Is IOTA a Good Investment? In-depth Analysis and Near to Longer-Term Expectations.
Is IOTA a Good Investment? In-depth Analysis and Near to Longer-Term Expectations.

By CryptoBoomer | Investments | 1 Oct 2019

$7.55 tipped


IOTA as an investment in an emerging digital infrastructure

 

  • Introduction to the IOTA enterprise.

 

IOTA is an ambitious and diverse initiative taken on to map out a large area of yet unexplored territories of distributed computing and data coordination within the domain of ubiquitous IoT environments. That includes everything from autonomous self-driving vehicles to positive energy districts of sharing economies (disrupting the energy markets), data marketplaces for real-time sensor data streams and data-driven insights, swarm intelligence (where many devices or machines organize to perform as a single unit) and countless more. It is a very diverse project with significant academic presence and established institutional relations that has fostered a large and active community around it.

The DIKW pyramid representing the structural-functional relationship between data, information, knowledge and wisdom. It is often considered in relation to the domain of IoT with the ubiquity of constantly generated data that characterizes it and how that data can be used to extract information, gain knowledge and acquire wisdom. It is often said that “data is the new crude” in today’s age and even more so tomorrow and IOTA positions itself in precisely that area of experimental systems design.

The IOTA token itself can be accurately described as "machine money" and is just one of the components of what is seen as the emerging machine-to-machine economy where devices become their own autonomous economic agents, capable of paying for their own maintenance and sharing computational resources in a world of stochastic meshnets ceaselessly establishing connections as loosely coupled subsystems. The token is both a unit of measure and exchange, highly divisible and in large supply as befitting its purpose (fast and highly precise micro/nano transactions in an on-demand machine economy).

A blockchain serializes lists of transactions on a single lane which presents a natural bottleneck, while IOTA’s arrangement maps transactions as dynamic flows in a graph of chained dependencies that follow trajectories of events. For a transaction to be accepted to the Tangle it must do small PoW (the hashcash anti-spam kind) and validate two other transactions.

IOTA is one of the two unique and highly idiosyncratic projects in the cryptosphere, one that doesn't really follow in the blockchain paradigm (as not suitable for IoT), but uses instead a specific directed acyclic graph (DAG) called the Tangle -- a DAG is a way of mapping out chains of events (vertices) and their causal relationships (arrows) along their paths in a way that an event can never loop back to a previous one. 

DAGs are actually a way to map complex and complex adaptive systems where there are multiple variables and dimensions involved in collective behavioral assemblies that self-organize and adapt to changing circumstances. Another striking difference from blockchains is that the Tangle deals with probabilities and estimations (Markov Chain Monte Carlos, etc.) and generally allows for the application of a wide range of out of the box algorithms on the surface of the Tangle (which serves as both the ledger or registry and as a data transport layer). 

Last, but not least, transactions in IOTA are feeless as per required in systems economies of the sort, thus friction is maximally reduced in order to give way to as perfect information as possible. 

Visualization of the Tangle at tangle.glumb.de.

 

  • Short history of the IOTA project. 

 

IOTA held an ICO on December 20th 2015 and reached an ATH of around 5$ on December 2017. Presently it trades at $0.3. As mentioned, it is not ideal for traders and not recommended if expecting any significant market movements soon or in the structural setting of this market as it so presently stands. The project itself began from a collaboration between Sergei Ivancheglo, a.k.a. “Come-from-Beyond”, a legendary figure in the crypto space who built the NXT platform and the first working Proof-of-Stake consensus algorithm, Sergei Petrov, a mathematics professor from the Moscow Academy of Mathematics who specializes in stochastic processes and authored the IOTA white paper specification, Norwegian David Sønstebø whose interests lie in physics and systems design, and Dominik Scheiner from Italy who has previously been involved with various crypto-related initiatives, particularly such focused on driving social change and reinventing democracy on the basis of Internet’s digital infrastructure. 

Beginning as a startup for a ternary microprocessor for ubiquitous distributed computing, it eventually led to the founding of the IOTA foundation. Perhaps worth pointing out as also to illustrate the specificity of IOTA is the dedicated fiat gateway soon to launch at www.omoku.io. It provides a direct real-time IOTA/EUR gateway (not an exchange) and at the same time, IOTA itself is seeking to transition away from the crypto markets. This exemplifies the function of IOTA as "machine money" and the manner in which it is meant to fluidly circulate and flow unconstrained by block times or serializing transactions along a single global lane or sequence.

The IOTA token's ATH at ~5$ at the end of 2017.

It must be mentioned that the IOTA foundation and community really do their best to avoid spreading or provoking any hype or stir up any expectations prematurely. They also do not encourage speculation at this point in time and tend to focus their efforts on R&D and iterative testing and development. IOTA shouldn’t really be seen as a crypto project so much, but as an organization with an institutional mandate in developing open industry standards for the IoT - which in turn constitutes a separate parallel Internet following a different logic (trinary instead of binary logic and quantum-proof cryptography, in themselves esoteric fields not too extensively researched, but necessary in the coming futures on the horizon). 

In a word, the community consensus is such that the current price, being translated from factors little to do with IOTA under present market conditions, is neither authentic nor of prior importance presently. IOTA is really a long term investment and project, one setting the groundwork and preparing for a future fast approaching ("data is the new crude"). And the token, as intended to serve a crucial role in a machine economy, characterized by high-frequency streams of micro and nano transactions and able to be be articulated in complex functional expressions, is not yet properly circulated in such a setting where it can organically discover its value.

Additionally, the IOTA foundation itself is a Berlin-based and registered non-profit and the first one to be funded by cryptocurrency, so it is under the strict German regulatory control when it comes to things of that nature which is another reason why speculation in the spirit of crypto 2017-2018 is not desired and seen as beneficial to the mission of the project.

 

  • Notable partnerships and collaborative efforts befitting the nature of IOTA.

 

IOTA's partnerships focus on key industry players (Jaguar, Bosch, Volkswagen, etc.), institutional partners and academic collaborators, but has also formed such with various municipalities (e.g., Taipei city) in light of developing smart cities infrastructures. All the partnerships are too numerous to list, but a full alphabetic list with more available details is provided at iotaarchive.com/listing.html

One reason for having formed as numerous partnerships and collaborations is that the IOTA foundation has actually grown quite large, as well as they themselves being open to and assisting anybody who seeks to integrate the IOTA technology for some project or another. None of this has much effect on price, however, as it is not seen to be the main point of IOTA. 

The Bosch XDK programmable sensor and IoT prototyping device. IOTA is meant to function in a machine-centric environment of connected devices which follows a different logic from the one of the human-centric Internet as we know it. Fog computing and edge computing as well as LiFi and LoRa define the realm of IOTA.

Some noteworthy involvements include the EU Commission funded smart city exchange program for the setting up of positive energy districts (PEDs) - that is, districts and localities which produce more energy than they consume, as per EU’s goals to reduce carbon emissions. The Bosch partnership has also led to the design of the Bosch XDK swiss-army knife for prototyping any IoT use case imaginable (IOTA-compatible). It’s collaboration with Jaguar has led to the implementation of an IOTA wallet that allows vehicles to earn IOTA tokens for sharing their data in shaping the digital infrastructure for self-driving vehicles. 

An IOTA-powered smart wallet implementation in a Jaguar Land Rover.

IOTA seems to mostly have presence in technologically advanced countries and has formed partnerships with municipalities in such, particularly Germany, Taiwan, Israel and the Netherlands. That, as part of the global smart cities trend which at its core is about a smart digital economy of waste reduction and intelligent resource allocation in real time.

 

  • Potential red flags and possible downsides.

 

It is too massive and ambitious an undertaking and some things may take longer than planned, but once the initial steep climb, development tends to accelerate in this particular case (it being different than others, in both nature, approach, purpose and end-goals). 

Also, it is currently working out its prototype for a Coordinator-free IOTA implementation (a project termed “Coordicide”), equipped with a range of composable modules that allow for a variety of regimes of decentralized operation. The so-called Coordinator that is to soon be phased out consist of IOTA nodes run by the IOTA foundation itself whose role is to serve as temporary training wheels in the nascent stages of bootstrapping the network and provide the necessary degree of security until the network has built enough critical mass to no longer require it. Not really a red flag, but in a way according to some presenting a centralizing point (not quite the case, given the permissive nature of the project and how anybody can spawn their own IOTA Tangle with own Coordinator or tweak any consensus algorithm so long as it aligns with the condition of making sure no double-spends are allowed to enter). 

Many of the investors in IOTA are from the industries to which their work is relevant, others are community members who accumulate as they can along the way and get to witness and be part of the building a digital infrastructure of tomorrow. As said, this is a strikingly different enterprise with many things done in radically different ways, so the same concepts, notions and semantics may not necessarily apply in the same way as they do with blockchain-based cryptocurrencies and as the rule with complex systems design, IOTA lacks the same deterministic, rigid boundaries that define blockchains (e.g., no global network-wide consensus, as consensus by definition does not scale).  

 

  • Other similar projects and alternatives to IOTA worth consideration

 

Holochain overlaps in some ways with IOTA, despite their conceptual divergence (IOTA as machine-centric and Artificial Machine Intelligence oriented, Holochain agent or human-centric and Collective Synthetic Intelligence oriented), but Holochain is also light-weight and could run on lower-end devices. Both projects are really worth considering in their own right and both utilize non-blockchain architectures for their purposes, as well as recognizing the problematic of imposing a monolithic consensus and single version of truth, instead going for a pluralistic world of fractally organized interoperability and dynamic sense-making (as so-called “bio-inspired computing” and drawing upon “ontology engineering”, among others).

But that aside, for anything else of that academic, technical and intellectual weight and scope, level of competence and clarity of purpose, not really. For the historically necessary mission of what IOTA has undertaken, it has already seized that first mover advantage, not least of all because of having had the confidence and understanding of what is needed for making such a bold step. This is also to an extent the reason for the early smear and attack campaigns that took place at the beginning of IOTA’s launch, since it necessarily broke some established dogmas within cryptography (“don’t roll your own”, which doesn’t necessarily apply the same in some specific instances of, say, post-quantum cryptography), while booby-trapping their code as a copy-protection tactic and claiming to have theoretically solved the scalability trilemma that plagues blockchain-based systems.

 

  • Final words and future prospects.

 

IOTA as an investment is something a bit of a category in itself. One should first do some further research, ideally visit the IOTA Discord and spend some time there, get to know what they really do and the goals they are working towards before considering investments. Since in order for one to want to invest in IOTA, one has to have an understanding of the implications of IOTA within its intended domain of function and the range of possibilities that affords. In any case, it is better advised to invest in IOTA if also more actively participating and engaging with the events taking place and the technology developed rather than only just passively accumulating. 

Overall, it is something for those also driven by curiosity and desire to learn about things like distributed systems design, approaching and dealing with organizational complexity, stochastic processes and chaotic systems, statistical voodoo magic and other related topics and themes in a highly multi-disciplinary field of experimentation and research. 

Insofar as profits and returns, suffice to say that IOTA's properties - when reaching the level of maturity and accumulated a critical threshold of network size (speed is a function of the size of the network, the opposite of blockchains) - so happen to also ideally suit the purposes of also the financial world (speed, clean functional dataflow expressions, no fees, probability approximations, on-demand computational resource as edge computing, etc.) 

Nevertheless, far as market price forecasts, we have to take into account the structural problematic of the crypto market as it stands today - the Bitcoin dominance of mass pyramid correlation and denomination and the role of centralized exchanges, the limited exposure beyond that and the early stage of development for most legitimate projects intending to actually solve a problem and accomplish something on this novel experimental playground of what can be built on top of what had before Bitcoin been a fringe area of computer science (distributed computing and peer-to-peer architectures). IOTA, being also under legal obligations and a very pragmatically driven mandate with no ideological implications, is slowly distancing and transitioning away from the cryptosphere, both marketwise and as a community, seeking to establish itself where intended to. 

But given its functionality and the possibilities afforded in a setting like that (as “programmable money” among others), it potentially overshadows both Bitcoin and Ethereum in terms of value in the long-term. However, in the present age of financial capital the derivative function divorces value from price under such regime of purely mathematical abstractions. 

A humorous illustration of frequentist vs. Bayesian statistics. The latter deals with belief approximations and belief updating in series of inferences called Markov chains. Bayesian methods are applied wherever frequentist methods appear not adequately suited.  

And IOTA is to operate in the same setting as modern financial capital does, as highly abstract mathematical expressions of Bayesian probabilities operating on real-time data as computationally intensive formulae that split the second and scalp the cent. Only, instead of relying on centralized structures, multi-million dollar investments, geographic proximities and competition, IOTA weaves a world in which things self-organize as needed and in the localized regions of where necessary and called for. A form of computing known as fog computing and an arrangement which has been experimentally shown capable of predicting even short-term chaos

Needless to say, the long-term price of some such thing is impossible to price in any given measure, but given also IOTA’s collaborations with the central bank of Sweden and its relationships with the Norwegian government, it is a realistic expectation that it could itself come to be used as form of money (unlike any other crypto so far, which tend to be assets or financial instruments of some sort or another), which in turn enables the value articulation of more complex logic on top of it.

From all experiments and undertakings in the crypto space, IOTA is most reminiscent of the spirit of the early days in the dawn of the Internet, marked by vibrant experimentation and lively speculations about a connected world. 

 

 

    -- by @rhyzom (Martin B.)


CryptoBoomer
CryptoBoomer

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Be careful, these are not a financial advice:)

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