IOTA was designed mainly for the Internet-of-Things industry. It strives to make thousands of machine-to-machine transactions per second at lightning speed and zero cost. To do this, it goes beyond the blockchain technology and brings forth its main feature, Tangle, a directed acyclic graph (DAG). This new system tries to solve the blockchain’s many drawbacks like its high fees, limited transactions per second (TPS), and network congestion, which make micropayments for the IoT impossible. Blockchain technology has definitely proven its worth over the past few years, but IOTA provides new insight for a possibly better solution.
IOTA Chart
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Tangle
Unlike blockchain technology, Tangle has no need to distinguish between those who issue transactions (users) and those who approve transactions (miners). There is no mining; the users are the ones who validate and approve transactions.
For a user to issue a transaction, he or she must first work to approve two random transactions prior to theirs. Theoretically, the more users issuing transactions, the more efficient and secure the network becomes.
Fast transactions with Zero Fees
A fast and cost-effective micropayments system must be in place for the IoT to thrive, and IOTA positions itself to serve this necessity. As mentioned above, tangle’s system increases in throughput as the number of users issuing transactions increases. This gives it unlimited scalability as it supposedly gets faster and more secure as it grows. At the time of writing, IOTA has been confirmed to be able to process 1,000 transactions per second – much better than Bitcoin’s 3-5 TPS and Ethereum’s 15 TPS. IOTA should theoretically be able to scale boundlessly, only limited by bandwidth, so developers continue with real-life tests to confirm the numbers.
While there are other blockchains that offer fast transactions, they also charge fees that can be greater than the micropayment going through. It would not be sensible to pay a higher fee than the amount of the transaction being transferred; however, it would be difficult to remove fees from these other cryptocurrencies because this is an incentive for the miners, those who secure the network, to keep mining. IOTA does away with mining and blockchain altogether; therefore, it has no need to charge any fees. This is what makes IOTA an attractive system for numerous micropayments and the IoT.
Internet-of-Things
The IoT refers to all physical devices that are connected to the internet. These devices are smarter, updatable, and can communicate with each other as it collects and shares data. Imagine your refrigerator being able to detect that you are low on orange juice, orders and pays for more orange juice on its own, and has it delivered by drone to your doorstep. This is where technology is headed and IOTA places itself right in the middle, as a means of exchange for the machine-to-machine economy.
Quantum-Proof
Quantum computers pose a threat to blockchain technology. It might be a long ways down the road, but quantum computers will eventually be able to hash quicker than any other computer and write every block, or brute-force into anyone’s account in a brief period of time. IOTA’s technology addresses this issue by not requiring a lot of computing power and trials to find the nonce for a suitable hash. This means that quantum computers will not have a significant advantage over classical computers, hence, giving tangle better protection against such attacks as compared to the blockchain.