IOTA: What is it? – Everything you need to know!


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IOTA here, IOTA there – what is that and why is the interest in the Berlin cryptocurrency project so great? We took a look at the ideas and visions of the creators as well as the technology and provide an overview in this article.

With the help of IoT, the “Internet of Things”, machines, household and other end devices are connected to the Internet and to each other – one of the major topics not only within the IT world. Blockchain is another topic that will certainly keep us busy in 2018. Unfortunately, Blockchain is equated too directly with the crypto-currency Bitcoin, which is certainly not correct.

Although the Bitcoin blockchain created the first linked chain of data blocks in this way, the blockchain concept can be used for other purposes as well. For example, another well-known crypto-currency called Ethereum also uses the blockchain principle, but with the so-called Smart Contracts offers quite different possibilities.

If you look at the two topics of IoT and crypto currencies together, you will soon come up with the idea that it makes sense to find a way to pay even for the steadily growing range of IoT devices. Exactly this possibility offers IOTA – a name, which consists of the two parts “Internet of Things” and “Tangle” (explanation to Tangle in the further course of this article) and is based on the ninth letter of the Greek alphabet Iota

IOTA was founded in 2015 by David Sønstebø, Sergey Ivancheglo, Dominik Schiener and Dr. med. Serguei Popov. It is supervised by non-profit organization, the IOTA Foundation. It should primarily devote to the development of technology and thus keep it royalty-free for developers. Further information about the history and development of IOTA can be found on the website of IOTA and on Wikipedia . We’ll look at the differences from Bitcoin Blockchain on the next few pages and tell you what makes IOTA so popular right now.

A look at the web brings many articles, comments and assessment on the topic of IOTA on the desktop: It becomes clear that it seems difficult to find a clear demarcation in the definitions. Similar to the Bitcoin / Blockchain combination, IOTA is often categorized as a crypto currency and, above all, a direct bitcoin competitor.

Under the headline “What is IOTA?”, The IOTA Foundation calls IOTA more differentiated than “… a new and groundbreaking distributed ledger that does not use blockchain.” This is one of the most important distinctions to other crypto currencies: the blockchain -Technique is not used here. And what does the term “Ledger” mean, which also occurs again and again in Bitcoin solutions as Distributed Ledger? This translates to “distributed account book” and in principle represents a distributed, decentralized database that allows members of a network to share read and write access to it.

IOTA: What is it?


All sources of information about IOTA combined: On the web page, interested parties will find the so-called IOTA index, which lists the corresponding pages. In addition to white paper (unfortunately not yet in German) tools for developers including Developer hub, tutorials but also market data are available.

In principle, IOTA also deals with transaction processing and a data transfer method, which, according to the developers, “initially focuses on serving as the backbone of the Internet of Things.” The developers have the blocks lined up one after the other as a sequential chain , to which successively new blocks are added at regular intervals, replaced by a so-called ” tangle “.

This “tangle” or “clutter” (so the direct translation) is a directed acyclic graph ( DAG -Directed Acyclic Graph ). In a sense it represents an open database in which all transactions of the IOTA network are stored. A tangle is a distributed ledger that provides scalability without transaction fees. The necessary proof of work (PoW) in this case is no longer performed outside of the network via miners (as with the blockchain), but directly within the network.

Thus, according to the developers, this technology becomes a decentralized and self-regulated peer-to-peer network . Another advantage of this approach is that the validation of the transactions can take place in parallel. As a result, it can achieve a high transaction throughput associated with no transaction fees. As Tangle grows and more and more participants make transactions, the overall system becomes safer and faster.

Why and how does IOATA fit especially well for the Internet of Things? A closer look at the fundamental techniques, previous applications and devices that are used under this category and of course under IIoT (Industrial Internet of Things – ie IoT devices and applications in the industry environment) shows clearly that in this area very special requirements exist.

A payment system that can work here should be lightweight at first, so you do not have to carry along an unnecessary amount of overhead in terms of functions and techniques. It goes without saying that it has to be economical with resources. In addition, the microtransactions, which ideally take place directly between the devices, should not cost any fees.

The IOTA developers claim to fulfill these requirements with their technology and like to call their solution “a blockchain without blocks and chains”. Interested parties can read up on IOATA’s website with what claims the creators behind the system have gone to the implementation:

  • High Scalability – IOATA points out that without blocks, there is no limit to the size of the blocks – a problem that is increasingly coming to the fore with Bitcoin.
  • The “lightness” was a particular focus during implementation – this makes IOTA particularly suitable for IoT or M2M communication (machine-to-machine).
  • No fees for the transactions – of course, the devices on which the network is operated, must be powered, which ultimately costs. But further costs are expressly not to arise.
  • Actions in IOTA can be carried out openly – this is especially important for IoT devices, as they do not need to communicate exclusively via UDP and TCP, but can also establish connections via Bluetooth or ZigBee (a specification for wireless networks with low data volumes).


IOTA: What is it?


A trading center for sensor data that is otherwise unused: In cooperation with 20 well-known companies, IOATA has made this web site available as a “data market” at the end of 2017.

Another question that frequently arises in this context and in comparison with the blockchain technique: What about Bitcoin miners and IOATA? The miners at Bitcoin and Blockchain are responsible for confirming the transactions and then entering them into the account book – the Legend. They use their computing power to calculate the corresponding hashes that are stored in the block at the end of the blockchain. Such blockchain miners are completely useless for IOTA, because the cryptological hash function SHA-256 is not used here.

Miners typically use large arrays of ASICs to compute these hash functions, which IOTA does away with. The IOTA developers emphasize again and again in this context that the security of their approach depends on the number of participants: the larger the number of participants and the higher the number of active transactions, the more secure the whole Network .

The basic concepts of IOTA do not make it easy for a layman whose hobby is not necessarily mathematics to understand the background . The current hype surrounding everything around crypto currencies and the potentialities and dangers of IoT devices and applications is helping to fuel interest in these issues.

IoT is the concept that we will encounter in more and more areas – be it in the business or private environment – in the coming months and years much more often. It seems hardly avoidable that more and more devices will be connected directly online and over the Internet. Since it seems logical that an approach, as propagated by IOTA, will also find its justification: Would be great if the refrigerator could pay his own order …

From the down-to-earth perspective of professional IT, it is also very obvious that crypto-currencies of all kinds and types are experiencing enormous hype. Currently, around the turn of the year 2017/2018, we can hardly resist the impression that the main thing is financial jugglers who predict a big future and meaning for this “virtual money”. So it is not easy to judge the future prospects for IOTA reputable.

The technical basics are interesting and innovative. If, as IOTA Foundation aspires, they prove their worth in hard practice, this technique could well be used in the future in the IIot environment (Industrial Internet of Things), aside from speculative bubbles.

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