Disclaimer: I don’t work for IOTA, but the title is quite verbose.
TL;DR: I think IOTA is the future, the marketing does a bad job representing the coin, but good technology is what I am counting on.
Currently, IOTA is in a big dip, probably because of Microsoft’s clarification about the so-called “partnership” with the IOTA Foundation — you might ask, why am I buying more of this?! — I'll do my best to explain.
It all started about 5 months ago when I noticed IOTA in coinmarketcap.com. It was late at night and I had 20ish tabs already open looking for the “next” big thing.
This is what I saw:
I was immediately skeptical. As a developer, I am so sick of buzzwords, that I said, “ohh, another fu*king coin that tries to steal my money with buzzwords, great. Nice how every new coin has a cool web design though (I tend to digress)…”
And right there, my relationship with IOTA ended for 3 months.
About 2 months ago I went with some friends to a local cryptocurrency meetup, and I decided to buy some BTC in a cash ATM. While standing there I met a guy everyone was referring to as the cool IOTA guy. I was intrigued, maybe this guy can explain it, I thought.
Turns out this guy was one of the developers of IOTA. He introduced himself as a developer on the team. I thought, OK, maybe this guy is invested in this so it may have some merit to it, as he is indeed totally cool. I asked him what it was all about, and got some decent answers. One thing I missed from my initial quick look at the coin was that there were no fees and that it didn’t use the blockchain. Mind you, fees were looking bad — $7 for a small transaction with BTC (I know now it’s worse, but still it was really yucky).
He told me they were looking for more help* with the development and that I should read about it, and so I did.
After reading a bit about it, I decided to buy some, and wait to see where things were going. When it topped $1 I said, “Nice! Time to do more research”. I started reading about the Tangle, how IOT will play a role in the future and how IOTA sees itself in that future. I bought some more. I am pretty happy right now, even if there are dips here and there. Now let me explain what I learned.
The Tangle vs The Blockchain
TL;DR: Bitcoin is like web 1.0, Ethereum is like web 2.0 and Tangle is web 3.0, the innovative solutions are just waiting to be grasped.
Before you continue I suggest you check out this great video about the blockchain.
I want to start with a bold statement. Here it goes: Bitcoin is centralized, and IOTA isn’t (as much, after the transition from the coordinator**)
Wow, hold on there for a second dude! Everything I read points out that bitcoin is decentralized, so why the heck do you say that?
Good question, well, the blockchain uses miners in order to function. Every transaction needs to be validated, and this is currently done by large groups of computers, because of the difficulty imposed in the blockchain. This means that there are 6-7 miners (pools, groups of miners working together) that hold more than 78% of the mining power right now (!).
What happens, let’s say, if one of the biggest pools decides to disrupt the network by increasing the transaction fees, thus lowering the price? Well, it kind of wrecks the system, just look at this and this.
Some of those huge mining pools were said to be moving to bitcoin cash — likely because the changes in the “cash” fork were better for miners. Promptly after the move, the bitcoin network started to slow down and increase the transaction fee (~citations needed). Sorry, but this screams to me: “Centralized!”
Some big players dictate the network, this is the essence of centralization, indeed, 7 big players are better than one bank, but still, we can do better.
On the other hand, IOTA (specifically Tangle, the system behind IOTA) uses a better approach in my opinion. For every transaction you send, you as a participant in the network must validate 2 past transactions, therefore removing the need for traditional miners, as everyone participating in the network is basically a “miner” themselves (!), spreading the mining load evenly. Because you are helping the network, you are rewarded by having no fees imposed when sending your own transaction, how cool is that?!
Want to read more about the Tangle?
Edit: as some people mentioned, currently the network is centralized, without a doubt, but the technology and the future it enables is decentralized (without the coordinator, when the network becomes strong enough). TL;DR “the coordinator”: is only temporary as a security measure to protect the network while it’s in its infancy.
Market Caps is all we need to talk about
At the time of writing IOTA’s market cap is $10.9B, Bitcoin’s is $295.7B. A reminder before we calculate things:
Coin Market Cap = (Coin Price) X (Circulating Supply Of Coin)
This means that if IOTA swaps places with bitcoin, let’s say in 2 years, and the overall market cap of cryptos stays the same (it should go up if you are a believer in crypto), it should be worth at least:
$295.7B / $10.9B * ($IOTA) = 27.12 * $3.92 = $106 (!)
Just think about it for a second, maybe it will reach a third of that, $35 is still really good, especially if you invest right now (at $3.92).
Just as a side note, if you think that Bitcoin will reach $100k, that means that it will have a market cap of about 5 times the current market cap, which would be about: 300B * 5 = 1500B. Just to compare check this link for the biggest companies listed in NASDAQ with their respective market caps — now this will help you make a better decision, at least in my opinion.
Changes I think need to be made
Please don’t kill me, o’mighty IOTA founders/community, just try to be open-minded:
- Marketing, for the love of god! One of the reasons I thought this was a shit coin in the beginning. The IOT buzzword thrown around like a beachball at a pop concert. Put more emphasis on the technology — you have a winning product, why not show it? No fees, scalable, no blockchain, quantum resistant. This will catch people's attention, more so than the (rather sexy) IOT themed site right now. Then add the vision about making the world of IOT connected via IOTA. But the main use case shouldn’t be that, you are limiting the currency for partnerships, make it the first usable coin first. Don’t get me wrong, IOT should be a core feature and vision, it’s awesome! I just don’t think this should be the essence of the coin’s marketing. This should replace bitcoin guys, c’mon, make it easier on yourselves. (I know I am going to eat a lot of shit, but I just want to help. Most of the people I talk to repeat the same thoughts and changing the marketing just a bit could do wonders in my opinion)
- Better wallet, shh, just heard that they are working on a new one (Maybe this?)
- Smart contracts — I know there are issues with how to implement this in the Tangle (with timings?) but this would be a game changer, for sure!
- Better network handling — currently it is quite slow and problematic.
- More exchanges
- Better PR — I heard that the founders are making their own life harder, for god’s sake, please try to be chill guys, you have a winning product, concentrate on it and don’t waste time on Reddit trolls. No more shit twitter hype games, we just want relevant updates, people and companies alike should see the project in a healthy perspective for it to succeed. Just betting on technology even if it's awesome will only get you that far. Edit: response from IOTA — pretty good for a change.
- Move away from the coordinator as soon as possible to maintain the decentralization as promised. (Edit)
Reasons I could be mistaken
- Maybe the Tangle has some intrinsic vulnerability which is unfixable hence it would subject the system to collapse.
- The marketing gets stagnated (like putting too much emphasis on IOT maybe?) and people don’t realize the potential, until a similar coin joins the Tangle idea train and uses it, and grabs all the market.
- More fake (misleading) news like Microsoft partnerships that erode the faith in the team and the coin.
Well, as I note in the disclaimer below, you need to decide on your own if you want to invest. I am just sharing my thoughts, not advising you on buying any.
I think I made a good decision, but as I noted I could be wrong. Now it’s time to hold my coins for at least a year, as IOTA is still in BETA, mind you. I want to give it a chance to shine, let’s hope I come back from the future in a year with a positive update!
Disclaimer #2: This is my own opinion, and I am not a financial advisor, so any investment should be taken at your own risk. Nor am I affiliated with the IOTA Foundation / IOTA.
Disclaimer #3: I may have some facts wrong as I collected all the info myself, any correction would be greatly appreciated.
Update #1: Misconceptions about IOTA
Update #2: The partnership with Microsoft wasn’t a fully-fledged partnership, but rather a participation in the IOTA market. Read more here.
Update #3: Fixed some typos and grammar.
Update #5: Great video explaining IOTA.
Update #7: My new article may help any beginners here — Bitcoin for your grandmother.
** “ The Coordinator is run by Iota Foundation, its main purpose is to protect the network until it grows strong enough to sustain against a large scale attack” — https://medium.com/@ercwl/iota-is-centralized-6289246e7b4d
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