How IOTA makes bright future for Internet of Things

14 min readJun 18, 2017

Internet of Things (IoT) holds one of the biggest potential for human life change. It might become the fastest growing market in next couple years but the more important thing is that the development in related areas is interconnecting. Since IOTA has been released, we gained the whole new perspective not only for IoT, but for Industry 4.0 itself.

The recent boom in the cryptocurrency market proved one more time that decentralization is a real thing and our society will get to that point sooner or later. For a long time I believed that blockchain is a revolutionary system that will change our lives, starting from cryptocurrency and changing the old banking system. When I heard about IOTA I realized that there is no end and even blockchain won't rule forever.

In this article I tried to collect the most relevant information, how IOTA will change the economy of Internet of Things (IoT). We hear many news about self-driving cars, smart fridges and intelligent drones but very few from behind the scene. I will try to connect as many dots as possible to give you a quick overview to upcoming future.

Let's jump right into it!

Update 2021: If you want to buy IOTA I recommend Binance exchange. Use this link a get 10% off from trading fees.

The price went recently from 1 USD up to 5 USD. Be careful there will be increased volatility in coming days. As you will read bellow, IOTA is my favourite cryptocurrency and I believe that we will see the price much more higher in 2018.

I do not recommend trading but buying IOTA and holding!

The future of Internet of Things

Before Internet of Things becomes an integrated part of our everyday life it has to overcome many obstacles. Using smart watch and collect data from our morning run is what we experience today, but in couple years there will be interconnected every single device we use and all machines will communicate to each other.

Since we imagine such a world with billions of devices, machines and humans that are communicating with each other, we are facing a huge problem with actual infrastructure and hardware/software standards. In other words scaling will cause problems.

The latest tech development that we can demonstrate on this very clearly is a cryptocurrency market.

Breaking the status quo twice in a row

If you imagine millions of tiny transactions there is no way to proceed it with a central payment processors without any fees. That's how standard banks work and that is the world we live in today.

Micro-transaction that are based on blockchain brought a revolution to our economy. 7 years ago someone by a pseudonym Satoshi Nakamoto invented Bitcoin and since then we have witnessed lots of different cryptocurrencies and projects that tackle many problems of our economy and society. For sure some of them will play important part in sharing economy Internet of Things but to be honest none of them will provide true real time micro-transactions.

Why is that?

Because all of them (so far) are based on blockchain, mostly connected to Bitcoin or Etherium development. The problem is that current blockchain incarnations aren’t able to scale to a high number of transactions per second and at the same time provide stable infrastructure and run on a lightweight hardware. Moreover, with scaling there is always increase of transaction fees.

Always,…until now!

IOTA makes a real difference

IOTA is a new cryptocurrency that focused on Machine-2-Machine (M2M) transactions. The main purpose of IOTA is to serve the machine economy by enabling feeless M2M (Machine-to-Machine) payments.

How does IOTA do that?

IOTA goes beyond blockchain. It is the first cryptocurrency that provides the whole ecosystem based on blockless blockchain.

What is IOTA?

IOTA provide efficient, secure, lightweight, real time micro-transactions without fees. It is open-source, decentralized cryptocurrency, engineered specifically for Internet of Things, its real-time micro transactions and providing ecosystem that is ready and flexible for scale.

3 reasons why is IOTA revolucionary

Zero transaction costs
Potential for indefinite scalability
Offline transactions

Tangle, the core innovation of IOTA

IOTA is often consider as an alternative coin (altcoin), but the truth is that IOTA is not just an altcoin, it is an extension of blockchain ecosystem. IOTA goes beyond blockchain. IOTA is based on Tangle instead of blockchain.

Tangle vs. Blockchain

What is Tangle? With simple words we would say, that Tangle retain the blockchain features of the distributed ledger and secure transactions, but does not work with blocks. Instead of blocks (regular blockchain), Tangle uses the form of a Directed Acyclic Graph (DAG).

Raw Tangle illustration from David Sonstebo

Directed Acyclix Graph (DAG)

Why is DAG better than blockchain? Because DAG technology enables various features like zero-cost transactions, infinite scalability or offline transactions that blockchain simply cannot do and will neither probably be developed to do.

A traditional blockchain technology works like this:

Various transactions are bundled in each block and after that they can be verified by miners. That means that with increase of transaction there will be more job for miners. What we experienced so far with Bitcoin (and Etherium as well), that also means increase of transaction fees.

A Tangle works like this:

In the Tangle, each transaction forms a new block and it is verified by itself. To be able proceed this verification it has to first verify two randomly chosen transactions in the network.

IOTA’s architecture is inherently decentralized on a level that no blockchain can match, due to the fact that users and validators are one and the same in Tangle.

Almost like perpetum-mobile, right? Of course there is a cost of every transaction, but the cost is “to verify other transactions”. The idea behind is very clear: IOTA creates self-sustainable economy that is based on demand. That's why we talk that Tangle run with zero-cost transactions.

This model has one more benefit. There is no limit for scaling. The problem that we face right now with cryptocurrencies (based on blockchain) is scalability. The IOTA network could become indefinitely scalable with zero cost because every new transaction verifies two new transactions in the network. One more and more people join and send transaction, IOTA will grow and scale smoothly. A Tangle brings solution for scalability with zero cost, that is revolutionary!

From the Internet of Things to Internet of Everything

Internet of Things is spreading like crazy. Almost every week we can see start-ups introducing a new SmartSomething. This is 4 th Industrial revolution, where technology takes a lead. The big step in our evolution is hidden in technology, indeed.

In following years there will be a huge development in SmartTransport (not just SmartCars), SmartHomes, SmartFinance, SmartPlants, etc. And this is just the beginning.

SmartEverything goes beyond Internet of Things

Internet of Things (IoT) is not just a buzzword. It will revolutionize our life on this planet, no doubt. The challenge is not in development the smart devices or machines, but in communication level. Once we solve that, there will be a huge step forward.

Imagine the whole world with ability to communicate. As far we were considering smart things as a devices that interconnect human communications. But we need a different perspective. There will be soon more machines than humans! We need to be able to speak with machines and we need to provide a network for machines to communicate with another machines (devices).

We aren’t talking just about Internet of Things (IoT), now we are talking about Internet of Everything (IoE).

IOTA creates an environment for IoE

Now, IOTA is coming! IOTA Foundation create an environment for Internet of Everything (IoE). The IOTA platform can be presented as a bridge via systems can connect, communicate and evolve.

The interconnectivity is the key for our new economy. With interconnectivity comes incredible huge amount of data that devices send and receive every seconds.

To take full benefit from the IoT and IoE we have to find a way how to connect the billions of cyber-physical systems together. The network we set up has to gain our trust.

Human kind is nowadays dependant on Internet. Can you imagine what will happen if the Internet goes down. Even just for one day or one hour. The future of fully operational status of our society and economy lies in the 24 hour-stable communication (interconnection). The Internet is by far the most efficient medium but we can’t afford to use just that. The consequences of depending on one single channel would be catastrophic. IOTA developed a protocol on which the machines can communicate via other channels, such as Bluetooth, Z-wave, ZigBee or LoRa. The future of connectivity might lie beyond the Internet itself.

IoE: Sensors as an example

The market of IoE rapidly increasing. Let's talk about sensors, the area of market that you might not heard about yet, but will have significant impact on our economy and social life.

The number of sensors especially due to demand in SmartHomes and SmartCities is growing like crazy. Sending and receiving data is just the beginning of the chain. There is no doubt we will need more computational power. The big data in our new economy needs to be analyzed first and reported as soon as possible. Cloud storage nowadays cannot provide us real-time results that we require. We need smart sensors, that have computational ability itself and are able to work with other stations as well. Instead of Cloud computing we talk about Fog computing and Mist computing. Find the difference in an easy explanation.

There will be billions of sensors by the 2025. Data won't be shared freely and that is a potential for cooperation among companies and individuals. IOTA will provide the platform for exchange (data for money).

Just imagine that once you gather some data, you can sell them, as well as you can sell your free storage. Selling it means to get compensation with IOTA currency. There won't be just distributed computing, data and storage, but also distributed brandwith and energy. The future of Internet of Everything is coming. But untill it reaches our everyday life, we need to do some changes starting on recognition of smart devices.

Identity of Things (IDoT)

To make IoT ecosystem secure, we need to think about machines and devices differently, not just as a metal things without life. We need to consider each device as its own identity.

Why?

Because the identity carries some attributes and we cannot securely and efficiently work with IoT without knowing more.

One of the biggest challenge for IoT will be the maintenance. Creation is hard process, but to maintain IoT (means also keep them resilient) is a long-term task, that cannot be undervalued. Look at any software and application that you use on PC or smartphone. How many times did you update it? Maintenance is a new angle of re-creation process.

So far we use one unique identifier for devices, but that is not enough to satisfy our future needs — secure status and smooth long term usage.

Identity of Things (IDoT) will become a new standard. The question is when it will happen. To give you an idea, we need to create IoT with some specific attributes, such as:

who manufactured it
when it was deployed
what is the expected life time cycle
who owns it
what data is it gathering

For deeper understanding I recommend you to read IOTA development roadmap.

The biggest chalenge for society 2.0

With growing number of smart devices, there will be more data traffic. Data means informations and informations are money (or power, if you prefer). All the IoT (IoE) communication must be encrypted. One of the IOTA modul is called Masked Authenticated Messaging and its job is to secure and encrypt entire data stream. Only authorized parties will be able to read and reconstruct the stream. Encrypting the data streaming is the whole area that needs to be developed with a new way of approach.

Far by most important is security. As our society technologically grow, we became dependant on software and hardware. We become more vulnerable to software or hardware malfunction or hacker's attacks. The future will take place even more in cyberspace, so security should be our first priority when we aiming for a tech change.

Quantum computation and mechanics cause headaches to security engineers, because in the coming decades we can see very real possibility of scalable quantum computers. This will disrupt most of cryptographic protocols used today. So in another words, our world can become insecure with quantum computers. If you want to go more in depth, have a look on article How secure will our data be in the post-quantum era?

No-one can be ready for this cybersecurity challenge, but IOTA is very proactive in solving solution. It deploys 2 separate mechanisms to safe-guard against quantum threats. You can read about security issues in the Tagle whitepaper.

All in one solution is replaced by layers and eXtension Interface

The approach for developing IOTA is not to build all in one universal solution, but instead design and engineering core simple principles (they call it often underlaying edger protocol) and then extend its utility through the IOTA eXtension Interface (IXI). The advantage is that anyone can build IXI for their own needs, it is fast and very flexible solution to speed up development. IXI modules are the reason why IOTA will stay lightweight and optimized.

History of IOTA

We heard about IOTA first in 2014 when a small team developed a brand new type of microprocessor for IoT and distributed computing. The persistent problem in deeper development was lack of a clear incentive for interoperability. It was crucial.

Machine 2 machine economy is and will be based on micro-transaction. It is getting better but even today we still face prohibitive fees, inflexibility and perpetual problems with scalability in blockchain development.

IOTA was born as an idea to create a compensation layer that will act as the building blocks of the Economy of Things where machines can trade resources effectively and securely on-demand.

IOTA main network went live on 11th July. The protocol and data transfer on the distributed and decentralized Tangle has been launched.

The first stage: IOTA core live, establishing the IOTA Foundation, moving the community’s chat over to Slack, completing some partnerships, IOTA on exchange market, spreading into the world

The second stage: extending IOTA’s utillity, open IOTA to anyone that want to build on top of the IOTA network

The third stage: development of hardware (project's name is Jinn project), a brand new type of microprocessor for IoT, a hardware implementation hasher for IOTA’s ‘Curl hash function’

Core founding IOTA Team

Sonstebo
Sergey Ivancheglo
Serguei Popov
Dominik Schiener

Find more about IOTA team.

Ecosystem

To start an open source project is not hard, but to grow it is incredibly difficult. The successful open source project need a great ecosystem surrounding it. The reason for it is simple. Ecosystem will deliver long term sustainability.

IOTA in 2017

IOTA already proceed till the end of 2016 over 3 million successful transactions. Just to remind you, IOTA is the world’s first digital settlement system without any fees.

Even though IOTA has been already launched, the year 2017 will be the first year when big changes start occurring. There are lots of projects that are in developing mode (since 2015) and will be reviled and launch soon.

The number one IOTA priority of 2017 is to make the IOTA platform developer inviting and friendly. Thanks to active core team and collaboration with the community the IOTA Lightwallet went live, Mobile wallet for Android has been released and dedicated hub for tutorials around IOTA is growing (client libraries in Javascript, Python, C#, Java and Go).

What is IOTA Sandbox and why is it so important?

The IOTA Sandbox is here for developers and provides them tools, utilities and environment for “just code”. They don't need to download anything, setting up their PC or app, they are not disturb, they can just code. The Sandbox is important because IOTA is open source, so anyone can participate on development. IOTA needs more developers who build core and apps to grow the ecosystem and make it world-wide.

Do you want to participate? Learn IOTA.

IOTA Foundation is responsible for developing and maintaining the core open source protocol IOTA. It is registered in Germany as an official non-profit Stiftung.

Real examples of IOTA use

There are many M2M examples but if you are looking for one that is tightly connected to your life right now, check this one.

The internet connection is provided (sold to you) by telecommunication companies and set it up in your house. You usually need to call the company, sign a contract and pay monthly fee. Can you imagine that you don't need to pay monthly fee for the Internet connection/data and you don't need to buy any credit upfront. In the future where IOTA takes place, your device will get connected to the Internet and it will brandwith data real-time as you browse the Internet.

Wouldn't be this cool? Our devices will solve one more problem for us. IOTA is a bridge and more than one middleman will loose his job.

IOTA collaborations

Based on my first research I was able to find these IOTA collaborations.

Innogy — a spin-off company of RWE, the second largest energy company in Germany, working together on development of smart cities and energy mobility.

Canonical — the company behind Ubuntu, working together on new telecom-focused applications. Participate on development a new hardware solution (LimeSDR)to bring down the cost of mobile base stations.

Useful Links

What you should know before you start investing or speculating

IOTA has broken record by exceeding 1.5 billion USD in capitalization market during first day (13th June 2017) of trading on Bitfinex’s cryptocurrency exchange. IOTA jumped the same day on the TOP 10 cryptocurrencies by market capitalization and today (17. 6. 2017) it is on 8th position.

Be aware that there is a huge volatility with every new tokens, same with IOTA. As you can see on the graph bellow, couple hours after releasing IOTA token on Bitfinex, its value went up to 1,3 USD. Just few days later it is back to 0,43 USD.

If IOTA is your long-term strategic investment, you don't need to worry about daily movements. In my personal opinion you don't need to actually worry if you invested and pay for 1 IOTA 1,3 USD. In 2018 it will valued much more and in a long-term perspective you will earn hundreds of percents.

Update 21st December 2017

I don't want to delete what I wrote above just to let you see to progress of IOTA. Today, we are in December 2017 and IOTA went far above imagination many traders. We see the price IOTA around 5 USD.

IOTA is in TOP 6 cryptocurrency on the market and many predicts bright future for the development and valuation as well.

I personally think it is not too late buying IOTA. Sure there will be volatility and we might go back to 3 USD. But in long term I strongly believe that we will see much higher price in 2018.

If you are not holding IOTA now, you can buy IOTA on Binance exchange.

News

IOTA has been covered in Forbes, CryptocoinNews, TechCrunch. If you are looking for more information, let's dig deeper. You can start here:

Blockalive: How IOTA Foundation Helps to Build Smart Cities in Asia and Europe

Forbes: IOTA’s Bitfinex Listing Surges To $1.5B Record-Breaking ‘Crypto’ Capitalization On Market Debut

CryptocoinNews: IOTA: A Cryptoplatform for the Internet of Things

IOTA is supported by Outlier Ventures, a venture fund led by Jamie Burke. It is their first investment in tokens — noting that Jamie Burke said three months ago that 99% of blockchain startups are bullshit. IOTA is obviously different. Read the full article and find out why they decided to invest in IOTA.