Are you interested in cryptocurrency and the IOTA coin? Then, you’ve come to the right place. You will be an expert upon finishing this useful guide. This guide will cover everything you need to know about IOTA and prepare you for your trading experience!
IOTA (MIOTA) is an open-source distributed ledger specifically designed for the Internet of Things (IoT), a unique system used to record and perform transactions between machines and devices. The ledger uses a cryptocurrency called MIOTA to account for transactions in its network. What makes IOTA different from other cryptocurrencies is that it does not use a blockchain. Therefore, miners are no longer required to maintain the network’s integrity, and the mining fees are eliminated. Tangle, a system of nodes, is used to confirm transactions. IOTA claims that Tangle is faster and more efficient than typical blockchains used in cryptocurrencies.
Who are the people behind IOTA?
David Sønstebø, Dominik Schiener, Dr. Serguei Popov, and Serge Ivanchelgo co-founded IOTA in 2015. It was created as a specialized peer-to-peer distributed ledger. Its main goal was to democratize and power the Internet of Things (IoT).
More relevant information can be found here.
IOTA Foundation
IOTA Foundation is a non-profit organization that created the Tangle system. Early IOTA investors gave 5% of the total supply in 2017 to help fund the project’s development and the formation of the IOTA Foundation. The Germany-based IOTA Foundation was officially founded in 2018, aiming to assist in research and development, education, and the standardization of the IOTA technology. Its goal is to empower all connected devices by using truth verification and transactional settlements to encourage devices to make their data available in real-time.
The IOTA Foundation is a board member of the International Association for Trusted Blockchain Applications (INATBA) and the founding member of the trusted-IoT alliance and mobility open blockchain initiative (MOBI). The IOTA Foundation Team is distributed across over 25 countries, sharing a clear and focused mission to construct a de facto standardized 'Ledger of Everything' to enable the paradigm shift of the Internet of Things, Industry 4.0, and a trustless 'On-Demand Economy.’
Sergey Ivancheglo resigned from the IOTA board of directors on June 23, 2019, following a disagreement between IOTA co-founders David Sønstebø and Sergey Ivancheglo. Additionally, the IOTA Foundation Board of Directors and Supervisory Board announced on December 10, 2020, that the Foundation had officially parted ways with co-founder David Sønstebø.
How does it work?
Unlike Bitcoin which uses blockchain technology, IOTA uses a directed acyclic graph (DAG) called the Tangle. They believe it would help resolve scalability and cost issues associated with blockchains. Transactions (Txs) are connected via one-way hash functions. As a result, new incoming data can be recorded with high throughput since it lifted blocksize constraints. DAG is also a system that records transactions on a digital ledger. Therefore, there is no need for miners to maintain the integrity of the network, resulting in the elimination of the mining fees. As long as everybody contributes to the network by confirming other transactions, it is free. At the same time, it speeds up the approval of new transactions because the increased number of incoming transactions lead to more existing transactions being approved. This allows the IOTA coin protocol to process micropayments, making it an ideal payment system.
Comparison between blockchain and Tangle (Sourced from MDPI)
Each transaction must process two other transactions before it can be accepted on the network. In other words, users who want to send funds must also contribute to the network by confirming other users’ transactions. This consensus mechanism is called Proof-of-Work (PoW), where a cryptographic puzzle must be solved for the new block to process or verify new transactions at low power. It saves computing power as no blocks are discarded, leading to low transaction costs. This also means that the digital currency MIOTA can be used on a wide range of systems and devices without consuming much power.
In a blockchain, all transactions are grouped and processed simultaneously. As a result, issues arise when there are a large number of outstanding transactions on the network. If they cannot fit into one block, they will have to wait until the next one is processed. Tangle is able to solve this problem by processing each transaction individually. As a result, the IOTA system becomes more scalable when more people use the system. In other words, there is no limit to the number of transactions the network can process each second, making the IOTA “infinitely scalable”.
Another feature of IOTA is called Quantum Proof which involves using hash-based signatures that are faster than the elliptic curve cryptography (ECC) to deal with threats. Hash-based signatures also simplify the signing and verification process and reduce the Tangle protocol’s overall complexity. Through this, IOTA can secure its network and prevent attackers from stealing IOTA tokens. IOTA allows devices to communicate freely with one another and their surroundings without the need for human engagement. The public and private key pairs for the IOTA distributed must be different. Instead of being recorded in a chain, new transactions are entangled in a network.
Furthermore, Tangle is capable of handling asynchronous transactions. As Tangle expands, the network runs by assuming that any wrong transactions will be instantly orphaned or deleted. A tip is a new, unapproved transaction. Two past transactions should be referenced in each new Tip. To ensure that only good tips are chosen, the network adopts the Random Walk Monte Carlo240 algorithm. This randomly checks a large number of nodes against the last known “legitimate mode”, if the sufficient percentage of nodes examined are good (usually 95-99%), it is a valid transaction. This consensus method is effective because two previous must first approve every new tip before being considered valid. This means that it becomes easier to reach a consensus when more devices are added to the network.
Transactions on IOTA (Sourced from IOTA.org)
The green represents squares that all grey squares agree are valid. Thus, as more transactions are entered, more white squares will turn green, and consensus will be easier to obtain.
IOTA vs Bitcoin
Technology – IOTA uses Tangle whereas Bitcoin.
Initial Distribution – IOTA uses Directed Acyclic Graph, but Bitcoin uses mining.
Market Cap – IOTA exceeded $5 billion USD, whereas Bitcoin surpassed $250 billion USD.
Transactions – IOTA does not require miners, and users would have to confirm other people’s transactions, making the network more scalable, fast, energy-saving. On the other hand, Bitcoin uses mining. As a result, it takes Bitcoin approximately 10 minutes to confirm a transaction, increasing in time and high computing power and electricity.
Consensus mechanism – Both use Proof of Work.
IOTA Price
IOTA price from November 2020 to September 2021 (Sourced from CoinMarketCap)
At the time of writing this article, the IOTA price today is $1.09 USD with a 24-hour trading volume of $89,772,073 USD. It has decreased 3.00% in the last 24 hours. It reached its highest price point of $2.5322 in mid-April 2021.
How many IOTA(MIOTA) coins are there in circulation?
IOTA’s Market Cap from November 2020 to September 2021 (Sourced from CoinMarketCap)
IOTA ranks #46 with a market cap of $3,043,227,951 USD. It has a circulating supply of 2,779,530,283 MIOTA tokens. It has a maximum supply of 2,779,530,283 MIOTA tokens that are all in circulation, including 2.779.530 GIOTA (Giga IOTA) and 2.779 TIOTA (Tera IOTA). Its market cap reached its highest point of $7.04 billion USD in mid-April 2021.
IOTA was first funded through Initial Coin Offering (ICO), which raised 1,300 BTC from investors when 999,999,999 were sold during the 2015 crowd sale. This amount of Bitcoin was worth around $500,000 USD at that time. However, the supply of MIOTA did increase a few years later, with the team arguing that a higher supply would make the token more suitable for the “tiny nano transactions” that we will most likely see through IoT devices.
When the IOTA Foundation was founded in 2017, it owned about 5% of all tokens in circulation donated by the community. The majority of these funds were granted to further the development of IOTA, as agreed upon by the participants (investors) in the network.
MIOTA is available on multiple exchanges such as Binance, Bitfinex, and OKEx. According to the project, various trading pairs are available linking the token to Bitcoin, Ethereum, stablecoins, and fiat currencies such as Japanese yen, euro, pound, and dollar.
How is the IOTA network secured?
IOTA’s network is fully decentralized and ensures the security, validity, and authenticity of the data exchanged by using Tangle that is tamper-proof. Once a transaction has been verified, the system or any external interventions will not be able to reverse the process or alter anything. The network becomes more secure as the network’s traffic grows. It has built-in immutability that makes compromise difficult, if not impossible. The network also implements cryptographic encryption for all activities and interactions to avoid interception and ensure that all data and information are kept as secure as possible.
IOTA Wallet
Users would most probably opt for larger cryptocurrencies that give more credibility and security as IOTA operates on a non-blockchain structure. However, this is not a problem because IOTA is also well-known, and a variety of wallets are available to store IOTA tokens securely. If you are searching for an IOTA wallet, you have to choose the one that suits your needs. It is important to consider the compatibility, ease of use, security features, backup options, customer support and ongoing development.
Here are some wallets you may use:
What Drives the Price of IOTA
Similarly, IOTA is driven by the factors that determine the prices of the traditional blockchain cryptocurrencies despite being a unique currency. IOTA’s price has always fluctuated significantly, even by cryptocurrency standards. The price is determined by demand, and the adaption or actual usage determines demand. The IoT will continue developing and improving, resulting in an increased number of machines connecting to the internet.
Corporate partnerships are one of the essential price drivers for service-oriented cryptocurrencies like IOTA. The value of IOTA increased by 90% after the collaboration announcement on media with industry giants on the launch of their data marketplace. After IOTA and Microsoft clarified that no direct partnership was formed, the IOTA price plummeted by 15%. Significant price increases can be expected if there are any future collaborations announcements. In addition, like other cryptocurrencies, its price is influenced by the media attention and buzz about new features. For example, if IOTA is mentioned in the news frequently, it is expected to have a sudden price increase. This is often followed by a short, sharp corrective period as traders engage in profit-taking.
Price history and predictions
IOTA was launched on Binance in 2019, trading at $0.25 USD. Despite showing no discernible upward movement since its launch until January 2021, when the IOTA price live traded sideways, things changed in January 2021, as IOTA soared 785% from then until April 2021.
IOTA price from November 2020 to September 2021 (Sourced from TradingView)
As shown in the chart above, the price reached its highest price point of $2.73 USD on April 16. Many experts believe that the price will continue to rise higher. However, a similar trend to other cryptos, the price dropped rapidly by 78% between April and July.
IOTA regained its momentum in July, with the price increased gradually. Following a virtual event in which a member of IOTA’s upper management delivered an update on how the platform may be used in the trucking industry, IOTA’s price surged by 144% at the beginning of September. As a result, this boosted the market sentiment with further optimism and credibility.
The bullish trend of IOTA is positive and promising. Major companies such as Dell and Jaguar Land Rover still use IOTA despite the security issues in 2018, when IOTA was hacked, and more than $10 million USD worth of IOTA coins were stolen. According to Economic Watch, the price prediction for IOTA in 2025 forecasts that IOTA will prosper and its future is bright. The growth of IoT will help IOTA’s platform garner popularity in the upcoming years, and it could be worth around $4 USD by then.
Technical Issues/ Problems
IOTA is still relatively new and still under the development stage in the crypto scene. It has experienced technical issues and mishaps such as wallet hacks that have happened several times since 2017, resulting in a loss of momentum and market cap. Last year in February, IOTA had to shut down the entire network when hackers stole funds from users’ wallets. The hackers exploited Trinity by targeting at least 10 high-value IOTA accounts, a new wallet app developed by the IOTA Foundation. Bitcoin faces similar risks. However, if hackers were to hack Bitcoin, they would need 51% of hashing power. It is most likely impossible since Bitcoin has so many miners.
In order to deal with the early phase attacks such as parasite chains in Tangle, IOTA uses Coordicide, a decentralized consensus mechanism by removing the coordinator. Coordinator is a specialized client owned and controlled by the IOTA Foundation that issues specialized transactions known as milestones. The Coordinator completes a complicated mechanism of transaction indexes that are acknowledged by the nodes in the network collectively. Coordinator nodes exist to prevent cyberattacks, but the network is still being targeted. Coordicide uses a special node known as “Coo”. It allows people to run their own coordinator, providing the coordinators decentralized authority. It publishes zero-value transactions that serve as the checkpoint on Tangle. These milestones determine the direction in which Tangle is being spun. The validity of the transactions can be confirmed depending on the coordinator.
If there is a central coordinator, IOTA is not truly decentralized – yet. Therefore, it received criticism in the crypto community. Although the IOTA foundation cannot invalidate transactions retroactively, it can de facto freeze the deposits of network participants if the coordinator fails to consider their transactions when announcing new milestones. Furthermore, an attack on the coordinator may bring the entire Tangle to a halt. Last but not least, the inclusion of the coordinator limits IOTA's scalability, which is one of the protocol's most robust features.
The Coo was provided from the start as a temporary solution. However, it is important to note that Coordicide was the main reason why the IOTA Tangle could never reach its full potential. Therefore, the Coordicide upgrade provided a solution to these issues. The term “coordicide” is made up of the words coordinator and kill, which means killing off the coordinator in this context. The new consensus “Parallel Reality-Based Ledger State” has taken the role of the coordinator.
What Experts Say
The Massachusetts Institute of Technology (MIT), one of the best universities in the world with highly acknowledged research, released an academic paper and mentioned IOTA’s flaws, especially the vulnerabilities in IOTA’s code that made it susceptible to attacks. The golden rule of the cryptographic system is “Don’t roll your own crypto.” Bruce Schneier, a technologist and security specialist, said:
“In 2017, leaving your crypto algorithm vulnerable to differential cryptanalysis is a rookie mistake. It says that no one of any caliber analyzed their system and that the odds that their fix makes the system secure is low.”
Bruce Schneier
Despite receiving criticism from many experts and developers, IOTA still received a lot of support from other sectors. IOTA is constantly providing new updates on their new developments, feel free to check it out their blog here.
Pros and Cons of IOTA
PROS | CONS |
Zero Fee | Security issues |
Highly Scalable | Technical Flaws |
Quick Transactions |
|
Low computing energy required |
|
Versatile Technology |
|
Unique Proof of Work Protocol |
|
Conclusion
IOTA may be a new, fairly experimental piece of technology, and it is a platform with a lot of potentials as it is used globally, so it will be a great investment in the long run. We hope that you find this article useful! Everything in this article is written based on our findings, so we seek your understanding of any inaccuracies. Bear in mind that investments come with risks so it is important to do research. Happy investing!
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