Connecting The World With IOTA
IOTA (Internet-of-Things Association) announced a partnership with Microsoft and Samsung among other major corporations to create a “data marketplace,” sending the price of the currency skyward this past week.1 A 90% jump in the spot price of the currency has launched IOTA to the fourth largest market capitalization in the cryptocurrency space.2 The organization is creating a foundation for the Internet-of-Things using a decentralized platform requiring no fees to allow devices to trade specific amounts of resources like data or energy in real-time.3 In addition to data exchange, proposed applications include micro-transactions, voting, encrypted communications, and platforms for the sharing economy.
Internet-of-Things (IoT) is a rapidly developing sector of technology working out the best way to create a connect the computers that run everything from the your phone and the electrical grid, to cars and the appliances in your home to the internet.4 Connecting all of those computers poses security risks that developers and cryptographers take quite seriously, but with benefits including increased data exchange, energy efficiency, and unparalleled convenience the field has become incredibly valuable to venture capitalists and the tech sector.
IOTA does not rely on a blockchain, instead using a similar technology called a Tangle developed specifically for the platform. Tangle acts as a ledger like a regular blockchain but instead of using a mining or staking process to verify transactions, each transaction on the network automatically includes an algorithm to provides verification for two previous transactions. Regular blockchains become more secure as more miners, stakers, and users run nodes of the network but less efficient as the amount of transactions piles up. Take the Ethereum network’s recent issue with CryptoKitties, for example.5 The Tangle, on the other hand, allows the IOTA network to become more secure and more efficient as it gains users and transaction volume.
One point of contention among the cryptocurrency community regarding the IOTA network deals with the use of a Coordinator Node. IOTA uses a Coordinator Node to support transaction confirmations and protect against specific types of attacks on the system until the network has enough traffic to secure itself. Skeptical users fault this as a point of centralization and the company had to shut down the Coordinator in October, 2017 after hackers exploited a bug allowing them to access the wallets of token holders using the official IOTA wallet.6 IOTA shut down the Coordinator and set up a process to restore lost funds to their rightful owners.
In spite of the technical issues faced by IOTA and severe critiques from MIT researchers,7 the platform offers a unique approach to ledger-based technologies that could provide a superior alternative to smart contract platforms suffering from scaling issues and an effective choice for utility-based cryptocurrency applications. It could be easy to become distracted by the application of cryptocurrency technology to a sector as lucrative and high-profile as Internet-of-Things but the use of a non-blockchain ledger could have significant repercussions for the future. The use of even minor transaction fees in most blockchains and smart contract platforms can be prohibitive to applications like IoT that require a lot of small transactions, so if the developers can successfully pick the bugs out of the Tangle then similar technologies could come to replace blockchains as the ledger-technology of choice.
The IOTA Foundation launched in October, 2017 as a non-profit based in Berlin and hired the Denmark-based security company Cybercrypt to oversee development of the hashing function that secures the Tangle.8,9 More recently, the company announced a hackathon contest seeking the most novel use of the Flash Channels that provide no-fee transactions and the launch of their anonymous messaging system.10,11 To learn more about IOTA please visit https://iota.org/ or for a more technical overview you can find the white paper at https://iota.org/IOTA_Whitepaper.pdf. Thanks for reading!
6. https://btcmanager.com/iota-coordinator-price/
7. https://medium.com/@neha/cryptographic-vulnerabilities-in-iota-9a6a9ddc4367
8. https://blog.iota.org/iota-foundation-fb61937c9a7e
9. https://blog.iota.org/iota-foundation-hires-cybercrypt-615d2df79001
10. https://blog.iota.org/flash-chanels-competition-statistics-15870a4073ea
11. https://blog.iota.org/introducing-masked-authenticated-messaging-e55c1822d50e
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