of two places; North America and Asia. As such, it’s fitting that IOTA, one of the top cryptocurrencies by market cap, is both European and not a blockchain at all. Founded in Germany by Dominik Schiener, IOTA is unique from other cryptocurrencies in a variety of ways. First, it uses a directed acyclic graph that they refer to as a ‘Tangle’, rather than the traditional blockchain that drives most currencies. Second, they avoid the need for miners or master nodes by requiring each user to validate two other transactions in order to send their own. This eliminates the massive computing needs of larger blockchains like Bitcoin, while still ensuring the necessary processing to complete all transactions.
Tangle versus Blockchain
The process is referred to as the Tangle due to the visual representation of this sequence. In a blockchain system, each transactions is processed by either a miner or a master node. Once validated, the block of transactions is added to the end of the ledger’s chain, which is updated on every node in the system. The full blockchain can be viewed at any time, allowing backwards validation. In a Tangle, there is a constant, spiderweb of transaction validations by every user on the platform. Each transaction must be validated by multiple other users – but it is still processed exponentially faster than a traditional blockchain. Validations occur in parallel, rather than in a single, linear chain.
Powering the Internet of Things
Although IOTA is the name of the token, investors will almost universally find it listed as MIOTA. This is because an IOTA is small – as the name suggests – and is designed for a very specific purpose. The difference between an MIOTA and an IOTA is the same as a megabyte versus a byte, The exceptionally low price per unit allows IOTA to be used as a currency for Internet of Things devices. Premium data can be purchased for display on these devices, in increments small enough to be feasible for even the smallest payment environment. It monetizes the communication between devices, effectively ‘fueling’ this new ecosystem.
Founded in 2015, IOTA exploded in popularity in 2017. It now sits firmly in the top cryptocurrencies by market cap, with several high profile partnerships. The Chief Digital Officer for Volkswagen now sits on their advisory board, alongside members of Fujitsu’s senior management. IOTA recently revealed a series of electric vehicle charging stations that use their cryptocurrency for payment, a strong real world use case. Overall, IOTA’s unique system and strong partnerships will go far in ensuring their continued success.
Article By: Adam Stone