IOTA is a synonym that stands for Internet of Things Application and can be described as a crypto technology which enables transactions between devices on the Internet of Things (IoT). IOTA helps in solving the transaction fees and scalability problems that come with blockchain technologies by removing the block and chain. Instead, in order to submit a transaction to the IOTA ledger, you must verify two other previous transactions. This method of verification means there’s no central ledger, and there’s no need for miners to power the network.
As the devices on the network randomly verify each other’s transactions, they build consensus through the web of connections between transactions. In cryptography, this type of verification is known as Directed Acyclic Graph (DAG), but the creators of IOTA call it the Tangle.
Since computing power in the Tangle grows as the network grows, IOTA is promising free, fast transactions. It’s also designed to process micro-payments and payments between machines, facilitating a whole machine-to-machine micro-economy.
Benefits of IOTA
IOTA has zero service fee. The service fee charged by Bitcoin and other cryptocurrencies is very fee. For instance, it is not cost effective to buy a cup of coffee using Bitcoin because the service fee may be higher than the price of a coffee. The high service fee makes the interoperability between machines or micro-trade between IoT devices impossible. IOTA is intended to fix this problem.
Since you contribute computing power to the network when you submit a transaction, the cost of using the network is only as great as the electricity needed to verify two other transactions. The Tangle allows IOTA to operate fee-free, and it means the network is even more distributed than a blockchain network. With blockchain, the network is distributed among the miners on the blockchain. With the Tangle, the network is distributed among every participating node.
The absence of fees is critical to IOTA’s mission of servicing IoT devices. These devices will often be transacting at fractions of a penny with high frequency. Any fees charged on such small transactions would make micropayments unfeasible. In order to serve as the backbone for the M2M economy, IOTA has to be free to use.
In addition to the zero service fee, IOTA does not have a performance bottleneck, unlike blockchain. The IOTA processing efficiency is proportional to the system size. A transaction is confirmed directly or indirectly by referenced transactions. In other words, IOTA has fast confirmation of transactions compared to the normal blockchain platforms.
Another fantastic feature of IOTA is the hash algorithm. Its Proof-of-Work (PoW) algorithm is called Curl. IOTA uses trio logic, not binary logic, in other words, it uses a three-state storage mechanism. This mechanism improves the performance of the platform.
Like other cryptos, IOTA trading has been turbulent over the years it has been available in various exchanges. Following the September-November cooldown period, the IOTA price went parabolic. It reached an all-time high of USD 5.23 in December 2017 but sharply fell with the rest of the market at the start of 2018.
After a brief resurgence in April 2018, the price has continued to fall but has seemingly bottomed out at about USD 0.45