IOTA makes use of distributed ledgers, unlike most cryptocurrencies, it does not use a blockchain, instead, it uses a technology their developers call, the tangle. Which is based off a mathematical concept known as directed acyclic graphs. This was a purposeful move by the developers, as with this design is what separates IOTA from every other cryptocurrency. Within the design, we have the removal of miners, without sacrificing decentralization, with the need of miners removed, so are the need for fees. Yes, IOTA is completely free to use!
This is because everyone plays an equal role in the network. Every time a transaction is made, the issuer must help authenticate to previous and random transactions. It uses a series of cryptographic algorithms along with many other sophisticated techniques to do this work. This work is done behind the scenes on such a small scale that any device could manage it without effort. Ultimately a network like this allows for two important features.
Micro-transactions are transactions that can be worth fractions of cents and cryptocurrencies like Bitcoin face many issues with this, largely due to the necessity of miners. In short, you couldn’t purchase a coffee with most blockchain digital currencies.
In cryptocurrency, speed is measured by TPS, transactions per second. In simple terms, none of us want to be stuck waiting hours for a transaction. Ultimately with IOTA, the more people that use the network, the faster it becomes. Alleviating the issues blockchain based cryptocurrencies face today. It is these 2 features that give rise to IOTA’s purpose, to support and facilitate a machine-to-machine economy, and to be implemented as an underlying protocol behind the internet of things.
The Circulating Supply Equals To 2,779,530,283,277,761 IOTA
2 quadrillion 779 trillion 530 billion 283 million 277 thousand 761. This is IOTA’s current maximum and currency circulating supply. While this number seems daunting, it only seems this way because of how IOTA is measured. On this page, we’re going to cover IOTA’s supply, units of measure and transactions per second. While contrasting them with other popular cryptocurrencies.
IOTA is broken down into 6 tiers of measurement.
- Ti – 1 trillion
- Pi – 1 quadrillion
To the average user, TI and PI will be rather irrelevant. Due to their sheer size, as 1 PI represents 1 quadrillion IOTAs or half of the total supply. The four remaining units we have are:
- i = 1 IOTA
- Ki = 1 thousand i
- Mi = 1 million i
- Gi = 1 billion i
At today’s current prices, 1 Mi is equal $0.35 cents and 1 Gi is equal to $3,350 US dollars. Now that we have a better understanding of IOTAs measurement system, let’s compare it to other cryptocurrencies to see how they match up.
For starters, Bitcoins smallest unit of measure is called Satoshi and Bitcoins supply is made up of over 2 quadrillion of them with a slight difference of .7 quadrillion, IOTA’s supply doesn’t seem all that daunting. Ethereums total supply, on the other hand, is yet to be determined. At the moment, there are 95 million ETH and the smallest unit of Ethereum is known as a wei. Today there are 95 septillion wei. As you can see, as it comes to a truly massive supply, Ethereum takes the cake.
Ultimately the confusion surrounding IOTA’s supply is a result of misunderstanding units of measure. It’s easy to understand that 1 Bitcoin is worth $15,000 dollars and that there are 21 million of them. It’s even more confusing to wrap your head around 1 IOTA being worth 0.00035 cents and that there are 2.7 quadrillion of them. The best way to calculate IOTA’s supply is by Gi. As mentioned, 1 Gi is worth $3,350 US dollars and there are 2,779,530 of them.
IOTA’s Network Capability
To understand this, we need to understand TPS, transactions per second. TPS is very important as it illustrates the capability of the network. On an average day, a company like PayPal will handle 115 transactions per second, which is nothing compares to Visa’s 3,000 to 4,000 transactions per second. It’s obvious that if any cryptocurrency wanted to be taken seriously, they would need to compete with giants like PayPal and Visa. On that note, both Bitcoin and Ethereum have a lot of work to do. At the moment, Bitcoin can handle a measly 3-5 transactions per second. While Ethereum averages about, 15 transactions per second. Leading the TPS cryptocurrency race seems to be Ripple which confirmed an average 1,500 transactions per second.
So where does IOTA fit in all of this?
IOTA’s latest stress test revealed the throughput of 1,000 transactions per second, just barely falling short of ripple. However, because of the design of the network where the more users making transactions, the faster the network becomes, the only theoretical limits of IOTA’s transactions per second are dictated by the laws of physics and bandwidth themselves. For now, we have a good old fashioned foot race and we have a feeling this foot race is only just beginning.
The Usefulness of IOTA
Distrust in national, federal and private owned banks is no secret. With decades of ill-mannered, irresponsible and borderline illegal practices in banking industries around the world, it’s no surprise that for the 8th straight year, America’s confidence in banks is unchanged and remains under 30%. Needless to say, with the massive disproval in the monetary system we have today, change is clearly needed. This is where cryptocurrency is introduced.
All cryptocurrencies have the same goal. This goal is to provide a decentralized currency capable of massive adoption that is not only safe but efficient. Bitcoin is the most popular cryptocurrency, by virtue of being the first functional one, thanks to the blockchain. This doesn’t mean it’s the best suited for the task, while Bitcoin has made massive stock gains and overcome many challenges during its development, it still has some major issues yet to be solved. Slow verification times and scalability issues. The ability to send micro-transactions are the most notable. At the moment, while Bitcoin continues it’s record-breaking stock increases, developers are steadily working on solutions for these problems. Nevertheless, the problem seems to be clear, the blockchain itself. The blockchain works like this, when a user submits a transaction, the transaction is grouped together with a bunch of other transactions, often thousands. This is called a block. This block is cryptographically protected and needs the work of miners, which are individuals and groups of people that have assembled large amounts of computing power to solve these complex cryptographic algorithms. Once a block has been mined, or solved, your transactions are completed and the miners involved in solving the block are rewarded. It is then time stamped and then added to the blockchain in chronologically order where it is stored and open for anyone to view.
So, what’s the problem here?
The blockchain needs miners and the miners are incentivized to mine transactions with the largest fees attached. Which means you need to pay a higher fee to process a transaction timely. Without paying a sufficient fee, transactions can take hours, or even fail to complete. This plays a role in the scalability issue. The inability to transfer small amounts of value. Currently, it’s impossible to transfer 1 US dollar worth of Bitcoin. This is because the fee would be larger than the transaction itself. Inevitably, we end up with questions like how could you buy a cup of coffee with Bitcoin? The unfortunate answer is, you couldn’t. Not for now at least.
Moreover, even if the issues of the blockchain could be solved, without compromise, Bitcoin along with other blockchain based currencies would still lag in comparison to the one cryptocurrency that faces none of these issues. IOTA. IOTA is a third generation cryptocurrency that challenged the status quo. IOTA is block-less, secure, decentralized, scalable, remarkably quick and lastly, completely free to use. It is one of the only cryptocurrencies that operate without technology based on the blockchain. Instead, IOTA uses technology developers dubbed, “the tangle.”
The tangle utilizes a mathematical system called directed acyclic graphs, or DAG’s, and if it sounds complex, well, that’s because it is, but that doesn’t mean we won’t try our best to give you a quick rundown on how it works. When a transaction is made, it goes through 3 steps.
- First, the transaction is signed with your private key. Don’t worry, your device does this for you.
- Second, the transaction enters, “Tip Selection Mode,” this is where your transaction uses a selected algorithm to confirm random and previously unconfirmed transactions. It takes some rather complex algorithmic work to verify the authenticity of the transactions, but it does this by running them against the entire history of the tangle. This is to ensure the transactions are in fact valid. Just like Bitcoins blockchain, the tangle anonymously keeps a record of every transaction ever made, with a transparent ledger, open for anyone to access. The work your device is doing is very sophisticated, much like the work of the miners, but because it’s done on such a small scale, it’s able to be accomplished very quickly.
- Lastly, your transaction enters the tangle and is now in branch mode, which means your transaction is simply waiting to be selected as the same process you just completed. Please keep in mind all of this happens behind the scenes, and you, the user experience nothing more than clicking send or receive. Ultimately because of the roles of validators and users become intrinsic with IOTA, you find the result is a fee-less currency that is not only secure, scalable and capable of massive adoption, but truly pragmatic.
If the goal of cryptocurrency is to be truly decentralized, to instantly exchange value, and to thrive under the conditions of global adoption, then look no further. The tangles characteristics dictate that the more people that use IOTA, the faster it becomes. Limited only by the laws of physics, moreover, IOTA is the only cryptocurrency, or currency for that matter that is completely free to use. It does not cost to own a wallet or to send funds from one place to another, without borders and to anywhere in the world. There are no charges and there never will be. IOTA truly challenges the status quo, and in a society with smart-phones, smart-houses and smart-cars, IOTA stands to think it’s time for a smart-currency.
IOTA is the latest cryptocurrency on everyone’s lips and with a 700% return on investment just the last month, we wanted to dig deeper into what IOTA is, and to see if there’s still gains to be made.
IOTA, Blockchain or Tangle?
When you hear about cryptocurrencies, you think about the blockchain. For a lot of people, cryptocurrencies is the blockchain. Well, IOTA is a cryptocurrency but it’s not built on the blockchain. Instead, IOTA is built on something called tangle.
What is the difference between a blockchain and a tangle? Well, the blockchain is a chain of blocks and each block represents a series of transactions, a block keeps a hash, or an ID key of the previous blocks and all of the previous transactions. So if someone wants to insert false information, like a false block, it won’t fit into the current chain. To add a layer of security, the blockchain introduces a way to prove that your transaction is correct. In Bitcoin, this is called proof of work and it’s basically a big puzzle that takes a certain amount of computational power to complete. Think of it as a 10,000-piece puzzle. It takes a while for it to complete, but once it’s actually completed, it’s very easy to see it’s actually correct.
When it comes to tangle, instead of thinking a long chain of blocks, think of a web. Instead of a large chain that starts at the newest block that’s connected to the previous block before that, which is connected all of the way to the first block, the tangle is more of an interconnected web with interconnected sites all over. These sites are validated by new transactions at random, which increases the size of the web, each new site, or the latest transactions are all added to the web so it grows larger, if you try to tamper with a site, it won’t fit in to the surrounding sites and you break the whole web.
This way we get network security, without having to take into account all of the previous transactions like a blockchain. This web architecture makes transactions faster, easier and most importantly, without fees. The validation works similarly to how a blockchain works, a hash or a type of puzzle, but this puzzle is simplified to allow machines with a lower computational power to process it.
Why is this important with IOTA?
IOTA was created not only to be used by humans but devices as well. The IOT part of IOTA comes from the abbreviation of an internet of things, so what will it be used for?
IOTA and The Machine Economy
So what is the internet of things? Devices, vehicles, and appliances through sensors, internet connectivity, and software can connect to the internet and exchange data. The global market for the internet of things is predicted to grow from $150 billion dollars in 2017 to $450 billion dollars in 2020. This is a compounded annual growth rate of almost 30%. The consulting firm, Bain thinks that the business to business sector of the IOT market will generate approximately $300 billion dollars by 2020 and the consumer market will generate about $150 billion dollars. IOT makes it possible to extract and use a large quantity of data, but currently, only 1% of the generated data is used today. This is a huge waste and gives rise to huge possibilities for improvements. It can be used for simpler tasks, like automatically paying for your cab ride when you arrive at your destination through your smart-phone, or you can hook it up to an AI and find a lot more interesting applications.
Think about that cab, with IOT you can connect sensors to your car which can gather information about your surroundings and with artificial intelligence, you can actually analyze that data in real-time and it can do things like veer your vehicle when you’re bound for an incoming collision.
With all of this growth with IOT, what role does IOTA play in all of this? The amount of machine with IOT capabilities is expected to grow to 31 billion units by 2020. Of these, 3 billion will have a machine-to-machine connection, which is roughly a 100% increase. A machine-to-machine connectivity is important because it gives rise to interoperability. Interoperability is the ability for software and systems to exchange and use information. This exchange of information drives over 40% of the total value of IOT. This is where IOTA comes into play with its interconnected tangle.
To understand IOTA’s vision of a data marketplace, we first need to understand what data is, and why it’s important, data in the simplest terms is a raw, unedited truth about reality. Transactional data, like a certain demographics spending habits, personal data like voting preferences, agricultural, geographical, scientific, all data is relatively important and relatively valuable to someone, somewhere. Take Uber for example, Uber is known for inexpensive Taxi and it has an estimated worth of about $68 billion dollars, this is largely due to the fact that it owns the largest pool of data about supply, drivers and demand, passengers, when it comes to personal transportation.
The value and importance of data are best summarized by the founder of IOTA, David Sonstebo, when on his blog, he wrote, “Every filament of our digital zeitgeist is unequivocally telling us that data is the fuel of the future.” The world economic forum valued the global data economy at 3 trillion dollars, and this number is only expected to grow. Today, the vast majority of data is collected, stored and used by large corporations and governments around the world, however large-scale data gathering costs money, therefore the companies keep their findings to themselves, forming data silos. They have no incentive to make the information public because they do not have a practical way to sell the data, the market prices for a reasonable amount of data are so minuscule that they would be dwarfed by traditional banking processing fees, not shy to credit cards, PayPal or blockchain based cryptocurrencies alike. It is estimated that 99% of data in these silos will be lost in the void, but this doesn’t have to be the case as David Sonstebo points out, the information in these silos wants to be free, but not for free, IOTA’s data market could open the floodgate, allowing the data to flow freely, this would help allow for data to be traded in real-time on a fee-less market powered by IOTA and IOTA’s engine, the tangle.
The tangle is IOTA’s immutable distributed ledger, which keeps the data secure and authentic. Because IOTA was designed for micropayments, companies and individuals alike could start selling their data, no matter how minuscule in price and still remain profitable, as once again, there would be no fees. How data will impact our future is still unknown. Companies like Tesla use data from their electric cars to track and record human driving, ultimately helping improve their artificial intelligence driving algorithms. A Forbes article stated, “data in healthcare is being used to predict epidemics, cure disease, improve quality of life and avoid preventable deaths.” It’s clear that utilizing big data has major potential, but the key for big data to be truly big, relies on an open-market, for data to be traded in real-time and not trapped in silos to be lost in the void. This marketplace is what IOTA hopes to provide.
The Surge in Price for IOTA
The huge potential for IOTA has guarded the interest of investors thinking IOTA will be the next big thing. When big tech firms start closing deals with IOTA, there’s no stopping them. But IOTA was actually under the radar for a long time, long hovering around $1 dollar or lower. IOTA CEO, David Sonstebo shocked this up to never intending to be in the public eye, this is why they have never for example paid for promos or advertisement. Then all of a sudden this summer, IOTA doubled in price when it announced partnerships with UC Berkeley, Imperial College, and the Norwegian Healthcare Organization and then the price of IOTA increase four-fold in the last weeks when they announced partnerships with firms like Cisco, Fujitsu, and Samsung, as well as a lot of other big tech companies.
With this increase in interest from big players, it’s easy to understand why IOTA has attracted a lot of investors. Finally, we’ll leave you with the words from the CEO, Sanstebo, “IOTA has resolved 3 major issues of blockchain, fees, scaling limitations, and centralization and built up real worth partnerships and projects with world-leading companies.”
An Investment Towards IOTA
In the curious and uncharted territory of cryptocurrency, one with hundreds of millions of dollars behind invested aimlessly into various ICOs and cryptocurrencies alike, it’s not often that the eager and uninformed investors stop to ask themselves, is this useful? This question is one of the most fundamental and important questions when it comes to cryptocurrencies, yet it remains largely unaddressed. For starters, we need to understand IOTA’s purpose. While IOTA does provide a seamless peer-to-peer network, this is not it’s purpose.
IOTA is intended to maintain, facilitate and provide an incentive for a machine-to-machine economy. It does this by providing a value and information transferring system, in which the protocol allows for transactions that are near instant, secure and scalable. So why is this IOTA’s purpose? IOTA operates under the assumption that as technology and the internet-of-things progresses, the need to provide an underlying system to support the internet-of-things will surface, and IOTA will be there to meet that need.