IOTA (IOT) – A Beginner’s Guide, Review & More

What is IOTA?

IOTA is constructed to provide a solution for digital payments in the machine economy. The primary use-case of this Cryptocurrency is machine-to-machine payments and micro- and nano payments, which are necessary for the Internet-of-things era. IOTA aims to enable machines, for example, sensors and autonomous cars, to make transactions with each other.

It is a Requirement for this particular scenario that transactions have to be instant and feeless and the underlying mechanisms have to be able to scale indefinitely.

Because of this circumstances, IOTA is not built on top of a blockchain. Instead, they have chosen a Directed Acyclic Graph (DAG) for the structure of their underlying ledger. In a DAG every node that wants to send a transaction has to verify two previous transactions, so there are no miners involved. Every node has to do a small amount of Proof-of-Work to do this.

In theory, the DAG gets faster the more nodes are participating, and the transactions are feeless (they are not, but I will get to this later). The IOTA-foundation runs the project, and it is not entirely open-source, as some components are kept hidden from the public. The asset of IOTAs ecosystem is traded in batches of one million IOTAs. They are referred to as MIOTA (M stands for Mega). A vast supply of IOTA-tokens is necessary to perform nano payments in the magnitude of fractals of a cent.

Iota History

History

IOTA was founded in 2015 by Anders Sønstebø, Serguei Popov, Sergey Ivancheglo and Dominik Schiener. An ICO was held from the 24. November 2015 till the 20. December 2015, they collected 434 000 USD. 2 779 530 283 277 761 IOTA-tokens were generated at the Genesis.

The project is developed with the help of the non-profit IOTA-foundation. At the date of writing it is assumed that the IOTA-foundation holds ~50% of the existing MIOTA-tokens.

To find out insider news, before-the-public, I advise you to bookmark www.blockchainwhispers.com

Can IOTA be mined?

No, the total supply was pre-mined at the Genesis.


What differs IOTA from other Cryptocurrencies?

The most significant difference is that IOTA uses a DAG instead of a blockchain. This works without miners, every participating node verifies two previous transactions and only a few full nodes store and update the balances of the accounts within the network.

As most of the participating nodes are small IoT-devices like Sensors, they cannot store much data, so these devices only validate two previous transactions and are then allowed to send their own transaction into the network. A full history of transactions is not stored. Another significant difference it aimed for machine-to-machine value transfer rather than peer-to-peer transactions.


How much is IOTA worth today?


What is the total and the circulating supply?

The maximum supply and the circulating supply are 2,779,530,283 MIOTA.


You can buy MIOTA on several cryptocurrency exchanges, most notably Bitfinex, Binance, Coinone, and OKEx.


Can MIOTA be sold for cash?

You can sell MIOTA for cash on several cryptocurrency exchanges that have fiat-pairings, most notably Bitfinex and Coinone.


Future Development

IOTA is developing partnerships with big firms like InnoEnergy and works with companies like Volkswagen and Bosch. They aim to be a significant factor in the Internet-of-things ecosystem, especially in the areas Mobility and Automotive, Supply Chains, M2M-payments and Smart Energy. They work on improving their product, forming partnerships and raising awareness.


Verdict and Rating

0/10 There are several major red flags about IOTA. First, IOTA disregarded cryptographic best-practices when they rolled their own hash-function (“Curl”). This is highly alarming, as cryptographic algorithms have to be tested for years to get a realistic assessment. Analysts of the MIT Media Lab found a critical vulnerability in this function.

When IOTA was confronted with that finding, one of the co-founders, Sergey Ivancheglo, responded that the flaws in the Curl-function were implemented on purpose, to function as a sort of “copy protection.” This backdoor would allow IOTA to compromise projects that copied their algorithm. Either they have implemented an insecure, flawed algorithm unintentionally and are too proud to admit it or they have implemented a security vulnerability on purpose to attack competitors who copied their code. Either way, this is deeply concerning and unworthy of a company who wants to be trusted with people’s money.

Such behavior is a hostile attitude to the open-source community. The security flaw is now fixed, but the bad taste remains. Another example is the role of the so-called “coordinator,” a piece of code who is necessary for the network to function properly. This piece of code is not available to the public, so the problem is not open-source. Also, the claim that IOTA-transactions are feeless is misleading. They are paid for in the PoW that every participating node has to do before sending a transaction. Just because you don’t have to pay for a service in an amount of work instead of a monetary unit doesn’t make it “free” or “feeless.”

Other negative points:

  • IOTA uses ternary instead of binary like virtually every existing hardware
  • IOTA does nothing to punish malicious nodes, which makes it prone to attacks
  • No mining reward or transaction fee, which makes it susceptible to spam attacks
  • There is no proof that the DAG-system of IOTA actually works
  • IOTA-foundation made misleading statements about “partnerships.”
  • IOTAs network was down for several weeks last year. This never happened with an open-source, permissionless blockchain.
  • There are claims that the IOTA-foundation accessed wallets of users and frozen or withdraw tokens (These claims are not confirmed).
Blockchain Whispers warned about IOTA and its practices multiple times. If you aren’t aware, Blockchain Whispers is the most informative crypto website in my opinion. You can check them out at https://blockchainwhispers.com/about-2/
0 / 10.0
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Disclaimer

The writer’s views are expressed as a personal opinion and are for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
Author

Contributor : Felix Kirui

Felix Kirui has been the lead technical writer at Simplex United since 2016. He covers Blockchain, Cryptocurrency, and the good or bad of digital assets. He has also worked in the same capacity for other brands like Cryptorepo, The SohoLoft Media, Dinardirham, and so forth. In addition to being a writer, Felix provides technical SEO services to businesses of all sizes. You can follow him on LinkedIn and Twitter.

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