What is IOTA?

We live in a world, where our fridges can order food for us, drones transport freight from point A to point B and our cars don’t need humans to control them anymore. Because of the massive amount of money, companies would have to pay by flying freight with drones instead of hiring a trucker or pay a airmail company, technologies, that save these companies money, are being pushed forward.

Imagine billions of devices communicating with each other and the high fees a consumer would have to pay for this.

The Internet of things

The aim of IOTA is to build a network for equivalent devices exchanging data with each other.
Building this network on blockchain basis might be a good idea because of the decentralization and independence, but there is a big problem for consumers.

Based on the high number of micro transactions, a small network of devices of the every day life would have to run, there would be very high fees.

Another disadvantage of using a blockchain for “the internet of things” is the bad scalability. The maximum number of transactions, that bitcoin is able to complete per second, is 10.

The third generation

What IOTA is trying to build, is not the less than setting the standards for third generation cryptocurrencies. By not using a blockchain to verify transactions, IOTA got rid of the big scalability problem.
Instead of a Blockchain, IOTA uses a tangle structure.

What is a Tangle?

Different to Bitcoin, IOTA doesn’t need miners. There was a genesis transaction, that distributed all coins to the founders of IOTA.
So how are transactions getting verified?
In order to do a transaction on the IOTA network, you have to verify two other transaction. Furthermore, a cryptic puzzle has to be solved for spam protection.
By adding transactions on transactions, the network gets formed.
Because of the rising number of verifications, the network gets stronger and stronger.

Advantages

If we assume, that more and more people use this network, the network becomes stronger and safer because of the high number of verifications.
In addition to the high security, the network even gets faster, the more transactions are made. Different to Bitcoin, transactions can be handled parallel to each other. There is also no need to safe all transactions ever made on the network, what saves computing power.

Partners and projects

By being acknowledged as the first foundation based on a Cryptocurrency in Germany, the project got received with open arms by the industry.
Companies like Microsoft, Deutsche Telekom and Fujitsu are working with IOTA in order to make the tangle-technology useable for consumers.

The first use case of this technology is a peer to peer marketplace for sensor data.
In the future, an entrance fee for visiting a waterpark could be paid by your cellphone exchanging data with sensors in the waterpark.

Should I invest in IOTA?

IOTA is an interesting project with big partners, leading technology and hopefully many future solutions for problems of the everyday life.

There are still some problems with running the tangle consistently, but IOTA’s technology is still in its early stages. That and the current cheap price of IOTA makes the project attractive for a long term and risk loving investor.

This is no financial advice!
Always do your own research!