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IOTA is a ledger that tries to handle transactions between devices in the IoT (Internet of things) ecosystem. IOTA is trying to solve significant problems that the current blockchains are faced with, including the centralization of mining to a specific group, low network speeds, and scalability.

What is IOTA?

According to Investopedia, IOTA is “IOTA is a distributed ledger developed to handle transactions between connected devices in the IoT ecosystem, and its cryptocurrency is known as MIOTA.”

IOTA uses a directed acyclic graph to store transactions on its ledger. The ledger that IOTA offers has potentially higher scalability compared to distributed ledgers based on blockchains.

Instead of using miners for validating transactions (like other leaders do), IOTA uses nodes. In this way, any node issuing a new transaction on the network must approve two previous transactions. Then, that new transaction, in its turn, will be approved by the next transaction which will enter the network. This cycle repeats itself, and each new transaction has to approve two others, so the whole process will not need miners. This is why the IOTA ledger is without fees. IOTA automatizes this process.

IOTA uses a coordinator node to reach a consensus. The IOTA Foundation is the operator of the coordinator node, making the IOTA network centralized.

However, IOTA had an unusual design, and it did not match most established standards. Thus, Critics doubted that IOTA could operate adequately in practice. So, IOTA’s founders made significant changes to the network, naming it Chrysalis or IOTA 1.5. In IOTA 1.5, controversial decisions such as ternary encoding and quantum-proof cryptography were replaced by established standards. In late 2020, IOTA’s founders updated made other changes on the network, updating it to a new version called Coordicide, or IOTA 2.0. In the newest update, founders tried to release a distributed network that no longer relies on the coordinator for consensus in 2021.

IOTA: Roots and History

IOTA was created by David Sønstebø, Dominik Schiener, Sergey Ivancheglo, and Serguei Popov in 2015. The IOTA network was named after the smallest letter of the Greek alphabet.

An online public crowd-sale initially funded IOTA. Approximately 1300 BTC were raised, corresponding to about US$500,000 at that time, and the total token supply was distributed pro-rata over the initial investors. Finally, the IOTA network was released in 2016.

IOTA’s Difference with Other Blockchains: Tangle
IOTA tries to significant conceptual limitations and topographical constraints of a blockchain. The process of mining cryptocurrency is different compared to that of other blockchains. MIOTA is pre-mined, and transactions’ consensus is also dissimilar.

Tangle is the most significant difference that IOTA is trying to make. Tangle is the new data structure designed by the IOTA foundation to organize numeric representations within a computer’s memory in a new way.

Tangle is a nonsequential node system, i.e., a Decentralized Acyclic Graph (DAG). In Tangle, one node can connect to multiple nodes. However, the connection only goes one way, and a node can not refer back to itself.

Other standard blockchains are connected too. These blockchains can also be referred to as a Decentralized Acyclic Graph. However, Tangle provides a parallel system where transactions can be processed simultaneously instead of sequentially in IOTA’s network.

As more systems are attached, the Tangle becomes more secure and efficient at processing transactions.
As each new transaction is confirmed by referencing two previous transactions, Tangle does not require full node miners. This cycle leads to more transaction speed and decreases the amount of memory needed for verification. Finally, a Proof of Work (PoW) puzzle is added to the verification process of transactions which can be solved quickly.

How Does IOTA Work?

As mentioned before, the IOTA network uses Tangle, a new Decentralized Acyclic Graph. Tangle provides a system in which any new transaction has to confirm two previous transactions to get verified. The two transactions that are chosen are referred to as tips.
IOTA uses a tip selection algorithm with “confidence” as a measure to approve the transaction. Consider, for example, a transaction that has been already supported 83 times in the past. This means that there is 83% confidence that it will be approved in the future.
This verifying transaction leads to a zero-fee transaction confirmation process, making MIOTA an excellent candidate to be used between a wide variety of devices and machines.

Why Choose IOTA?

IOTA has partnered up with credible companies such as Busch and VoleksWagon. These partnerships help set it apart from other cryptocurrencies, which promise a bright future for IOTA and its cryptocurrency called MIOTA.

Additionally, the zero-fee transaction verification process and low power use are solutions to most blockchains’ problems. So, IOTA seems a good crypto investment. What are you waiting for? Click here to invest in IOTA right away!



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