IOTA is one of the most well known projects occupying the crypto space. It is known for being the preeminent distributed network for Internet Connected Devices.
Apart from being the leading project focused on distributed IoT, IOTA also employs some of the most unique technology that differentiates it from a number of other blockchain based networks. During its four year history, there have been numerous ups and down.
However, is IOTA still everything it’s cut out to be?
In this IOTA review, I will attempt to answer that and give you everything that you need to know. I will also analyse the long term potential of MIOTA.
Iota is a unique public distributed ledger that was created without the use of a chain or any blocks. That’s right, no blockchain. Instead, it uses directed acyclic graph technology and something it calls the Tangle to provide consensus without the need for miners.
IOTA has been around for longer than many of the blockchain projects out there, and the initial funding for the project came from a 2015 crowdsale that raised 1,337 Bitcoin, worth roughly $500,000 at the time.
I know that sounds like a small amount, but crowdsales and ICOs weren’t very common in 2015. All of the nearly 3 quadrillions IOTA tokens were issued to the crowdsale participants at that time, with none reserved for the founders, developers or advisors.
Because there were no tokens allocated for the team, the community donated roughly 5% of the total supply of IOTA to the IOTA Foundation and that has been used as the funding for the project.
The goal of the IOTA project is to enable the growing machine economy by powering all the machine-to-machine payments necessary to enable the Internet of Things.
With IOTA, all of the computing devices that are embedded in machinery throughout homes, businesses, and factories will be able to communicate, sending and receiving data, and using the feeless IOTA Tangle to make small micropayments to keep the data flowing.
The technology of IOTA is based on the Tangle, a data structure that is based on directed acyclic graph (DAG) technology, and was created specifically for IOTA. The DAG data structure grows increasingly complex as more nodes and transactions are added, which helps provide security. Additionally, the DAG moves in one direction and does not loop back on itself.
The Tangle is a graph that is composed of nodes which are connected to each other with edges. It is directed in that the node connections have a direction, so moving from point A to point B is not the same as moving from point B to point A.
And acyclic means the structure is not circular, so that moving from node to node along the edges means always moving forward, and there is never backtracking or encountering the same node twice.
In the IOTA Tangle, all of the connected nodes hold transactional data, and consensus is built into the system. Rather than using a Proof-of-Work blockchain where consensus is separated and miners are required to form a consensus, the Tangle requires each participant to confirm two other transactions in order to get their own transaction confirmed. This gives us a completely decentralized and self-regulating peer-to-peer network.
This consensus mechanism allows IOTA to remain feeless, and it will always remain feeless no matter the size of the network. By eliminating miners there is no need to pay anyone directly in the network. Instead, each user is paying by using a very small amount of their computing power to confirm two other transactions.
This works because as each transaction is confirmed and those transactions that have confirmed it receive confirmations themselves, there becomes a build-up of weight behind the transactions. And the greater this weigh the more reliable and immutably secured each transaction becomes.
One issue that IOTA has faced since the start is the fact that this DAG network could be taken over by an attacker gaining control of just 33% of the hashing power on the network. In order to avoid this happening the IOTA Foundation has introduced a special node called the Coordinator.
This Coordinator is controlled by the IOTA Foundation and it protects the IOTA Network from attacks. Because it makes the network centralized the use of the Coordinator has been criticized.
The IOTA Foundation says that once the network becomes large enough the Coordinator will no longer be needed and it will be decommissioned at that time, making IOTA completely decentralized.
IOTA isn’t just a theoretical network, it has real world use cases and applications that continue to expand as the IOTA network grows and gains increased adoption. Below are a few of the current use cases.
Taipei signed an agreement with the IOTA Foundation in January 2018 to test the IOTA technology in transforming the city into a futuristic smart city. The earliest tests involve the creation of a digital ID card based on the Tangle, and integration of Iota into air pollution monitoring devices.
Perhaps most importantly, the Taipei government feels that citizens will have more trust in government services once data integrity is ensured through the use of distributed ledger technology.
The power and energy sector is moving towards the Internet of Things at a furious pace and the decentralization of the electricity grid began back in 2016. Because IOTA is scalable and feeless it is an ideal solution for the energy industry.
IOTA has been working with Dutch power consortium Elaadnl since 2017 in creating smart charging stations for electric cars. These stations are setup so that data transfer and payments occur automatically between car and charger. Furthermore, the same technology is being tested to create smart energy communities.
Medical records are already rapidly moving into the digital world. This movement is already helping health care practitioners provide better, more rapid and effective care for patients. It is also helping with research initiatives. One area where IOTA believes it can improve on digital eHealth initiatives is by securing data integrity so that providers can be assured they are using reliable data.
Privacy is also a huge concern in the health care field, and IOTA can help here as well with their Masked Authenticated Messaging, which uses aMerkle tree based signature to send and receive encrypted data over the Tangel, ensuring security and privacy are kept intact.
The transportation industry can benefit greatly from IOTA technology and the feeless transfer of value between IoT devices. For example, vehicles equipped with their own cryptocurrency wallet can pay for tolls, parking, charging stations and other services automatically. They could also receive payments for selling data, ride-sharing and delivery services.
Volkswagen, together with @iotatoken will show at #cebit18 a proof of concept how the trusted transfer of software over-the-air to vehicles can be securely documented using the #tangle. Great example how distributed ledger technology can be used in the future pic.twitter.com/4wuc7pdKfv
— Johann Jungwirth (@JohannJungwirth) June 9, 2018
Volkswagen is already working with IOTA to create a vehicle that can have its software updated online and kept on the Tangle to unsure ownership and other data is immutable and trustworthy. In the future, autonomous cars can make extensive use of IOTA’s technology to ensure they remain charged and maintained properly.
The IOTA platform will be able to assist in all phases of manufacturing and the supply chain as it can provide immutable documentation at every point ensuring the authenticity of goods.
By writing data in the Tangle we can know the origin of a product, including the country and who created it. We can know exactly when it was manufactured, and can even trace it to the employees who manufactured it.
All of this data and more can be recorded and stored, giving manufacturers, distributors and consumers more trust in the products being delivered to them.
IOTA was founded in 2015 by a trio of entrepreneurs who saw that the blockchain was not the most effective means of creating a distributed ledger. In 2017 the IOTA Foundation was established to oversee the research, development, and standardization of IOTA and the economy of things.
The key members of the IOTA Foundation are as follows:
David Sonstebo – David is a serial entrepreneur who co-founded the IOTA Foundation and serves as a co-chairman on its Board of Directors. Prior to IOTA, he founded a stealth hardware IP company which developed a low power processor for use within IoT devices.
Dominik Schiener – Dominik is another serial entrepreneur who founded several companies prior to IOTA, including Bithaus and Fileyy. He was a co-founder of the Iota Foundation and serves on the Board of Directors as a co-chairman.
Professor Serguei Popov – Professor Popov is the third founding member of IOTA and he serves on the Board of Directors of the Iota Foundation. He is a professor of mathematics at the University of Campinas in Sao Paulo Brazil. He is the author of the IOTA whitepaper and the creator of the Tangle.
Dr. Moody Alam – Dr. Alam serves as Director of Research for IOTA. He has a long track record of leading research teams, and specializes in both decentralized systems and artificial intelligence, holding a PhD in Distributed Artificial Intelligence. He is a recent addition to the IOTA team and held a number of data science research positions previously.
Lewis Freiberg – Lewis serves as the Head of Ecosystem for IOTA, which is primarily involved with the promotion of an understanding of IOTA and its technology, as well as looking for innovations involving IOTA. He has been in the distributed ledger technology industry since 2013, and prior to that, he spent nearly a decade in the commercial software industry.
Edward Greve – Edward is the Head of Engineering for IOTA, connecting the various disciplines of mathematics, computer science and business, to engineer the future vision of IOTA. Prior to joining the IOTA Foundation, he was a software engineer for WillowTree and Glosssika.
Holger Kother – Holger has spent his career in various IT projects at multinational companies over the past 15 years. At IOTA he is concerned with creating partnerships between the foundation and the integrators and partners interested in using the IOTA technology.
There are a huge number of small, medium and multi-national corporations that have shown interest in IOTA and partnered with them on a wide variety of different projects. For a complete list see The IOTA Archive.
Some of the well-known partnerships are those mentioned above such as the Government of Taipei and Volkswagen. Other high-profile partnerships include Microsoft, Bosch, Fujitsu, and Accenture.
Most recently (April 2019) Iota announced a partnership with the U.K. based Jaguar Land Rover. The partnership will see Jaguar Land Rover rewarding drivers with Iota cryptocurrency for reporting data to Jaguar.
Another recent partnership (June 2019) is with food safety management firm Primority. IOTA’s Tangle will be used to track potentially fatal food allergens. The application using Iota’s technology will allow consumers to check food products for allergens.
There is no disputing that IOTA has a passionate community behind it. This is a great asset for any project as it leads to greater awareness and fosters broader adoption for the IOTA token.
So, how big exactly is this IOTA Community?
Well, as a first point of reference, they have a pretty large and active Twitter following with over 120k followers. This is more than we have seen on a number of other projects. On this Twitter account, the IOTA team keeps the community updated with the latest announcements and there is always a great deal of interaction with these tweets.
For broader community discussion IOTA has a Discord server as well as a general Reddit subreddit and a more specific IOTA Markets subreddit. In the Discord, they have over 22,000 members and across both of the subreddits they have over 130k members.
To get a better sense of the discussion amoung the community, I decided to jump into their Discord. There were numerous different chat threads that covered aspects of the project and ecosystem.
One thing that struck out for me in the discussion within this community is that there were very few “moon boys” to be seen. Most of the discussion were about partnerships, technology and broader adoption – always a good sign.
The long-term objective of the IOTA project is to create a network capable of power microtransactions between IoT devices. With IOTA an open market of devices can be created, where resource usage and transfer can be billed second-by-second in real-time.
This will open up enormous possibilities, such as vehicles that share weather and road conditions for small micropayments, or smart thermostats sharing temperature, humidity or wind data with weather stations.
The IOTA total and circulating supply is 2,779,530,283,277,761. The team decided on this number because it is optimized for ternary computation, being the largest possible 33-digit ternary number.
This total supply was pre-mined at the genesis transaction and there will never be more IOTA minted or mined. It is a fixed supply. Because there are no miners required to secure the IOTA network there are no incentives for anyone to try and raise network fees by slowing the network, or any other conflict of interest.
Even though IOTA tokens were created in 2015 as part of the crowdsale, it wasn’t until June 2017 that the tokens were listed on an exchange. At that time the token traded between $0.55 and $0.65.
The token was volatile from the start, dropping from its opening levels to just $0.18 a month later, and then rebounding and climbing over $1by mid-August 2017.
It couldn’t hold up that high and by November 2017 it was back under $0.40, but that didn’t last for long as December 2017 was the huge rally for the entire cryptocurrency market.
It reached its all-time high of $5.69 on December 19, 2017, and quickly fell from those heights. Even so, it struggled and managed to remain above $1 until July 2018. From there is crept steadily lower and as of August 2019 it sits at just $0.265044.
Even though it took 2 years for the IOTA token to get listed on an exchange today it is on dozens. The greatest trade volume is from Bitfinex and Binance, although there’s also a good deal of volume from Huobi Global and HitBTC (although we would avoid the latter).
Given that the volume is well spread out across exchanges, it means that MIOTA liquidity is not reliant on a single exchange. This means that if ever there was an issue with one of the exchanges, traders could always find an alternative market to place their orders.
On the individual exchange books, the turnover also appears to be healthy. The markets are deep and liquid which means easy execution for your larger block orders – no slippage.
For storing IOTA tokens the best alternative is the native Trinity wallet, which is available for both desktop (Windows, Mac, Linux) and mobile (Android and iOS). Download links can be found on the IOTA website or directly at https://trinity.iota.org/.
Something that I always like to do with a project is to jump into their GitHub repository to get a sense of how much code has been pushed. This can be a great indication of development progress.
Therefore, I decided to jump into Iota’s GitHub to see what I could find…
One of the best metrics to measure updates is code commits. Below are the total code commits that have being pushed over the past year to their top three most active pinned repositories.
As you can see there has been quite a lot of activity with the developers pushing numerous commits to these repos. It is also worth pointing out that there are a further 95 other repositories in their GitHub with varying degrees of activity.
If we were to compare the number of commits in the IOTA Reference Implementation to those of other projects, IOTA comes in at number 86.
Indeed this level of development activity will make sense when viewed in conjunction with the broader IOTA Roadmap. The IOTA team has one of the most comprehensive Roadmaps that I have seen.
This roadmap includes not only the work that they are currently completing on the Engineering side but also some of the most important research topics that are being studied.
On this research, perhaps the most exciting of these are the “Coordicide” (explained below) and the spam prevention. These could greatly decentralise and secure the IOTA network.
If you wanted to keep up to date with the latest to come out of the project then you should keep your eye on the IOTA blog.
IOTA hasn’t gone without criticism over the course of its life, with much of it centered around the technical flaws of the encryption algorithm. There is also the $11.4 million theft of IOTA that occurred in 2018 where a hacker created fake seeds and thus gained access to user’s wallets.
The biggest criticism of the project surrounds the fact that the project uses an encryption algorithm named Curl which the developers “rolled” themselves. This means they created the encryption algorithm from scratch, a highly discouraged thing in the cryptography industry.
These encryption algorithms typically need years of study to ensure they are secure, and that need was proven when Curl was found to have a property known as Collision, whereby the function will produce the same output when given two different inputs.
This could have allowed a hacker to easily steal tokens from the network. While IOTA’s developers have since corrected the vulnerability, some wonder what other surprises might lie under the code waiting to be exploited.
Another criticism of the project is in connection to the team’s avoidance of open source, which is even construed as being hostile by some. One of the cornerstone’s of most blockchain projects is an open source codebase, so with IOTA disdaining open source code, many wonder what they might be hiding.
Finally, there is the contention surrounding the use of the Coordinator, which essentially makes IOTA a centralized crytptocurrency. While the IOTA Foundation has said their top priority is to remove the Coordinator, until that happens there remains distrust of the project.
One positive development on this front was the announcement that IOTA has created a Coordicide team to drive the removal of the Coordinator, there is no set timeline yet, and the IOTA team admits it could take quite some time to remove the coordinator.
IOTA is certainly one of the more unique crypto projects, with the use of the Tangle a direct departure from the usual blockchain solutions. The goal of powering the Internet of Things is probably one of the loftiest in the space as well. And with the Tangle providing feeless transactions, extreme scalability, and quantum resistance it’s possible the IOTA team could eventually realize their goal.
That said, the team needs to avoid any further security concerns, and the removal of the Coordinator will be a crucial step for the project. To succeed as a machine-to-machine payment system the entire protocol needs to undergo vigorous testing and most likely a long experimental process.
The hostility and disdain that the team holds for the open source community could also hurt the project in a field where developers are coming to expect open source as the norm. And there’s been some hostilities between founding members, which could cause a divide, although thus far it seems they have been able to work through their differences.
Overall the IOTA Foundation appears to be doing an excellent job in securing partnerships and the business development of the project. They already have a strong stable of partners, and could see adoption spread rapidly in several sectors if they can find success with their distributed ledger solution.
Featured Image via Fotolia
The post IOTA Review: Distributed Permissionless Ledger for IoT appeared first on Coin Bureau.