What is Iota?
Iota is a cryptocurrency that intends to be used an exchange for money and not as a platform for other applications. Iota’s brand targets payments for the Internet of Things and micropayments. You may see the ticker MIOTA, which stands for a mega-Iota, or 1000 Iota’s. When people refer to IOTA, they usually imply 1000 units of Iota.
What problem does it aim to solve?
Bitcoin notoriously demands high fees and has long transaction times when its network is congested. In other words, it is expensive to use and is not scalable. Iota answers this problem by offering scalability and by not charging traditional transaction fees.
Iota aims to offer a scalable cryptocurrency without transaction fees through a different type of distributed ledger technology. Instead of using a blockchain, Iota uses what is called a directed acyclic graph (DAG). Iota calls their directed acyclic graph Tangle.
What is a DAG?
Directed Acyclic Graph (Tangle)
Blockchain (NEED PIC)
A directed acyclic graph is a way to model or store information. Like a blockchain, the flow of information is one directional. The major difference between a DAG and a blockchain is that there are multiple streams of information on a DAG, whereas a blockchain only has one.
How are transactions validated?
A unique part about Iota is that a transaction requires its sender to validate two other transactions. Iota is regarded as scalable and transaction feeless because its users validate transactions instead of relying on other miners. Because each user validates two transactions for each of their transactions, they don’t have to incentivize a miner with a transaction fee. Additionally, because a transaction requires a user to validate other transactions, Iota transactions should theoretically validate quicker as their network expands, which makes it a scalable medium of exchange. It should be noted that verifying other users’ transactions may be form of a “fee” although it is not a traditional monetary transaction fee.
Internet of things
Because Iota transactions are scalable and require small computation power as a fee, Iota is supposed to be a currency equipped to support the Internet of Things and machines interacting with each other with micropayments.
Iota uses a coordinator node run by the IOTA Foundation to assign milestone transactions every minute. The coordinator uses milestone transactions to announce to every user which streams of transactions within the Tangle are honest transactions. The official Iota blog states that the network needs a coordinator to protect itself from majority attacks until the activity within the network is sufficient to where it can evolve unassisted.
The controversy behind the coordinator is that it is not open sourced, so the userbase does not know if the coordinator has the capacity to censor certain transactions by choosing which transactions to validate.
The Iota team announced that the coordinator will be temporary and will be permanently removed once the network can sustain itself, but nobody knows when that will be.
Unlike wallets of other cryptocurrencies, Iota requires its users generate their own private key addresses, which makes getting started with Iota more difficult, and has led users to lose money to phishers.
Some users have criticized Iota for its non user friendly wallet as well as some unreliable transaction confirmations. A new wallet from the University College of London is in production that should improve the user experience, but we do not know when it will be released.
This is a list of interested parties from January 2018, which includes Bosch and Volkswagen.
Iota is hard to evaluate because its premise is based off a directed acyclic graph, which does not have the same proven track record as blockchain technology in the cryptocurrency industry. Iota also focusses on the Internet of Things, which is a futuristic concept. Iota has had some controversial topics arise and the team answers those problems by stating that they will eventually be solved (coordinator problem / wallet issues). BlockWolf is going to wait on investing in Iota because if Iota solves those problems, it will probably be before mass adoption. If Iota does live up to its word, there will still be time to invest. Additionally, the lack of a greater purpose past a medium of exchange limits Iota. We think that there are other cryptocurrencies that serve greater purposes (like hosting decentralized applications and smart contracts) that could also be equally equipped to support the internet of things.