Bitcoin, Crypto currency, Blockchain

Crypto-currencies explained: IOTA

1361a73217b91be20c22c33ef4632e10 - Crypto-currencies explained: IOTA


Especially during the “crypto-hype” in the late autumn of the year 2017 was a very special Cryptocurrency everyone is talking about and is it in a certain way since time immemorial – IOTA.

The opinions to the project IOTA apart to go in the crypto-Community, partly heavily, often to the project, but said the “next big thing”, and THE Bitcoin-to-be-killer. What the project exactly is, how it works and what opportunities and risks it poses to learn here.

Basics – Internet of things

In order to understand the overall concept of IOTA, it is important first to clarify, what problems would it solve and what it is to be used and can.
As IOTA, mainly as a secure transaction and communication system in the “Internet of things” (en. Internet of Things – IoT) is to be used, it will be helpful to consider in advance the potential of the IoT. Currently, the Internet consists of a vast network of computers, Notebooks, servers, Smartphones, and Co.. The networking of home computers and mobile devices, however, was only the beginning and in the future will not involved, other objects and everyday objects with in the network. Buildings, machinery and vehicles are in future to be with each other without human between the instance of networked and standalone can communicate with each other. This concept is called “Internet of things” and to get soon to enter in all areas of our lives. From banking and Finance to the workplace, the healthcare system, the machine production, trade, logistics or transport. Because in the next three to four years, according to estimates, nearly 50 billion IoT devices over the Internet will be connected, this is a gigantic economic potential hidden, which is why a lot of companies, put all from the automotive industry worldwide tens of billions of dollars in the research and development of IoT. Because of this variety of machines is necessary to will be to find a suitable industry standard, in addition to secure communication, e.g., Autonomous “machine-to-machine”-payments (also micro-payments) may allow you to IOTA a technology, which should come as Standard.

Example: In the future, an electric car runs completely autonomously on a special road, which is able to recharge the battery of the car directly inductively. The payment of the current does the car absolutely independently, and sends, for example, the value of the current as a IOTA-Coin directly to the IOTA-Wallet in the street. As in the case of IOTA, so-called Micro-payments are possible, can be paid for the actually consumed electricity on the fractional part of a cent exactly, without the occupants of the car would have to do something. The way to the (current)gas station could save the people in this future scenario, so a convenient manner.

What exactly is and makes IOTA?

More than just a crypto currency

If crypto-enthusiasts of “IOTA,” to speak, so this is my mostly native Iota-Coin (MIOTA), the total project IOTA, however, is much more than that. IOTA is in addition to the aforementioned crypto-currency (MIOTA) above all, a revolutionary Open-Source Distributed Ledger technology, which is funded by the specially-founded IOTA Foundation and provided to you. -. The aim of this, Berlin-based Foundation is to establish IOTA as the standard Protocol for the IoT to help the native IOTA-Token for value transfers in the business and industry to use, and thus an Ecosystem for applications in the IoT.

David Sønstebø

Dominik Schiener

Was founded IOTA of the South Tyrol Dominik Schiener, the Norwegian David Sønstebø, and the two Russians Sergey Ivancheglo and Serguei Popov founded, with the two today also to the Chairman of the Iota
Foundation hold (the other two are together with Ralf Rottmann also part of the five-member “Board of Directors”). Foundation hold (the other two are together with Ralf Rottmann also part of the five-member “Board of Directors”).

Numerous Partnerships

Already now, the IOTA Foundation with many “Big players” are working from different sectors of the economy. A comprehensive Overview of the partnerships can be found under the following Link:

The Technology

The Tanlge

Unlike most other known crypto-currencies the basis for the IOTA technology is not a Blockchain, but the so-called “Tangle”.
The “Tangle” is technically a so-called “directed acyclic Graph” (en seen. directed acylic graph – DAG), which consists of various nodes (or, in this case transactions), the through paths are connected to each other (Graph). The special feature of DAG’s, the paths a defined direction (directed) and there is no way, a path to find back to a certain starting point (acyclically). Graphically the whole thing looks like this:

The “Tangle”: Any transaction, refers to two other transactions.
Source: IOTA Whitepaper

The transaction process when IOTA comes from the fact that each user who wants to perform a transaction, must confirm two more transactions. As soon as a transaction has to obtain in this way a minimum number of confirmations, it is considered verified, and is then executed. Similar as for the confirmation of the new blocks in the known-block chains, are also used here the so-called Hash functions for the confirmation process. A transaction within the IOTA network is, roughly speaking, as follows:

First, a transaction must be signed using the Private Keys, in order to prove that the transaction actually. Then be selected by a Node two unconfirmed transactions (so-called “Tips”) at random, to which the transaction refers. Since IOTA not to pay transaction fees, it is to incorporate a mechanism that protects against Spam attacks. As well as the Bitcoin IOTA used for this purpose, the concept of the so-called Proof-of-Work – But with a much lower difficulty than in the case of BTC.
In addition, the two assigned to the Tips to sufficient resources and conflicting transactions must be checked. In conclusion, it is now transferred to the finished transaction to a Full-Node, which is the this to the network, so other Full Nodes, distributed. The unconfirmed transaction will be distributed as a Tip to other network participants, until finally, after the above-mentioned method, is verified.

As to mention further special feature is also the fact that in the Tangle, in addition to the normal value of the transactions (i.e. the Transfer of Iota-Token) is also zero-value transactions (data only, no Coins) can take place. This zero-value transactions are mainly for the exchange of data in the Internet of things is hugely important.

Warning: the “Auswuchern” of the Tangle to prevent and to reduce (e.g. computing power and memory capacity of the Nodes saves) at regular intervals, a so-called Snapshot (dt. Snapshot), the old transactions are deleted and only addresses with a positive balance.

The Iota-Coin

For the value of transactions in the network, a total of almost 2.8 trillion (2.779.530.283.277.761) Iota-Coins available, all of which were already issued at the Start of the network and not in the future by an algorithm distributed. Usually, the Iota-Coins are traded on crypto exchanges in “million bundle” (MIOTA).

Iota = 1 iota = 1 i = 1 i

KiloIota = 1 kiota = 1 Ki = 1.000 i

MegaIota = 1 MIOTA = 1 Mi = 1.000.000 i

GigaIota = 1 giota = 1 Gi = i

TeraIota = 1 tiota = 1 Ti = as 1,000,000,000,000 i

PetaIota = 1 Piota = 1 Pi = i

Advantages and criticism

An often-mentioned advantage of the Tangle to block chains, especially the scalability. In theory, the Tangle is infinitely scalable and its transaction speed increases, in contrast to the traditional Blockchain-systems, with increasing numbers of users. Theoretically, the Tangle can perform thus, any number of transactions at the same time. In fact, the System is still in its infancy and can be scaled virtually, of course, still not nearly as high as theoretically possible. Also whether other factors, such as technical limitations are added, can only show the future.

A further advantage is interpreted by critics, often negative: The Absence of transaction fees. While it is, in fact, that there is no monetary Form of transaction fees in the IOTA network, however, can theoretically be the cost of electricity, caused by the Proof-of-Work-Algortihmus, as the fees are seen. However, these are extremely low and almost negligible.

As the two largest points of criticism are often referred to as the current centrality and the Lack of an incentive for running a Full Node. It is today the fact that the IOTA network is not decentralized, is quite right. Since the Tangle is more or less still in Beta-test phase, the network is still very small and there are only a few Nodes are missing. In order to prevent that a potential attacker has a high number of Nodes, 34% of the network and then a malicious transactions can, the IOTA Foundation is currently a centralized Instrument, the so-called “Coordinator” . This acts as a temporary Alternative to the consensus mechanism for the Tangle. However since this is supposed to be for the protection of the network is absolutely necessary but in the near future switched off, is entitled to criticism.
Due to the absence of charges and the fact that Coins do not need to be gemint, participants in the network is really no monetary incentive for a “honest Full to operate Node” (after all, you would stay on the server costs). This criticism is justified in my opinion (at least currently) absolutely. The IOTA Foundation would have to either create monetary incentives, or to ensure that the industry partners (possibly also from self-interest), the appropriate Nodes.


IOTA (incl. the own crypto-currency) is definitely a project which has enormous potential and currently has no equal. Should it succeed in the IOTA Foundation, to achieve their own goals and the System continues to steadily expand and improve, so they could actually all of the critics to create in spite of, to be the next big thing.

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