My crypto-noob friend asked me about IOTA by way of this article, “Blockchain is Outdated.” My TLDR response to her was: yes, IOTA is a thing, and no, blockchain is not outdated. Nor will it be outdated anytime soon. The reason why: there are different types of data which require different types of data systems and organizational structures. Yes yes, I know — it’s all just zeros and ones, and its turtles all the way down, isn’t it?
But I argue, more specifically, that there are different types of content of data, which ultimately require different types of systems, be they Blockchain systems or systems like The Tangle. By analyzing examples from climate change and real estate, I demonstrate this below.
Before first let’s get some distinctions in place. What is the Blockchain? What is The Tangle? How are they similar? And what’s the difference?
Both are digital ledgers. Both may be distributed. Both may be decentralized. Both may have token-economic incentive-mechanisms. They are both subject to immutability attributes as defined by their networks/communities. And finally each network is comprised by its constituents, including users, devs, miners, and other stakeholders.
I like to think of the difference between Blockchain and Tangle in terms of linearity and sequence. The visual metaphor I always start with is the difference between a simple line and a braid. The Blockchain is the line, and data moving on the Blockchain moves along a simple line. The Tangle is braid-like and data moving on The Tangle moves along in a braid-like fashion, optimally interweaving for speed and efficiency. For efficiency, I will use The Tangle and DAG interchangeably.
So let me explain Blockchain technology via analogy. Imagine four friends — Adam, Bob, Claudia, and Dana — playing a game of telephone. In this set-up, if Adam wants to get a message to Dana, he has to tell Bob, and then Bob must tell Claudia, then Claudia tells Dana. Everyone of course has to do their part in order for the message to get to Dana. Each person is updated as they receive the message. And the message will move only as quickly as each person moves it. Ok, back to the Blockchain.
Now to connect the analogy to the Blockchain analog. On the Blockchain, A, B, C, D are different blocks. And for Block D to get a message from Block A, Block B, and Block C must first verify and transmit the data. Just like in the game of telephone: perhaps Bob goes through some sort of verification process before conveying the message to Claudia. Thus, on the Blockchain, in order for data to move from one block to the next, it is verified as it moves through a sequence of blocks, and each block is updated as it receives, verifies, and conveys the data.
If you’ve used any Blockchain networks, you’ll know how slow this process can be.
Things look very different on The Tangle. At least in theory.
The Tangle is the implementation of “DAG” or Directed Acyclic Graph. Here’s an explanation of The Tangle via analogy. The Tangle is interlinear insofar as it is braidlike: Adam, Bob, Claudia, and Dana are each connected to each other in an ordered way. When Adam wants to send a message to Dana, he can do so directly since he is connected to her. But since Data is connected to the Bob and Claudia as well, when Dana receives the message from Adam, she can immediately update Bob and Claudia about the message she received. So on this version, the message moves more quickly between Adam and Dana, and all parties are (near) simultaneously updated.
Now to connect the analogy to The Tangle analog. The Tangle doesn’t have these “Blocks” through which data moves. Since A, B, C, D are all connected in a braid-like fashion, the need for “blocks” are done away with. When A needs to communicate with D, A directly conveys the data to D while (near) simultaneously updating and synchronizing with B and C. The verification process occurs along the way.
Thus, data on The Tangle moves zero-to-a-hundred (i.e., real quick, real quick). At least in theory.
So DAG is better, faster, cheaper and infinitely more scalable. At least in theory.
1 REASON WHY TECHNICAL DIFFERENCES DOESN’T MATTER
But here’s 1 reason for why it won’t supplant Blockchain technology. I argue that there are different types of content of data, which ultimately require different types of systems. One type of system is the Blockchain, and the Blockchain has its own organizational structure. A different type of system is The Tangle, and The Tangle has its own organizational structure distinct from that of the Blockchain’s.
Why is this important?
Blockchains and Tangles aren’t just built. They are built for some application. What this means is that the ability to to move certain types of data (whether optimally or approximately) defines the structural attributes of the system itself. What this shows is that systems — be they Blockchains or Tangles — are built out with forethought as to the type of data-content they will carry.
Why is this important?
Well, we know from humans are self-preserving and self-advancing creatures. Humans act in self-interested ways — in ways that will bring the most value. And one definitive feature of crypto-land is that data is value. Blockchain, DAG, and other systems move data and thus move value. Given the choice, a person will choose to move high-value data-content on a network built for this function. Next, I flesh this idea out via analogy, and wrap up this article by looking ahead.
DIFFERENT TYPES OF DATA
While The Tangle may move data quicker and more cheaply, in its current form it is ill-equipped to move certain types of data. In its first implementation, The Tangle is deployed to move data between things, as in The Internet of Things, where the Tangle enables our smart-things to “talk” to each other. IOTA has eponymously branded itself in this regard.
The Tangle, for example, might be good for climate change data. For example, suppose that reliable IOT sensors ubiquitously collect climate data on a decentralized structure where it is not subject to centralized manipulation. This type of data-content, in turn, can be accounted for in a token economy whereby stakeholders are incentivized to act in certain ways, that is act for the good of the climate, or act for the good of the community.
But what if the type of data I wanted to convey is $1.4M USD? What if I wanted to buy a 2-bedroom condo in Manhattan, and I wanted to use crypto-technology in order to do so.
The Content of Data
Technology doesn’t much care about the content of the data it moves. Technology doesn’t prescribe value to that data. Humans prescribe value to data, typically determined by the content of the data.
Certainly, data moving between IOT sensors is different than the type of data-content moving between wallets. If I wanted to transmit $1.4M USD to buy a Manhattan condo, I would go with the system that is proven maximally secure to move this type of data-content. For simplicity, lets call this system Bitcoin Blockchain — a system that has proven itself against relentless attack.
Furthermore, I wouldn’t care if using Bitcoin Blockchain took a couple of hours. I probably wouldn’t flinch either if it took a day. After all, I’m using this system to move a particular type of data-content (valued at $1.4M), and when it comes to this type of data-content, I am used to the inefficiencies of the old-money systems of traditional banking where moving $1.4M could take days or weeks while being subjected to hefty fees and charges.
I am arguing that getting data to move between IOT sensors, like climate data, is simply different than transmitting other types of data valued at $1.4M USD. The difference is owed to the difference in the data-content type. Systems like The Tangle are being built to move the former type of data-content, whereas a system like Bitcoin Blockchain is built and maintained to move the later type.
But wait, DAG and Tangle advocates cry, if given the choice, people will choose DAG because it’ll technically be better.
If humans were purely rational animals, yes, people wouldn’t hesitate to use DAG technologies. DAG would usurp Blockchain, real quick. But humans are not purely rational animals.
Studies show that humans are fairly poor at calculating probability. Many remain unaware of the function of implicit bias, stereotyping, and framing in cognition. And most of us won’t admit that emotion often intervenes on rational judgment. We are complex creatures full of hubris with some what poor introspective capacities. Our decision-making processes are subject to various convoluting factors, not merely pure technicality.
Moreover, we are also social creatures. Our decision-making processes are subject to cultural, social, and political forces, along with collective intention and action. If technology existed in a vacuum, then DAG would usurp Blockchain’s position real quick since people would evaluate it purely based on its technical attributes. But technology isn’t suspended in theoretical abstracta. It isn’t the proverbial brain in a vat. Technology is socially embedded. As such, while DAG/Tangle may someday be fast, cheap, and secure, it would have to experience the same network effect as other legacy systems (ahem, BTC) before it supplants them. Network effect is never guaranteed. Let’s not forget that before we were buying $1.4M Manhattan condos with our Bits, we were giving it away for free from faucets, or spending 10,000 BTC for 2 pizzas. Yes, literally, TEN-THOUSAND BITCOIN.
Thus, even though DAG may someday offer technical advantages over Blockchain systems, these technical differences may not be enough to sway the perceived differences from a human standpoint. These perceived differences have more to do with the type of data at hand, the content of that data, and the prescribed value to that data. And these differences ultimately work to consolidate certain types of data to DAG/Tangle systems, and other types of data to Blockchain systems.
While I don’t think DAG will replace Blockchain anytime soon, I do see the two types of systems co-existing and collaborating resulting in integrated structures with mutually symbiotic token ecosystems and economies.