The Internet of Things (IoT) industry is among the promising new technologies on the horizon (along with AI and machine learning). As of present, it is estimated that there are over 8 billion internet-enabled devices that communicate with each other without any human interference. This metric is expected to grow exponentially with over 25 billion devices expected to be online at the end of this decade. In
IOTA is a decentralized cryptocurrency/cryptoasset network that seeks to provide a perfect ecosystem for IoT devices to seamlessly connect with each other and trade information and resources with one another without ever needing the input of a human being to maintain the network. A lot of data is collected by IoT sensors all over the world, a large portion of which is useless to the company who created the product but very useful to other firms. IOTA enables the seamless trade of these kinds of data between devices as well as the trading of other resources (such as buying electricity when a device needs it most and selling excess when it is feasible and prudent). IOTA enables all communication and trades to be carried out with zero fees attached to them.
Tangle vs. Typical Blockchain
Unlike most decentralized networks today which are built on a blockchain like Bitcoin and Ethereum, IOTA developers know that with billions of devices in constant communication with one another conducting transactions every second, a blockchain which is already coming under a lot of criticism for slow transactions can simply not support the millions of transactions every second that IoT devices carry out every single day.
To solve this problem, the creators of IOTA formulated its own consensus and transaction verification mechanism known as the Tangle. This is a verification process in which every participating device needing to have its own transaction verified must also verify two older transactions in order to have its own cleared by another device whose transaction comes after it. With the Tangle consensus protocol, the IOTA platform seems to solve the problem of scalability that bugs a lot of blockchain technology. As such no proof of work is required for transactions to be verified on its network as is with many other cryptocurrencies and cryptoassets (eg. Bitcoin, Ethereum, Litecoin, etc.). The fact that each device contributes its own quota in powering the network and securing its integrity, no transaction fees are added to any transactions on the IOTA network.
Potential Disadvantages of IOTA
One of the criticisms IOTA receives is related to its revolutionary Tangle consensus process - some experts say it is vulnerable to attacks and takeovers from hostile entities. While a typical blockchain such as the Bitcoin blockchain requires up to 51% of the total computers on it to be taken over in order for any significant damage to be caused. IOTA requires less than this - it is estimated at only 34% of the IoT devices on the network have to be taken over.
Cryptocurrency and cryptoasset industry watchers say this ability to seemingly take over the network with less than 40% of IoT devices exposes the IOTA network to a significantly higher risk of being compromised with a hostile party being able to add false transactions or delete genuine ones in the case of such an attack.
However, given the potentially very large number of IoT devices that are expected to go online over the coming years, this might prove a difficult proposition. IOTA backers also say that this vulnerability is only prevalent at its initial stages for which IOTA have taken measures to prevent by assigning what they term as the “Coordinator” to monitor and re-verify transactions until the network becomes big enough, where it will be almost impossible for any single entity to muster the needed 34% for any attack.
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