IOTA cryptocurrency, a brief overview

A completely new cryptocurrency that literally flew into the TOP-10 and is confidently gaining momentum. It is based not on the usual blockchain, but on an alternative technology. This principle is called a directed acyclic graph (DAG). In this structure, there is no need for miners since all hashes are initially generated. That is, all network users essentially perform the work of miners.

IOTA is a cryptocurrency that is aimed primarily at use in the Internet of Things world (the so-called “Internet of Things”). 

It appeared on the market in 2015, went through beta testing for almost the entire next year, and very quickly made it to the top of the most promising cryptocurrencies in 2017.

If we compare it with its classic predecessors, where groups of users and miners are clearly divided, then this division is not there in principle. For example, to make transactions in Bitcoin, a user submits a transaction to the network, where it must be verified and included in a block by a miner, who confirms the request using the resources of the entire system. To transfer funds in the IOTA system, you need to confirm two transactions from other (random) Tangle users. There are no blocks in Tangle IOTA, and transactions there are connected according to their own special scheme: each new transaction that occurs confirms two old ones. That is, the miner link is completely excluded from the system, since all amounts are generated at the start of IOTA.

The absence of the concept of mining in the system contributes, according to the creators, to the highest level of decentralization, since it completely eliminates the chance that a so-called pool of miners will arise, which will be able to dictate terms to the rest of the community.

The second advantage is unlimited scalability.

The traditional heavyweight blockchain is characterized by low transaction speeds. Today it is approximately 15-20 operations per second. If you imagine that in a couple of years billions of devices will be connected to this system, then it becomes clear that it will no longer be possible to satisfy their requests.

In Tangle, the speed of transactions depends directly on the number of users of this journal, and the more of them, the higher the transaction speed. The faster a new entry appears, the faster it confirms the previous two.

The third, main advantage of IOTA is the lack of commission.

Since there are no validators in the IOTA system, and the entire community is ordinary users, no one makes money on commissions.. It is no secret that as the popularity of blockchain grows, the commission becomes more and more and its amount per transaction of a couple of cents sometimes amounts to more than a dollar. Therefore, such systems are not designed to process micro-transactions between different devices.

We can say that IOTA is not a cryptocurrency in the usual sense of the word, but a system for fast transactions of micro-payments.

DAG, unlike the slow, energy-consuming and expensive blockchain, gives relatively good indicators regarding security, storage reliability, level of decentralization and at the same time is devoid of these disadvantages.

The biggest advantage of IOTA is that that this system has found implementation of something that no “classical” cryptocurrency has been able to implement yet (and is unlikely, in our opinion) - namely, free transactions.

That is why such a cryptocurrency can be ideally automated and integrated for the everyday needs of users into all the devices and gadgets that we use every day.

But there are also a number of shortcomingsthat we cannot fail to mention for the sake of objectivity of the review IOTA.

Firstly, the developers of this cryptocurrency use hashing algorithms that they invented themselves. And today there are no guarantees that these algorithms work correctly, since they have not been used anywhere else, outside of this system.

Secondly, the rapid growth of its rate is associated not so much with the growth of natural interest of users, but with large investments from currently unknown sponsors and with the well-known hype when it was reported on the network that IOTA had become an official partner of Microsoft. After some time, it turned out that this news was a canard, and that no partnership existed and that, in fact, IOTA is an ordinary Microsoft client. But the wave of excitement that arose after the message just pushed this coin from the lower steps into the TOP 10 cryptocurrencies, raising its rate almost three times. That is, we can believe that this cryptocurrency is too overbought today, and that in the case of IOTA the exchange rate should be taken critically.

Therefore, we do not recommend investing large sums in this project at the current stage, since the systemic risks are quite high. But it’s definitely worth taking a closer look at.