IOTA is basically short for Internet Of Things Application. Unlike most other cryptocurrencies, IOTA is specifically designed for a not-so-distant future where machines can communicate and transfer value in exchange for data.
They call it the M2M economy (machine to machine) that can really become mainstream if most people start utilizing IoT devices (Internet of Things). IOTA wants to take the first mover advantage when such a scenario happens in the future.
That being said, IOTA has been close to several different controversies, and it still has a long way to achieve its full potential. What IOTA really is, and why does it matter? Let’s find out with our review.
Brief History Of IOTA
IOTA was started by individuals from different countries. The main people behind IOTA were Sergei Popov, Sergey Ivancheglo, Dominik Schiener, and David Sønstebø. They had the vision to mix a cryptocurrency system to all IoT devices in the future because they believe that would be the future when machines can interact with each other and buy-sell data with IOTA currency.
They started with an Initial Coin Offering (ICO) in the year of 2015. IOTA was never seen as popular as Ethereum, and thus, they were only able to get $500,000 worth of funding (around 1500 BTC at the time). In return, they created 2,779,530,283 MIOTA coins for the community. MIOTA stands for Mega IOTA, which means 1 MIOTA is the equivalent to 1 million of IOTA. If you see a specific valuation of IOTA in any crypto exchange, usually, they refer to the value of 1 MIOTA, instead.
Anyway, IOTA was pre-mined, just like most other ICOs, and it did not pre-allocate the tokens to themselves. The IOTA foundation asked for a donation from the investors after they got successfully funded, and the investors came into agreement to donate around 5% of total IOTA token supply for the foundation in order to fund development.
At one point of time, IOTA actually went as high as the top 3 rankings in the crypto market cap. For a brief period of time in Q4 2017, IOTA was only below Bitcoin and Ethereum, and many people started to say congratulations to the IOTA Foundation. However, they fell off the crypto rankings, and nowadays, they are somewhere inside the top 30 rankings.
The Technological Features Of IOTA
IOTA uses what they describe as a Directed Acyclic Graph (DAG). Unlike the blockchain, DAG is basically blockless. Their own version of network is called The Tangle and they refuse to see it as a blockchain, even though many people still call the Tangle as IOTA’s blockchain.
So, unlike a blockchain where it stores data in a linear fashion, IOTA’s Tangle goes in one same direction, and it does not understand the concept of loops, which is why it’s acyclic. With The Tangle, to submit a transaction, one device needs also to confirm two other transactions that were previously made by other devices. By having this type of system, IOTA hopes that it will become much more scalable than Ethereum and other platforms.
And if you ask why, it’s because more devices mean more transactions can be confirmed as well. In IOTA, the transaction fees are also fee-less as they don’t have any miner to be incentivized.
Another important technological feature about IOTA is that the coin is quantum-resistant. IOTA team believes it’s important to create a coin that’s immune to the future of computing threats, which is the quantum computing technology. It is widely believed that computing technology can easily gain access to crypto private keys if the coin itself is not quantum-resistant. IOTA achieves this resistance by using Winternitz signatures.
Of course, IOTA is not a coin without controversy. One of the main arguments about IOTA is the fact that it’s still dependent on its “coordinator,” which means the Iota Foundation has a special node that can validate or invalidate the transactions. By having this coordinator, people criticize IOTA for not being permissionless, and everything is still decided by the IOTA Foundation.
However, IOTA supporters believe that this coordinator will be removed one day when the network has matured. They call this “coordinator removal event” as coordicide. However, there’s still uncertainty regarding when they will actually remove the coordinator.
Recently, IOTA also got involved in another controversy. It was all started by “wallet thefts,” and IOTA Foundation decided to turn off key parts of its Tangle, where it caused the entire community not able to transfer value from one to another. This controversy stole headlines everywhere, from subreddit cryptocurrency to most crypto publication websites.
Most IOTA critics believe it’s quite dangerous when the foundation can do whatever it wants with the network, which is the antithesis of decentralization itself. However, once again, IOTA supporters claim that it’s still beta, and thus this is still to be expected. They believe IOTA (sooner or later) will be able to decentralize itself, and IOTA Foundation’s influence will not be able to turn off the network just like what they did recently.
IOTA has a huge potential to achieve much bigger things than today, but they seem to have a lot of issues that still need to be solved. There have been some controversies already, and they are still far away to achieve their true potential with the coordinator and all the slow progress of upcoming features (such as smart contract capabilities).
IOTA remains one of the future biggest Ethereum rivals assuming it can achieve what it has envisioned for a long time. However, whether they can actually achieve it or not, we do not know yet. The future of crypto is still a wild wild west for everybody who participates in it.