What is IOTA? | The cryptocurrency for machines

IOTA is one of the most exciting old coins currently on the crypto market. From a technological point of view, the developers of IOTA have chosen a completely different approach to (almost) all other crypto currencies. IOTA is not based on any blockchain but uses the so-called "tangle" protocol. More on that later. According to co-founder Dominik Schiener, it is almost a block chain without blocks and without a chain.

It should serve as the backbone of the Internet of Things. How this should work, what the team of IOTA plans in detail and is to be expected in the future, you will find out in the following article.

The basic idea of ​​IOTA

In order to understand the great meaning and purpose, we have to make a difference: The Internet of Things is a huge and highly promising field of innovation. Everything is digitized, which is going to digitize. In the best case, so the goal of the Internet of Things, the machines should communicate with other machines independently of humans and thus facilitate the everyday life of humans.

For example, the refrigerator should automatically order the weekly shopping when the refrigerator is empty. A car should not only be able to drive autonomously, but also book the parking garage ticket right away.

The company intends to add machine-to-machine (M2M) payment behind IOTA to this environment. That means the fridge also pays for the weekly shopping, the car automatically pays for the car park. The IOTA token is the basis for the fully automatic transactions. This solves the problem that at present it is necessary to have a person who handles the payment between machines or an intermediary who translates between the different machine languages ​​and centrally checks the transaction and finally performs. On the one hand, this central instance needs to be trusted, on the other hand there is a central and potentially vulnerable vulnerability. This should be eliminated.

Why is IOTA better suited for this than Bitcoin, Ethereum & Co.?

At first, other digital / crypto currencies are just as suitable for this. In principle, payment between machines could also take place via bitcoin, for example. According to the reasoning of the founders for IOTA, the decisive advantage is the scalability and transaction costs of the in-house cryptocurrency. The tangle protocol provides infinite scalability and does not require transaction costs.

Scalability is particularly important because estimates suggest that in the future 50 billion machines could be networked together. With so much and the demands on the system, millions of transactions would have to be processed in real time. The scalability in the growing crypto-world is a general and central problem. For example, Bitcoin currently creates (despite SegWit2X) only 8 transactions per second. Ethereum plans to realize an amazing 1 million transactions per second this year (2017) through an update. But with 50 billion machines, even that seems to be too little. IOTA seems to be using the better protocol here with Tangle.

In addition, micro-payments (eg a parking ticket for 2 EUR) must be carried out without considerable effort, ie. H. additional costs for a transaction may be possible. Again, this represents a unique selling proposition of IOTA (at least currently compared to the other major Altcoins). At IOTA, no transaction costs are required.

Free Transactions - How Does It Work?

The IOTA consensus process relies on neither mining nor staking. Thus, there is no "effort", such as mining, where expensive technology and high power are consumed, or staking where the effort is to buy or to own (to validate). Each network member making a transaction must automatically confirm two more transactions. Due to the omission of miners and stakers, there is no need for rewards and therefore no transaction costs.

The aim of the company is to become the central protocol of the "machine economy". For this purpose, not only money can be sent via the Tangle protocol, but also data. Among other things, the protocol should also be compatible with Ethereum and Bitcoin (in planning).

---

Thank you for reading!

Don't forget to upvote, resteem and follow me for more content & contest

Tradingview, https://www.tradingview.com/u/Tradewonk/

Instagram, https://www.instagram.com/tradewonk/

Or any of my other social media channels. Please consider getting your
free account here on Steemit.

"Join the adventure and be inspired." - Tradewonk