IOTA analysis in detail

IOTA has recently been all over the news after reaching a historically high market cap, briefly hitting 4th place behind BTC, BCH & ETH, before coming to rest at number 7. IOTA is a unique cryptocurrency in that it uses a DAG (Directed Acyclic Graph) as opposed to the traditional blockchain.

This article hopes to place another brick in the wall, helping people understand this project a little bit better.

This analysis is done following strict criteria and is the result of hours of research. Your constructive input and comments are more than welcome.

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In a nutshell

Final word (opinionated)

• What investment rating do you give (rate from 1 to 5)?
  • 4/5 - IOTA is planning to solve some of the biggest problems with cryptocurrency: transaction fees and scalability. The tech is sound, the team is diverse and experienced, and the real world applications are growing every day.
• What investment risk do you give (rate from 1 to 5)?
  • 3/5 - Considering IOTA built its own hash function, curl, it does open itself up to potential security vulnerabilities.
• What’s your gut feeling about this project (describe but be short)?
  • IOTA is an interesting project with a LOT of potential. It has risen in the ranks in a short period of time, and apart from a few minor market swings, I believe it’s here to stay.

Future additions to the article

• We got constructive feedback from some readers (thank you!) and we will cover these aspects:
  • address reuse problems - explanation
  • coordinator source being closed - "coordinator" explanation & more
  • the cons (or even pros) of snapshotting - "snapshotting" explanation & more
  • persistent network congestion issue for the last several months - data please
  • no hardware wallet solutions yet - when? which?
  • IOTA still using Keccak (SHA-3) for cryptographic signing, not its Curl inhouse algorythm https://blog.iota.org/upgrades-updates-d12145e381eb
  • Wallet: should we only link to official wallets or add some kind of "watch out for phishing" text maybe?

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The nitty gritty

Basics

• What is the official website?
  • iota.org
• Where can I take part in the ICO?
  • Too late: it ended on December 21st 2015
• What is the ticker?
  • IOTA
  • MIOTA sometimes, with the “M” standing for Mega (Mega = 1 million), because there are so many tokens, one easily owns millions of tokens
• What is the goal of project (try to be as short as possible)?
  • The main goal of the IOTA project it to create an intuitive technology to enable machine-to-machine (m2m) transactions for Internet-of-Things (IoT) applications. It is intended as a fee-free exchange medium using the Tangle as opposed to traditional blockchain, which removed the need for miners (and therefore transaction fees).
• What is the best way to describe the project (try to be as short as possible)?
  • The IOTA Tangle is a quantum-resistant Directed Acyclic Graph
    IOTA utilises what they refer to as a 3rd-generation blockchain, or the Tangle. This is a Directed Acyclic Graph (DAG) system that self-verifies transactions. In the most simplistic form, instead of miners, whenever a transaction is performed, the cost of that transaction is the verification of other transactions; essentially strengthening the network with every added transacting device. This is how it achieves the goal of making a value-exchange for IoT applications and devices: Fee-free transactions which make micro and nano transactions a possibility, and the ability for IoT devices to store data such as sensor information that is verified on the secure ledger.

Other reviews/analysis

• IOTA price analysis (positive)
  • https://medium.com/@peterryszkiewicz/iota-price-analysis-and-predictions-1a5855a7c36
  • This article has high hopes on the IOTA price based on what they term “Inevitable events” such as integration with hardware wallets like Trezor, and being added to new exchanges (which generally result in a spike in price); as well as “Predictive events” such as additional big name support/partners and integrations with other protocols.
  • ~9/10 - based on the prediction that IOTA will be $141/MIOTA by December 2018
• IOTA tech analysis (positive)
  • https://www.technologyreview.com/s/609771/a-cryptocurrency-without-a-blockchain-has-been-built-to-outperform-bitcoin/
  • This article goes into the nuts and bolts of the IOTA system and tangle, applications that are, and could potentially run, and benefit from the system. There is also mention of high-profile names participating in its data market pilot—including Microsoft, Deutsche Telekom, and Fujitsu—suggest IOTA is onto something.
  • ~8/10 - based on the high-profile names, tangle as a concept, and the potential “infinite scalability” of the system.
• Why I find IOTA deeply alarming
  • https://hackernoon.com/why-i-find-iota-deeply-alarming-934f1908194b
  • A criticism of IOTA by Ethereum core developer Nick Johnson which illustrates flaws in mathematical assumptions made by the IOTA team surrounding ternary as opposed to binary processors. He also believes that IOTA is not secure against collision attacks, and is a bad player in the Open Source community.
  • ~3/10 - based on the criticisms of both the tech and team.
• The trouble with IOTA and how to fix it
  • https://cryptovest.com/education/not-a-iota-the-trouble-with-iota-and-how-to-fix-it/
  • While this outlines the same arguments in the previous article, it provides a more indepth look at the criticisms by Vitalik Buterin and the Ethereum team. It also looks at the technical aspects that have potential flaws such as the newly developed Curl algorithm, but does mention that IOTA, if successful is an extremely exciting new approach to distributed ledger technology that promises huge scalability and economic improvements over traditional blockchains.
  • ~6/10 - based on both criticism of the team and tech, but with the hope that once the issues are dealt with, that IOTA will live up to it’s ranking on Coinmarketcap.

Company/organisation

• What is the company/organisation behind the project?
  • IOTA Foundation
  • http://untangled.world/iota-founders/
• In which country is this company/organisation based (country of jurisdiction)?
  • The IOTA Foundation was officially announced as a registered not-for-profit entity under German law.
• What is the experience of experience of the company/organisation behind the project (if it's not its first project)?
  • The IOTA team is small but has significant experience in Electrical and Computer engineering, mathematics, Internet of Things technology, and banking.
• Does the project has any partnership with other companies/organisations?
  • The Foundation has established a collaboration with Volkswagen and Innogy to develop CarPass, an IOTA based technology that enables secure audit trails, digital identities, and charging networks for cars. With the participation of Deutsche Telekom, Microsoft, and Fujitsu

Team

• Does the team have a history of successful projects?
  • As a cohesive team, IOTA is the first project of the IOTA foundation.
• What is the experience of the team member (is any famous in the DLT field, if yes what did they do)?
  • The team is experienced in distributed ledger technology (DLT) with a few famous and semi-famous names among the founders such as David Sønstebø (heavily involved in Internet-of-Things, distributed ledger/blockchain/tangle technologies, Smart Cities, Digital identity, eGovernance and innovative hardware design) and Sergey Ivancheglo, also known as Come-From-Beyond (Founder and Ceo of IOTAtoken and Jinn. Lead developer of NXT and early adopter of Bitcoin.)
• What is the experience of the advisors (is any famous in the DLT field)?
  • The business team of IOTA is fairly impressive, with a few big names standing out such as Nick Beglinger -Swiss economist (LSE). In 2008 he co-founded the Cleantech21 foundation and since acted as CEO. His professional focus area is sustainable development at the crossroads of finance, innovation, and regulation.
• How many people are in the team?
  41
• What is the approximate proportion between tech people and business people?
  • While there is definitely an overlap between the respective fields, the team can be broadly split between these 3 fields
    • Technology and development - 17
    • Mathematics - 6
    • Business - 18

Project

• When did this project start?
  • 2015
• Is the project actually made of several projects (if yes, how many and which are they?)?
  • No
• What were the achieved milestones?
  • 2015 - beta testing
  • 2016 - over-the-counter trading began between users
  • May 2017 - IOTA announced a $10 million ecosystem fund to promote larger corporate collaborations, community projects, and developer acquisition initiatives.
  • June 2017 - IOTA was listed by its first exchange: Bitfinex.
  • December 2017 - IOTA launches data marketplace with participation from more than 20 global organizations, including corporations such as Deutsche Telekom, Bosch, Microsoft, PricewaterhouseCoopers, Accenture and Fujitsu, as well as research groups from universities around the world
• What is the state of the project (already have working product)?
  • IOTA is currently functional but does have a coordinator (a training wheels system of sorts) which will be in place until the system scales to the point where the coordinator will not be necessary.
• What is the roadmap for the future?
  • https://blog.iota.org/iota-development-roadmap-74741f37ed01
  • C++ IOTA Reference Implementation (IRI) - In early port stage
  • Rust IRI - Early development
  • Go IRI - Early development
  • Swarm client - Research / preliminary stage
  • Improved networking - Active Research
  • Automated snapshotting - Active development and testing
  • Permanodes - Alpha Testing
  • Flash network - Mid-stage development
  • Masked Authenticated Messaging (MAM) - Beta Testing
  • Private transactions - Early development
  • Oracles - Advances development
  • Go library - In development
  • Stresstesting - Planning and preparation
  • Public simulations - Largely completed, awaiting peer review
  • Sandbox - Re-launch mid-April
• Is the project already profitable?
  • The IOTA foundation is registered as a non-profit in Germany
• Does the project already have clients (if yes, who?)?
  • Volkswagen and Innogy are in collaboration with the IOTA foundation to develop CarPass, an IOTA based technology that enables secure audit trails, digital identities, and charging networks for cars.

Market

• What is the market size (roughly)?
  • $11,974,077,483 USD
• What are the competitors?
  • Raiblocks (also DAG)
    • $1,252,295,404 USD
    • http://raiblocks.net
    • Read our deep analysis on Raiblocks
  • Hashgraph (also DAG)
    • There is no hashgraph public ledger or cryptocurrency. Hashgraph is currently being implemented on permissioned networks.
    • hashgraph.com
  • Byteball (also DAG)
    • $437,029,544 USD
    • byteball.org
  • DAG coin (also DAG)
    • No information available; although there are LOTS of ponzi scam warnings surrounding this project.
    • dagcoin.org
• How much demand is there for the project, short & long term?
  • A fee-free transaction system with a focus on IoT is already in demand, and will become even more so with the advent of drone delivery, autonomous vehicles, and technologies we have yet to invent.
• Does/did the project get discussed in the relevant communities even before launch?
  IOTA had a significant following pre-launch (2015-2016) and had a valuation of ~$20 million.
• Have marketing bounties been established to incentivise the advertising of the project?
  • While IOTA has not had much push in terms of marketing, they recently hired Jeremy Epstein to campion the adoption and bring the vision, opportunities and technology of IOTA to the mainstream.
  • EDIT: Jeremy Epstein left IOTA after a couple of months https://www.reddit.com/r/Iota/comments/73jp9t/why_is_no_one_here_talking_about_jeremy_epstein/
• Is branding taken seriously?
  • Only recently has IOTA put significant effort into branding as the main focus over the past few years was purely on the technology.
• Is there a clear and well defined marketing plan?
  • That has yet to be seen. Since Jeremy Epstein's departure, nothing major has been announced

ICO

• Was/is there an ICO?
  • Yes
• When was the ICO (start & end date)?
  • Start: 24 November 2015
  • End: 21 December 2015
• how many tokens get generated?
  • The fixed supply of 2,779,530,283,277,761 Iota were created.
• what was the hard cap of similar projects (pick 3 or 4 famous similar project and list the hard cap for each)?
  • The only similar project was Raiblocks which had no ICO. It was distributed through people solving captchas
• was there a pre-ICO?
  • No
• how much money was raised in total (private sale + pre-ICO + ICO)?
  • mIOTA (1 million IOTA) was around 0.000182925 USD
    • “Community gathered 1337 BTC (including JINN assets) for 999 999 999 so called "old iotas" so 1 old IOTA is 2 779 531 new IOTA or 2.78 mIOTA. mIOTA was in ICO 40.65 satoshi. gIOTA was in ICO 40647 satoshi or 0.00040647 BTC” , see https://bitcointalk.org/index.php?topic=1596208.0
    • BTC price was around 450 USD when the ICO ended (21 December 2015)
    • 40.65 satoshi = 0.0000004065 BTC
    • 0.0000004065 x 450 = 0.000182925 USD

Token use

• Is there an off-chain solution to solving the same problem?
  • No, as the solution to the problem relies on fee-free transactions.
• Why what they offer is better than what we currently have on the market?
  • While there are very low-fee technologies on the market, none are fee-free and specifically focused on machine-to-machine transactions.
• Do token holders have any influence over the project (i.e. right to vote)?
  • Currently decisions are made as the discretion of the IOTA foundation and not by vote of the token holders.
• Do token holders have get any dividends?
  • No
• Do token holders get access to any extra functionality (that non token holders don't have access to)?
  • No
• Is there any built-in governance, project decision-making?
  • Currently the IOTA foundation is in charge of all decision making, while keeping an open ear to the community at large.

Storage

• Is any hardware wallet supporting this crypto (Ledger, Trezor, Keepkey)?
  • There are currently no hardware wallets supporting IOTA, but Ledger have said they are looking to implement IOTA in the coming months.
• Any regulated exchange listing this crypto?
  • Bitfinex - MIOTA/USD, MIOTA/BTC, MIOTA/ETH
  • Bittrex - (Coming December 2017)
  • Binance - IOTA/BTC, IOTA/ETH, IOTA/BNB
  • CoinFalcon - IOT/BTC
  • OKEx - IOTA/USDT, IOTA/BTC, IOTA/ETH
  • Gate.io - IOTA/USDT, IOTA/BTC
  • Exrates - MIOTA/USD, MIOTA/BTC
  • Coinone - IOTA/KRW
• Any web wallet?
  • https://www.wallet.iota.hr
• Any paper wallet?
  • https://arancauchi.github.io/IOTA-Paper-Wallet
• Any desktop wallet?
  • https://iotasupport.com/gui-download.shtml

Online presence

• How many people are on their Facebook group (in total, for the english speaking ones, there can be several groups)?
  • Official Facebook page
    • https://www.facebook.com/iotatoken/
    • 38,202 subscribers
  • Community Facebook page
    • https://www.facebook.com/iotacoin/
    • 9,568 subscribers
• How many followers do they have on Twitter?
  • David Sønstebø
    • @DavidSonstebo
    • 27,6K followers
  • IOTA
    • @iotatoken
    • 66,5k followers
• How many subscribers do they have on Reddit?
  • https://www.reddit.com/r/Iota - Official Reddit thread
  • 86,531 readers
• How many followers do they have on Medium?
  • https://blog.iota.org - Official Medium blog
  • 15,5k followers
• How many people are on their Telegram group?
  • https://telegram.me/iotatangle - Telegram group
  • 8,973 members
• How many people are on their Slack channel?
  • http://slack.iota.org - Official Slack channel
  • 30,135 members
• Overall, is there a strong and well maintained social media presence?
  • Yes, particularly with the their Medium Blog at https://blog.iota.org that keeps updated and has interesting and useful information.

Noise

• Much media coverage?
  • While IOTA has been making waves in the crypto-sphere with it’s unique take on blockchain, and the fact that it regularly hops in and out of the top 5 cryptos (by market cap), it has not garnered much main-stream media attention yet.
• Much buzz on social medias?
  • Yes, IOTA has been a rising star in the crypto community. It’s unique take on blockchain technology has been making waves and causing debate through Facebook, Reddit and Twitter.

Code quality & transparency

• Is the code publicly available (i.e. on github)?
  • https://github.com/iotaledger
• Was the code audited by 3rd party companies/organisations? if yes, was the audit published publicly?
  • No, but it is open-source and has been checked by community members.
• Is there any history of hacking?
  • There have been cases where people have used a weak seed and have had their wallets hacked. This is not the fault of the tech, but the user.
• Is there any history of big bugs?
  • MIT researchers managed to find collisions in the IOTA curl cryptographic function, but are now working together to improve it. No problems have arisen from this yet.
  • “The current version of IOTA does not have the vulnerabilities we found” - Neha Narula (MIT)
• Has a bug bounty been established to incentivise the discovery of exploits and bugs?
  • IOTA has a monetized bug-bounty
  • https://docs.google.com/spreadsheets/d/1ySvFV7D2K7vFNTNRxyayDa5YdgCIzQZiM1rJzyzfF-Q/edit#gid=0
• Is the company/organisation regularly reporting progress on the social media streams (facebook, Tweeter, Reddit, Medium, Telegram, Slack)?
  Yes. Security vulnerabilities (after they have been resolved of course) are posted about and discussed with the community members.

Tech

• How clear is the white paper?
  • https://iota.org/IOTA_Whitepaper.pdf
  • The IOTA whitepaper is well written and illustrated. The author (Serguei Popov) tries his best to simply illustrate how weighting works, what possible attack scenarios are, and how IOTA is resistant to quantum computation.
• Is the white paper surprisingly short or long (i.e. 3 pages)?
  • Medium length - 28 pages
• In the white paper, has the concept been fully thought through and described?
  • The concepts are clearly and comprehensively covered.
• Is the white paper clear on the technical implementation?
  • The white paper primarily focuses on the math of the tangle.
• What type of DLT is this (blockchain, DAG, else?)?
  • DAG
• What is the consensus used (PoW, PoS, else?)?
  • PoW (on a transaction basis by the transactor)
  • Instead of a smaller subset of the network being responsible for the overall consensus (miners / stakers), the entire network of active participants (i.e. devices making transactions), are directly involved in the approval of transactions. As such, consensus in IOTA is no longer decoupled from the transaction making process: it’s an intrinsic part of it, and it’s what enables IOTA to scale without any transaction fees.
• What is the transaction speed?
  • IOTA already handles over 1000 tps on the latest stresstest. IOTA integrates tiny asics (mind you a only a few logic gates) in a IOT device designed to send transations almost instantly.
  • In the mainnet the transaction speed is limited for now
• Is there a test network/project?
  • Yes, there is a testnet
• Is there a live network/project?
  • Project is currently live with a coordinator (training wheels until the system is big enough to self-sustain)

Legal

• Does the project have a identifiable legal representation?
  • Julie A. Maupin
  • IOTA foundation
  • Senior Research Fellow at the Max-Planck Institute for Comparative Public Law and International Law in Heidelberg, Germany.
  • Sits on the Fintech advisory board of the German Ministry of Finance and the G20 Digital Economy Experts Task Force and is a resource person for the UN Internet Governance Forum.
  • Holds external research appointments with the Centre for International Governance Innovation and the University College London Centre for Blockchain Technologies.

Closing

• Thank you so much for reading. This is the first article of a long series, in which we will do very deep analysis of crypto-ecosystem projects and gravitating topics.

• We hope you enjoyed this review and that the aim to bring something fresh to the crypto world has been reached.

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Authors and contributors

• Follow us on Twitter @icoPntsAnalysis
• Written by:
  • Adrien Berthou - founder of ICO Points Analysis
  • Herman Martinus - Shoegazer | Beach bum | Tech professional | ICO Points Analysis writer